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UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


y-'l 


DEPARTMENT  OF  COMMERCE 

BUREAU  OF  CORPORATIONS 


TRUST  LAWS 


AND 


UNFAIR  COMPETITION 


^ 


JOSEPH  E.  DAVIES 

Commissioner  of  Corporations 


MARCH  15.  1915 


WASHINGTON 

GOVERNMENT  PRINTING  OFHCE 

1916 


l^ 


tf'^^k  %^ 


ADDITIONAL  COPIES 

OF  THIS  PUBLICATION  MAY  BE  PROCURED  FROM 

THE  SUPERINTENDENT  OF  DOCUMENTS 

GOVERNMENT  PRINTING  OFFICE 

WASHINGTON,  D.  C. 
AT 

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CONTENTS 


Page. 

Letters  of  transmittal xlix 

Letter  of  submittal li 

CHAPTER  I— BRIEF  HISTORICAL  VIEW  OF  ANTITRUST  LEG- 
ISLATION. 

Sec.    1.  Introductory 1 

2.  English  law  regarding  monopolies  and  restraint  of  trade 2 

Monopolies  by  Crown  patent 2 

Engrossing,  regrating.  forestalling,  price  agreements,  etc 2 

Agreements  in  restraint  of  trade  tending  to  fix  prices  or  to  control 

the  market 3 

3.  Law  regarding  monopolies  and  restraint  of  trade  in  the  United  States 

prior  to  the  Antitrust  Act 5 

Common  law  regarding  restraint  of  trade  and  monopoly 5 

Trusts : 7 

Holding  companies 8 

4.  Legislation  against  combinations  prior  to  the  Sherman  Antitrust  Act. .  9 

State  antitrust  laws 9 

Interstate  Commerce  Act  of  1887 10 

5.  Sherman  Antitrust  Ad  of  1890 10 

6.  Early  judicial  interpretation  (1890-1901) 10 

Ineffective  enforcement  of  the  law 10 

Knight  case  (1895) 11 

Trans-Missouri  Freight  Association  case  (1897) 11 

Addyston  Pipe  &  Steel  Co.  case  (1899) 12 

7.  Economic  and  political  results 12 

Rapid  growth  of  trusts  (1898-1901) 12 

Industrial  Commission  (1898-1902) 13 

Establishment  of  Bureau  of  Corporations  (1903) 13 

State  antitrust  legislation 14 

8.  Northern  Securities  case  (1901-1904)  and  its  political  and  economic 

effects 14 

Northern  Securities  case  (1904) 14 

Decline  of  consolidations  and  development  of  "gentlemen's  agree- 
ments" and  "cooperation" 15 

Increase  of  activity  in  the  prosecution  of  trusts 15 

9.  Standard  Oil  and  Tobacco  decisions  and  their  results 16 

Standard  Oil  and  Tobacco  decisions  (1911) 16 

Character  and  effect  of  dissolutions 17 

Prosecution  of  the  Steel  Corporation 21 

10.  The  Federal  Trade  Commission  and  supplementary  antitrust  legisla- 
tion, 1914 21 

Public  agitation  to  modify  the  Sherman  Law 21 

State  reform  of  corporation  law 21 

Federal  Trade  Commission 21 

Clayton  Antitrust  Act 22 

III 


IV  CONTENTS. 

CHAPTER  II.— COMMON-LAW  DECISIONS  BY  COURTS  IN  THE 
UNITED  STATES  IN  REGARD  TO  AGREE- 
MENTS IN  RESTRAINT  OF  TRADE. 

Sec.    1.  Introduction 24 

2.  Agreements  connected  with  the  sale  of  a  business 26 

3.  Agreements  among  competitors  to  restrict  competition 36 

Control  of  supply 38 

Division  of  territory 41 

Pooling  arrangements 42 

Price  fixing  by  associations  of  competitors 42 

Common  marketing  agency 46 

Valid  restrictive  agreements 53 

4.  Agreements  among  competing  interests  to  consolidate  under  common 

ownership  or  control 57 

Acquisition  by  corporation  of  shares  in  another  corporation 58 

Trust  agreements 60 

Corporate  combinations 65 

CHAPTER  III.— THE  FEDERAL  ANTITRUST  LAWS  AND  THEIR 

INTERPRETATION. 

Sec     1.  Introductory. 70 

THE   SHERMAN   ANTITRUST  ACT. 

2.  Text  of  law 70 

JUDICIAL   INTERPRETATION. 

3.  Topics  considered 72 

4.  Constitutionality 72 

U.  S.  1).  Joint  Traffic  Assn 73 

Northern  Securities  Co.  v.  TJ.  S 73 

5.  Interstate  commerce 74 

U.  S.v.  E.  C.  Knight  Co 74 

Addyston  Pipe  &  Steel  Co.  ij.  IT.  S 76 

Hopkins  v.  U.  S 77 

-     Montague  &  Co.  v.  Lowry 77 

Gibbs  V.  McNeeley 78 

6.  Foreign  commerce 79 

Thomsen  v.  Union  Castle  Mail  S.  S.  Co.  et  al 79 

American  Banana  Co.  v.  United  Fruit  Co 80 

U.  S.  V.  Hamburg  -  Amerikanische  Packet-Fahrt- Actien-Gesell- 

schaf t  et  al 81 

U.  S.  V.  Pacific  &  Arctic  Railway  &  Na\agation  Co.  et  al 82 

U.  S.  V.  Prince  Line  et  al 

U.  S.  V.  American-Asiatic  S.  S.  Co.  etal.. 

American  Tobacco  v.  U.  S 83 

7.  Restraint  of  trade 83 

U.  S.  V.  Trans-Missouri  Freight  Association 84 

U.  S.  V.  Joint  Traffic  Association 85 

Standard  Oil  Co.  v.  U.  S 86 

U.  S.  V.  American  Tobacco  Co 88 

8.  Monopolize  and  attempt  to  monopolize 89 

Standard  Oil  (  o.  i>.  U.  S 90 

Continental  Wall  Paper  Co.  v.  Louia  Voight  &  Sons  Co 91 

9.  Trading  and  manufacturing  combinations 92 


82 


CONTENTS. 


Sec.  10.  Labor  combinations 93 

Loewe  v.  Lawlor,  or  Danbury  Hatters'  Case 93 

U.  S.  V.  Debsetal 94 

U.  S.  V.  Worldngmen's  Amalgamated  Oouncil  of  New  Orleans 94 

International  Harvester  Co.  -y.  Commonweal tb  of  Missouri 94 

11.  Railroad  combinations 95 

U.  S.  V.  Trans-Missouri  Freight  A  ssociation 95 

12.  Farmers'  combinations 96 

Steers  v.U.'S 96 

Connolly  v.  Union  Sewer  Pipe  Co 97 

13.  Forms  of  combination  in  restraint  of  trade 98 

14.  Mergers 98 

U.  S.  V.  American  Tobacco  Co 99 

U.  S.  V.  E.  I.  du  Pont  de  Nemours  &  Co 101 

U.  S.  V.  International  Harvester  Co 102 

15.  Holding  companies 103 

Northern  Securities  Co.  v.  V.  S 103 

Standard  Oil  Co.  v.V.S 104 

16.  Agreements  to  fix  ^jrices 105 

U.  S.  V.  Trans-Missouri  Freight  Association 105 

U.  S.  V.  Jellico  Mountain  Coal  &  Coke  Co.  et  al 106 

U.  S.  V.  Swift  &  Co 106 

17.  Agreements  to  limit  output 107 

Gibbst).  McNeeley 108 

Cravens  v.  Carter-Crume  Co 108 

18.  Agreements  to  apj^ortion  output 109 

U.  S.  V.  Chesapeake  &  Ohio  Fuel  Co 109 

"VMieeler-Stenzel  Co.  v.  National  Window  Glass  Jobbers'  Assn 110 

United  States  Tobacco  Co.  v.  American  Tobacco  Co Ill 

19.  Agreements  to  divide  territory 112 

Addystou  Pipe  &  Steel  Co.  r.  U.  S 112 

U.  S.  v.  Standard  Oil  Co 112 

Wlieeler-Stenzel  Co.  v.  National  Window  Glass  Association 113 

United  States  Tobacco  Co.  v.  American  Tobacco  Co 113 

20.  Agreements  to  divide  earnings  or  profits 113 

Addyston  Pipe  &  Steel  Co.  i;.  U.  S 113 

Continental  Wall  Paper  Co.  v.  I>ouis  Voighv,  &  Sons  Co 113 

U.  S.  V.  MacAndrews  &  Forbes  Co 114 

21.  Corners 114 

U.  S.  V.  Patten 114 

22.  Patents — Use  in  violation  of  Sherman  I>aw 1 15 

National  Harrow  ('o.  v.  Hench 115 

Standard  Sanitary  Mfg.  Co.  v.  U.  S 116 

23.  Agreements  to  fix  resale  prices 117 

Continental  Wall  Paper  Co.  v.  Louis  Voight  &  Sons  Co 117 

Hartniaix  i'.  John  D.  Park  &  Sons'  Co 118 

Dr.  Miles  Medical  Co.  u.  John  1).  Park  &  Sons' Co 119 

24.  The  Sherman  Act  not  void  for  uncertainty 119 

Nash?!.  U.  S 120 

25.  Character  of  judicial  i)roceedings  under  the  act 120 

Criminal  proceedings 120 

Suits  in  equity  by  the  Government 122 


VI  CONTENTS. 

Sec.  25.  Chi\racter  of  judicial  proceedings  under  the  act — Continued.  Page. 

Condemnation  proceedings 122 

Actions  for  treble  damages 122 

Other  suits  between  private  parties 122 

OTHER  ANTITRUST  LAWS. 

26.  General  statement 123 

27.  Act  to  Regulate  Commerce  of  1887 124 

28.  Wilson  Tariff  Act  of  1894 125 

29.  Panama  Canal  Act  of  1912 126 

30.  Federal  Trade  Commission  Act 128 

31.  Claj-ton  Antitrust  Act 132 

CHAPTER   IV.— IMPORTANT   PROVISIONS   OF   STATE   ANTI- 
TRUST LAWS. 

Sec.    1.  Introductory 143 

2.  Monopoly 144 

Constitutional  prohibitions 144 

Statutory  definitions 145 

Statutory  prohibitions '. 147 

3.  Restraint  of  trade 150 

Constitutional  prohibitions 150 

Statutory  prohibitions 150 

4.  Restraint  of  competition 159 

Constitutional  provisions 159 

Statutory  prohibitions 159 

5.  Pooling 164 

Definitions 164 

Constitutional  prohibitions 164 

Statutory  prohibitions 165 

6.  Price  control 168 

Constitutional  provisions 168 

Statutory  provisions 169 

7.  Limitation  of  output 179 

Constitutional  prohibitions .- 179 

Statutory  prohibitions 179 

8.  Division  of  territory ]  82 

9.  Restraints  on  resales 183 

10.  Comi)etitive  methods 184 

Exclusive  contracts 184 

Refusal  to  deal 185 

Local  price  discrimination 187 

Discrimination  in  sales  and  purchases 187 

Class  of  articles  or  commodities 188 

Specific  intent 188 

Allowances 190 

Exceptions 190 

Evidence 191 

Court  decisions 191 

General  price  cutting  and  other  methods  of  injuring  competitors..  192 

Regulation  of  transportation 195 

11.  Specific  provisions  affecting  agricultural  interests 195 

12.  Specific  provisions  affecting  labor 197 

13.  Holding  companies 199 


CONTENTS.  Vn 

Page. 
Sec.  14.  Special  provisions  affecting  business  declared  to  be  of  public  conse- 
quence   202 

15.  Recognition  of  common-law  principles 204 

16.  Administration 205 

Attorneys  general 206 

Attorneys  general,  county  or  district  attorneys 206 

Attorney  general,  county  or  district  attorneys  under  direction  of 

attorney  general 207 

County  or  district  attorneys 207 

Proceedings  by  and  on  behalf  of  private  citizens 207 

Miscellaneous  provisions 208 

17.  Evidence,  burden  of  proof,  indictments,  etc 208 

18.  Penalties 211 

Personal  penalties 212 

Corporate  fines 213 

Forfeiture  of  charter  or  right  to  do  business 213 

Contracts  void 213 

No  recovery  for  goods,  etc 214 

Recovery  of  consideration 214 

Prohibitions  against  dealing  in  or  handling  goods  of  convicted 

parties 215 

Damages 216 

Double  damages 216 

Treble  damages 216 

19.  Stock  watering 216 

Constitutional  provisions 216 

Statutory  provisions 219 

For  what  stock  may  be  issued 219 

Control  of  valuation 220 

Fictitious  increases  void 223 

Provisions  for  enforcement 223 

Selected  provisions 226 

Iowa  law 226 

Wisconsin  law 227 

New  York  law 229 

CHAPTER  v.— TRUST  LAWS  IN  FOREIGN  COUNTRIES. 

Sec.    1.  Introductory 231 

2.  England 233 

Common  law 233 

Railroads 238 

Patents 238 

3.  Canada 239 

Criminal  Code 239 

Customs  tariff  law 240 

Patent  law 240 

Inland-revenue  law 240 

Combines  Investigation  Act 241 

Railway  Act  of  1903 242 

4.  Australia 243 

Australian  Industries  Preservation  Act 243 

Declaration  to  attorney  general  absohing  criminal  intent 244 

Coal-vend  case 245 


Vin  CONTENTS, 

Sec.  4.  Australia— Continued.  Page. 

The  Patents  Act,  1903 246 

Interstate  Commission  Act,  1912 247 

5.  New  Zealand 250 

The  Monopoly  Prevention  Act,  1908 250 

The  Commercial  Trusts  Act,  1910 251 

Patents,  designs,  and  trade-marks 253 

6.  Union  of  South  Africa 254 

The  Meat-Trade  Act,  1907 254 

The  Post  Office  Administration  and  Shipping  Combinations  Dis- 
couragement Act,  1911 254 

7.  British  India 255 

8.  Egypt 257 

9.  Germany 257 

Criminal  law 257 

Civil  law .■- 258 

Special  laws  regarding  particular  industries 263 

10.  Austria 265 

Ci^dl  law 267 

11.  Hungary 268 

12.  France 269 

Criminal  law 269 

Civil  Code 272 

Special  laws 273 

13.  Italy 273 

Criminal  law 273 

Civil  law 274 

Special  laws 276 

Compulsory  sulphur  cartel 276 

Citrus  Products  Law " 277 

14.  Spain 277 

15.  Portugal 278 

16.  Switzerland 278 

Civil  law 278 

17.  Belgium 280 

Criminal  law 280 

Civil  law 281 

18.  The  Netherlands 283 

19.  Sweden 284 

Regulation  of  iron-ore  exports 284 

20.  Norway 286 

21.  Denmark 286 

22.  Russia 287 

Regulation  of  sugar  industry 289 

23.  Roumania 290 

Apportionment  of  domestic  sale  and  price  regulation  of  i)elr()leum.  291 

24 .  Turkey 292 

25.  Greece , 292 

Penal  Code 292 

Special  laws 293 

26.  Brazil 293 

Customs  law 294 

Coffee  valorization 294 

27.  Argentina 296 


CONTEISTTS.  IX 

Page. 

Sec.  28.  Colombia 297 

29.  Mexico 297 

30.  Japan 297 

31.  China 298 

32.  International  law 299 

CHAPTER  VI.— UNFAIR  METHODS   OF  COMPETITION    FROM 
THE  BUSINESS  AND  ECONOMIC  VIEWPOINT. 

Sec.    1.  Introductory 301 

No  definition  of  unfair  methods  of  competition  attempted  in  this 

chapter 301 

Kinds  of  competition 302 

Competition  by  classes  of  traders 302 

Point  at  which  competition  occurs 302 

Inequalities  in  size  and  other  circumstances  of  competitors 303 

2.  Fair  and  unfair  methods  of  competition 303 

Use  of  the  term  "Unfair  competition  "  and  other  like  terms 306 

3.  List  of  methods  of  competition  which  have  been  regarded  as  unfair 310 

4.  Local  price  cutting 311 

5.  One-commodity  price  cutting 313 

6.  Price  reduction  in  general 314 

7.  Use  of  trading  stamps,  coupons,  and  the  like 314 

8.  Excessive  credits 315 

9.  Reductions  of  price  for  quantity 315 

10.  Special  advantages  in  transportation  (rebates,  etc.) 316 

11.  Fixing  resale  prices 317 

12.  Bogus  independents 318 

13.  Exclusive-dealing  requirements 319 

14.  Full-line  forcing 321 

15.  Inducing  breach  of  contract 322 

16.  Enticement  of  competitors'  employees 323 

17.  Espionage  by  corruption  and  bribery 323 

18.  Secret  commissions 325 

19.  Misrepresenting  competitors 325 

20.  Abuses  in  advertising 326 

21.  Passing  off  goods  for  those  of  another 327 

22.  Shutting  off  competitors'  credit 328 

23.  Shutting  off  materials,  supplies,  or  machines  from  competitors 328 

24.  Acquiring  stock  in  competing  companies  fur  purpose  of  reducing  or 

destroying  competition 329 

25.  Wrongful  and  malicious  suits 329 

26.  Intimidation 329 

27.  Fixing  channels  of  trade 330 


a 


CHAPTER  VII.— UNFAIR    COMPETITION    AT    THE    COMMON- 

LAW. 

Sec.    1 .  Introductory 332 

2.  Inducing  breach  of  competitors'  conti-acts 335 

American  decisiona 336 

Inducing  breach  by  fraud,  coercion,  intimidation,  or  other 

unlawful  means 336 


X  CONTENTS. 

Sec.    2.  Inducing  breach  of  competitors'  contracts — Continued. 

American  decisions — Continued.  Page. 

Inducing  breach  of  contract  by  lawful  means 338 

Procuring  breach  by  lawful  means  actionable 339 

Procuring  breach  by  lawful  means  not  actionable 341 

English  decisions 342 

Inducing  breach  actionable  though  procured  by  lawful  means.  344 

Nature  of  contract 345 

3.  Enticing  employees  from  the  service  of  competitors 346 

American  decisions 346 

English  decisions 348 

4.  Betrayal  of  trade  secrets 348 

American  decisions 349 

Parties  who  may  be  enjoined  from  using  trade  secrets 353 

Agreement  not  to  disclose  secrets  implied 354 

English  decisions 355 

5.  Betrayal  of  confidential  information 355 

American  decisions 356 

Confidential  character  of  sources  of  supply,  costs,  etc 361 

Information  generally  known  to  the  trade  may  be  used 362 

Directors  of  corporations  may  not  disclose  confidential  infor- 
mation   363 

English  decisions 364 

6.  Appropriation  of  values  created  by  competitors'  expenditures 367 

American  decisions 367 

English  decisions 369 

7.  Defamation  of  competitors  and  disparagement  of  competitors'  goods. .  370 

American  decisions 370 

Personal  defamation 370 

Disparagement  of  goods  as  an  indirect  attack  on  a  manufac- 
turer or  dealer 373 

Disparagement  of  competitors'  goods 375 

Libel  and  slander  not  enjoined 376 

English  and  colonial  decisions -. 377 

Personal  defamation 377 

Disparagement  of  goods  as  an  indirect  attack  on  a  manufac- 
turer or  dealer 381 

Disparagement  of  comj^etitors'  goods 382 

Falsely  representing  that  a  competitor  has  ceased  to  carry  on 

business 385 

8.  Misrepresentation  by  means  other  than  words 386 

American  decisions 386 

9.  False  claims  to  testimonials,  medals,  and  other  distinctions 387 

American  decisions 388 

English  decisions 388 

10.  Intimidation  of  competitors'  customers  by  threats  of  infringement 

suits 389 

American  decisions 391 

English  decisions 394 

11.  Combinations  to  cut  off  competitors'  supplies  or  to  destroy  their 

market 395 

American  decisions 396 

Cutting  off  competitors'  supplies 396 

Destroying  competitors'  market 401 

English  decisions 403 


CONTENTS.  XI 

Page. 
Sec.  12.  Intimidation,  obstruction,  and  molestation  of  competitors  or  their 

customers 406 

American  decisions 406 

English  decisions 408 

13.  Exclusive  dealing 409 

American  decisions 410 

Contracts  to  buy  from  or  deal  exclusively  in  the  goods  of  one 

person r 410 

Contracts  for  exclusive  agency  or  for  exclusive  territory 414 

Contracts  for  rebaltes  in  consideration  of  exclusive  dealing 415 

English  decisions 416 

Contracts  to  buy  from  or  deal  exclusively  in  the  goods  of 

one  person 417 

Contracts  for  rebates  in  consideration  of  exclusive  dealing —  419 

Contracts  for  exclusive  agency 420 

14.  Bribery  of  employees 420 

American  decisions 420 

English  decisions 421 

15.  Competing  with  purchaser  after  sale  of  business  and  good  will 423 

American  decisions 424 

The  general  rule  with  respect  to  reentering  the  business 424 

The  Massachusetts  rule 425 

Exceptions  to  the  rule  that  the  vendor  may  reenter  the 

business 426 

Right  of  the  vendor  to  solicit  his  former  customers 427 

English  decisions 429 

16.  Passing  off  the  goods  of  one  manufacturer  or  dealer  as  those  of  another.  431 

American  decisions 431 

Geographic  or  place  names 435 

Company  and  trade  names 436 

Personal  names 438 

Descriptive  and  generic  terms 440 

Dress  of  goods 442 

Dress  of  store 443 

Imitation  of  goods  themselves 444 

English  decisions 446 

Geographic  or  place  names 448 

Company  and  trade  names 450 

Personal  names 451 

Descriptive  and  generic  terms 452 

Dress  of  goods 452 

Dress  of  store 453 

Imitation  of  goods  themselves 454 

17.  Miscellaneous 455 

American  decisions 455 

English  decisions 460 

CHAPTER  VIII.— FEDERAL  STATUTES  RESPECTING  UNFAIR 

METHODS  OF  COMPETITION. 

Sec.    1.  Introductory 462 

DECISIONS    UNDER   THE    SHERMAN    LAW    WITH    RESPECT   TO    METHODS    OP 

COMPETITION. 

2.  General  statement 462 

3.  Price  cutting 463 


Xn  CONTENTS. 

Page. 

Sec.    4.  Discriminations 464 

5.  "Fighting  ships" 464 

6.  Bogus  independents 465 

7.  Exclusive  dealing 466 

Rebates  to  induce  exclusive  dealing 466 

Refusal  to  deal  save  on  exclusive  terms 469 

Patented  articles 471 

Exclusive  agencies 472 

8.  Use  of  certain  articles  as  a  condition  of  purchase  or  use  of  other 

articles 472 

9.  Inducing  breach  of  competitors'  contracts 473 

10.  Enticement  of  employees 474 

11.  Bribery  and  espionage 474 

12.  Boycotting  and  blacklisting  by  trade  associations 474 

METHODS   OF   COMPETITION   PROHIBITED   BY   DECREES   UNDER  THE 

SHERMAN   LAW. 

13.  General  statement 478 

14.  Price  cutting 479 

In  general 479 

Bonuses 479 

15.  Price  discrimination 479 

In  general 479 

Between  localities  (local  price  cutting) 479 

Between  a  competitor's  customers  and  its  own  customers 480 

Between  stockholders  and  nonstockholders 481 

Between  competitors  and  noncompetitors 481 

Between  customers  who  purchase  a  specified  quantity  of  goods 

and  those  who  do  not 481 

16.  Bogus  independents 481 

17.  "Fighting  ships,"  ' 'fighting  brands,"  and  "flying  squadrons" 482 

"Fighting  ships" 482 

' '  Fighting  brands  " 483 

"Flying  squadrons " 484 

18.  Exclusive  dealing 484 

Contracts  for  exclusive  dealing 484 

Refusal  to  deal  save  on  exclusive  terms 485 

1!).  Use  of  certain  articles  as  a  condition  of  purchase  or  use  of  other 

articles 486 

Utilizing  a  patent  to  control  the  sale,  etc.,  of  unpatented  articles.  486 
Requiring  the  purchase  of  certain  unpatented  articles  as  a  con- 
dition   of    purchasing    other    unpatented    articles    ("full-line 

forcing  ") 486 

20.  Inducing  breach  of  competitors'  contracts 487 

21.  Espionage  by  corruption  or  bribery  of  employees 487 

22.  Boycotting  and  blacklisting  by  trade  associations 488 

Unlawful  objects 488 

Boycotts 490 

Black  lists 490 

White  lists — Lists  of  apjn'oved  manufacturers  and  dealers 491 

23.  Defamation  of  competitors  and  disparagement  of  competitors'  goods. .  492 

24.  Preventing  competitors  from  obtaining  raw  material  or  machinery 493 


CONTENTS.  Xm 

Page. 

Sec.  25.  Coercion,  threats,  and  intimidation 494 

Threats  to  establish  competing  plants 494 

Thi-eats  to  sue  for  infringement  of  patents 495 

26.  Miscellaneous 495 

Retention  of  competitor's  property 4J5 

Purchase  of  stock  for  the  purpose  of  harassing  a  competitor 495 

FEDERAL  TRADE  COMMISSION  ACT  AND  OTHER  ACTS  RELATING  TO  METHODS 

OF   COMPETITION. 

27.  Federal  Trade  Commission  Act 495 

28.  Clayton  Antitrust  Act 496 

29.  The  Act  to  Regulate  Commerce 498 

30.  Legislation  prohibiting  importation  of  articles  bearing  decepti\-e  trade 

descriptions 501 

CHAPTER     IX.— STATE     STATUTES     CONCERNING     UNFAIR 
COMPETITION  AND  CERTAIN  RELATED  TRADE  PRACTICES. 

Sec.    1.  Introduction 502 

2.  Bribery  of  employees 504 

3.  Adoption  of  corporate  names  already  in  use 505 

General  statement 505 

Domestic  corporations 506 

Foreign  corporations 507 

4.  Unauthorized  use  of  names  of  corporations  or  individuals 508 

Individual  names 508 

5.  Counterfeiting  or  fraudulent  use  of  labels,  marks,  and  brands 508 

Counterfeiting 508 

Fraudulent  use  of  genuine  labels,  marks,  and  brands 509 

6.  Passing  off  .the  goods  of  one  person  or  corporation  as  those  of  another. .  510 

7.  Enticement  of  employees 510 

8.  Use  of  trading  stamps 511 

General  statement 511 

Legislation  prohibiting  the  use  of  trading  stamjjs 512 

Statutes  regulating  the  use  of  trading  stamps 516 

9.  False,  deceptive,  or  misleading  advertising 517 

False  or  misleading  advertisements  of  newspapers  respecting  their 

circulation 52^ 

10.  Misbranding  or  falsely  marking  goods 521 

General  statement 521 

Statutes  applying  to  all  goods 521 

Statutes  appl>dng  to  particular  articles  or  commodities 522 

11.  Conducting  business  under  an  assumed  or  fictitious  name 526 

12.  Placing  handbills,  circulars,  etc..  in  newspapers  and  magazines  with- 

out the  consent  of  the  publisher '528 

CHAPTER  X.— UNFAIR   COMPETITION    IN    FOREIGN   COUN- 
TRIES. 

Sec.    1.  Introductory 529 

Character  of  the  law 529 

Forms  of  unfair  competition 530 

Basic  legal  ideas 530 

Method  of  presentation 531 

Countries  considered 532 

General  comparison  of  European  systems  of  law 532 

International  law 533 


XIV  CONTENTS. 

Page. 

Sec.    2.  England  and  Colonies 533 

Bribety  of  employees 534 

Exclusive  contracts  (tying  clauses) 539 

Intimidation  by  threats  of  infringement  suits. 543 

Legislation  affecting  the  use  of  trading  stamps 544 

Confusion  of  corporate  names 546 

Misbranding  or  falsely  marking  goods 546 

Falsely  marking  gold  ware 548 

I^Iiscellaneous  statutes  regarding  false  marking 548 

False  or  misleading  advertisements 549 

Dumping 550 

The  Australian  Industries  Preservation  Act,  1906-1910 551 

Egypt 556 

Penal  Code 556 

3.  France 557 

General  principles 557 

SPECIAL   LAWS. 

Law  of  1824 560 

Law  of  1844 562 

Law  of  1857 562 

Law  of  1905 567 

Laws  of  1886  and  1912 568 

GENERAL   PROVISIONS. 

Confusion  as  to  establishment 569 

Confusion  as  to  product 573 

Substitution  of  one  product  for  another 574 

Defamatory  and  diKparaging  statements 575 

Price  cutting 579 

Deceptive  advertising 580 

Usurpation  of  titles 581 

Discrimination  against  a  competitor 582 

CoiTupting  employees 583 

Divulging  secrets 585 

Disloyalty  of  former  employees 585 

Subsidizing  striking  employees  of  competitor 586 

Implied  obligation  not  to  reenter  business 586 

4.  Belgium 588 

Introductory 588 

Penal  Code 588 

Trade-mark  law 589 

General  provisions  of  the  Civil  Code 590 

Defamatory  and  disparaging  statements 590 

Price  cutting 591 

Di.sloyalty  of  former  employees 593 

Enticing  employees 594 

5 .  Italy 595 

Introductory 595 

Penal  Code 596 

Law  of  August  30,  1868 596 

Law  of  October  30,  1859 597 


CONTENTS.  XV 

Sec.  5.  Italy — Continued.  Page. 

Civil  Code 598 

Enticing  customers 598 

Deceptive  advertising .- 599 

Misrepresentation 599 

Divulging  trade  secrets 599 

Disparaging  statements 599 

Assuming  or  imitating  distinctive  designations  of  another . . .  600 

6.  Spain 601 

Penal  Code 601 

Law  concerning  industrial  property 601 

7 .  Portugal .^  605 

8.  The  Netherlands T  606 

Penal  Code 606 

Civil  Code 607 

9 .  Switzerland 610 

Introductory 610 

Law  of  Obligations 611 

Trade-mark  law  of  September  26,  1890 613 

Federal  decree  of  May  8,  1914,  relating  to  foodstuffs 614 

Cantonal  laws 614 

Unfair  competition  law  of  Zurich , 615 

Unfair  competition  law  of  Neuchatel 616 

Unfair  competition  law  of  Aargau 618 

10.  Germany 620 

Introductory 620 

SPECIAL  LAWS. 

Patent  law 621 

Trade-mark  law 621 

Unfair  competition  law  of  1896 622 

Unfair  competition  law  of  1909 623 

General  clause 623 

Deceptive  advertising 624 

Bankrupt  and  closing-out  sales 628 

Deception  concerning  quantity  or  quality  of  goods 633 

Bribing  or  corrupting  employees 634 

Disparagement  or  misrepresentation 636 

Misappropriation  of  designations 639 

Unauthorized  disclosure  of  trade  secrets 642 

Administrative  provisions 646 

GENERAL  PROVISIONS. 

Cutting  fixed  resale  prices 650 

Compelling  price  maintenance  by  boycott  or  intimidation 653 

Enticing  customers - 654 

Subsidizing  a  strike  against  competitors 655 

Compelling  exclusive  patronage 655 

Disloyalty  of  former  employees 656 

Disparagement 656 

Implied  disparagement 658 

Deceptive  advertising 658 

Creating  confusion 659 

Arbitration  boards 661 

Regulations  of  the  Berlin  Board  of  Arbitration 662 

30035°— 16 II 


XVI  ■      CONTENTS. 

Page. 

Sec.  11.  Austria 663 

Introductory -.  663 

Penal  Code 664 

Trade  law  of  March  15,  1883 664 

Trade-mark  law 667 

Law  regulating  closing-out  sales 667 

Copyright  law 668 

Foodstuffs  law  of  January  16,  1896 668 

12.  Hungary 670 

13.  Denmark '. 670 

Penal  Code 670 

•          Unfair  competition  law  of  1912 671 

14.  Norway 675 

Penal  Code 675 

Trade-mark  law 676 

15.  Sweden 677 

16.  Russia 678 

Copyright  law 678 

Code  of  Manufacture 678 

Penal  Code 678 

17.  Greece 679 

Penal  Code 679 

Unfair  competition 680 

18.  Roumania 684 

Trade-mark  law 684 

19.  Bulgaria 685 

Penal  Code 685 

Trade-mark  law 685 

20.  Turkey 686 

Penal  Code 686 

Trade-mark  law 686 

21 .  Brazil 687 

Penal  Code .• 687 

Decree  of  November  3,  1897 688 

Trade-mark  law  of  September  24,  1904 688 

Decree  of  January  10,  1905 689 

Customs  law  of  November  14,  1899 691 

22.  Argentina 691 

23.  Chile 692 

Penal  Code 692 

Trade-mark  law  of  November  12,  1874 692 

Trade-mark  law  of  October  24,  1898 693 

24.  Peru 693 

25.  Japan 694 

Civil  Code 694 

Penal  Code 694 

Commercial  Code 695 

Trade-mark  law 695 

Patent  law 696 

Law  of  designs 696 

26.  Internati(mal  agreements  regarding  unfair  competition 697 

Introductory 697 

International  Union  for  the  Protection  of  Industrial  Property 697 


CONTENTS.  XVII 

Sec.  26.  International  agreements  regarding  unfair  competition — Continued.  Page. 
International  agi-eement  for  the  prevention  of  false  indication  of 

origin  on  goods 700 

International  agreement  regarding  the  registration  of  trade-marks. .  700 

Association  for  Creating  a  World  Trade-Mark 701 

Berne  agreement  for  the  protection  of  works  of  literature  and  art.  701 

Middle-European  Economic  Association 701 

Sixth  International  Congress  of  Chambers  of  Commerce  and  Com- 
mercial and  Industrial  Associations 1 702 

Fourth  International  American  Conference  at  Buenos  Aires 703 

CHAPTER  XL— ACTIVITIES  OF  TRADE  ASSOCIATIONS  AND 
THEIR  RELATION  TO  LAWS  CONCERNING  COMPETITION. 

Sec.    1.  Introductory 705 

GENERAL   CHARACTER   AND   PURPOSE    OF   TRADE   ASSOCIATIONS. 

2.  Classification  of  trade  associations 705 

3.  Association  acti^■ities  looking  toward  general  promotion  of  the  industry.  706 

4.  Publicity  of  product,  cooperative  advertising i    706 

5.  Price  control 707 

6.  Fixing  the  channels  of  trade;  opposition  to  "direct  selling";  the  "ir- 

regular" dealer 707 

7.  Uniform  terms 708 

8.  Marketing  and  other  cooperative  associations 708 

9.  Standardizing  materials,  processes,  or  products 709 

10.  Standard  cost  accounting 709 

11.  Impro\'ing  processes  or  product;  technical  activities 709 

12.  Credit  bureaus 709 

13.  Collection  agencies 710 

14.  Traffic  matters 710 

15.  Labor  matters 711 

16.  EmplojTnent  bureaus  and  clearance  cards 712 

17.  Apprenticeship  and  trade  education 712 

18.  Legislative  activities 712 

19.  Supplying  insurance  to  members 713 

20.  Foreign  trade 714 

21.  Publications 714 


JUDICIAL  ATTITUDE  TOWARD  ACTIVITIES  OF  TRADE  ASSOCIATIONS  AFFECTING 

COMPETITION. 

22.  Price  control 717 

23.  Prevention  of  sales 724 

24.  Limitation  of  output 729 

25.  Allotment  of  customers  and  division  of  territory 730 

26.  Means  of  accomplishing  association  purposes 731 

27.  Mutual  protection  against  delinquent  debtors 732 

28.  Conclusion 735 

Index 813 


LIST  OF  EXHIBITS. 

■  • 

Page. 

Exhibit  A. — Canadian  Combines  Investigation  Act,  1910 737 

Exhibit  B. — Australian  Industries  Preservation  Act,  1906-1910 746 

Exhibit  C. — Australian  Inter-State  Commission  Act,  1912 756 

Exhibit  D. — German  law  concerning  the  sale  of  potash  salts  of  May  25,  1910. . .  770 
Exhibit  E. — Italian  law  concerning  the  establishment  of  a  compulsory  associa- 
tion for  the  Sicilian  sulphur  industry,  July  15,  1916 781 

Exhibit  F. — Russian  laws  regulating  the  production  and  sale  of  sugar 789 

Exhibit  G. — Roimaanian  law  concerning  the  apportiomnent  of  the  total  require- 
ments of  illuminating  petroleum  among  the  refineries  of  the 

coimtry 794 

Exhibit  H. — Brazilian  coffee  valorization;  agreements,  laws,  etc 797 

Exhibit  I. — German  law  against  imfair  competition  of  June  7,  1909 806 

xvin 


TABLE  OF  CASES. 


AMERICAN,  ENGLISH,  AND  COLONIAL  COURTS. 

Page. 

Aberthaw  Construction  Co.  v.  Ransome,  192  Mass.  434 394 

Acker,  Merrall  &  Condit  Co.  v.  McGaw  et  al.,  144  Fed.  864 428 

Adams  Co.  v.  Knapp,  121  Fed.  34 352 

Addyston  Pipe  &  Steel  Co.  v.  U.  S.,  85  Fed.  271;  175  U.  S.  211 12, 55, 

76, 78, 107, 112, 113,  475, 497 

Adriance,  Piatt  &  Co.  i;.  National  Harrow  Co.  et  al.,  121  Fed.  827 392 

A.  C.  L.  R.  Co.  V.  Finn,  195  Fed.  685 497 

Acme  Silver  Co.  v.  Stacey  Hardware  and  Manufacturing  Co.,  21  Ontario  Reps. 

261 384 

Aikensi;.  Wisconsin,  195  U.  S.  194 195 

Ajelloi;.  Worsley,  L.  R.  (1898),  1  Ch.  274 461 

Alcott  V.  Millar's  Karri  and  Jarrah  Forests  (Ltd.)  et  al.,  91  Law  Times  Reps.  722      383 

Alger  V.  Thacher,  19  Pickering  51 32 

Alger  ■?;.  Keith  etal.,  105  Fed.  105 420 

Allen -y.  Flood,  L.  R.  (1898),  A.  C.  1 345,348 

Althen  v.  Vreeland,  36  Atl.  479 428 

Altman  v.  Royal  Aquarium  Society,  L.  R.  (1876),  3  Ch.  Div.  228 418 

Amber  Size  &  Chemical  Co.  -y.  Menzel,  L.  R.  (1913),  2  Ch.  239 365 

American  Banana  Co.  v.  United  Fruit  Co.,  160  Fed.  184;  166  Fed.  261;  213 

U.S.  347 80,474 

American  Clay  Mfg.  Co.  v.  American  Clay  Mfg.  Co.,  198  Pa.  St.,  189 507 

American  Fibre  Chamois  Co.  v.  Be  Lee,  67  Fed.  329 435 

American  Insurance  Co.  v.  France,  111  111.  App.  382 359,  386 

American  Law  Book  Co.  v.  Edward  Thompson,  84  N.  Y.  Supp.  225 335,337 

American  Malting  Co.  v.  Keitel,  209  Fed.  351;  217  Fed.  672 338, 370,  376 

American  Pin  Co.  v.  Berg  Bros.,  188  Fed.  683 442 

American  Seeding  Machine  Co.  v.  Commonwealth,  152  Ky.  589 165 

American  Stay  Co.  v.  Delaney,  211  Mass.  229 353 

American  Tobacco  Co.  v.  U.  S.     (See  U.  S.  v.) 

American  Waltham  Watch  Co.  v.  Sandman,  96  Fed.  330 436 

Anchor  Electric  Co.  v.  Hawkes,  171  Mass.  101 27 

Andersons.  Jettetal.,  89  Ky.  375 42 

Angle  V.  Chicago,  St.  Paul,  etc.,  Ry.,  151  U.  S.  1 336 

Appeal  of  Huessener  &  Schroeder,  6  Cr.  App.  Rep.  1 73 536 

Applebee  v.  Skiwanek,  140  N.  Y.  Supp.  450 505 

Appleby's  (Alfred)  Twin  Roller  Chain  (Ltd.)  v.  Albert  Eadie  Chain  (Ltd.), 

16  R.  P.  C.  318 395,544 

April  etal.  v.  Bairdetal.,  32  N.  Y.  App.  Div.  226 402 

Arbour  v.  Pittsburgh,  etc.,  Assn.,  35  Pa.  County  Rep.  595 733,735 

Armour  Packing  Co.  i;.  U.  S.,  209  U.  S.  56 497 

Arnheim  v.  Arnheim,  59  N.  Y.  Supp.  948 438 

Arnot  V.  The  Pittston  &  Elmira  Coal  Co.,  68  N.  Y.  558 38 

Ashley  t'.  Dixon,  48  N.  Y.  430 342 

Atcheson  r.  Mallon,  43  N.  Y.  147 53 

Atlas  Assurance  Co.  (Ltd.)  v.  Atlas  Insurance,  138  Iowa  228 437 

XIX 


XX  TABLE   OF   CASES. 

Page. 

Attorney  General  v.  Consolidated  Gas  Co.,   124  N.  Y.  App.  Div.  401 147 

Attorney  General  v.  National  Cash  Register  Co.,  148  N.  W.  420. .  148, 336,  386,  390, 406 
Attorney  General  of  the  Commonwealth  of  Australia  v.  Adelaide  Steamship 

Co.  (Ltd.)  etal.,  L.  R.  (1913),  A.  C.  781 236,245,418 

Axmanni;.  Lund,  L.  R.  (1874)  18  Eq.  330 394 

Bachelder  &  Co.  v.  Bachelder,  220  Mass.  42 426 

Bailey  v.  Master  Plumbers,  103  Tenn.  99 395,  398, 719,  726 

Bairdi;.  Smith,  128  Tenn.  410 160 

Baker  &  Co.  v.  Slack,  130  Fed.  514 435,438 

Baker  (Walter)  &  Co.  (Ltd.)  v.  Baker,  77  Fed.  181 438 

Bsier  (Walter)  &  Co.  (Ltd.)  r.  Baker,  87  Fed.  209 438 

Baker  (Walter)  &  Co.  v.  Gray,  192  Fed.  921 435 

Baker  (Walter)  &  Co.  (Ltd.)  v.  Sanders,  80  Fed.  889 438 

Bald  Eagle  Valley  Ry.  Co.  et  al.  v.  Nittany  Valley  Ry.  Co.  et  al.,  171  Pa.  284.      414 

Ball  ^.  Best,  135  Fed.  434 438 

Ballin  v.  The  Fourteenth  Street  Store,  123  N.  Y.  App.  Div.  582;  195  N.  Y.  580.  504, 505 
Baltimore  Life  Insurance  Co.  v.  Gleisner  and  The  Commonwealth  Beneficial 

Assn.,  202  Pa.  St.  386 377,  386 

Barataria  Canning  Co.  v.  Joulian,  80  Miss.  555 174 

Barley  V.  Walford,  9  A.  &  E.  197 460 

Barnes  t!.  Pierce,  164  Fed.  213 435 

Bates  Numbering  Machine  Co.  v.  Bates  Mfg.  Co.,  178  Fed.  681 437 

Batty  1).  Hill,  1  H.  &  M.  Ch.  Cas.  264 388,550 

Beali).  Chase  etal.,  31  Mich.  490 27,33 

Beard  et  al.  v.  Dennis,  3  Indiana  200 32 

Beattyi;.  Coble,  142  Ind.  329 427 

Beck  et  al.  v.  Indianapolis  Light  &  Power  Co.,  36  Ind.  App.  600 411 

Beckett.  S.  S.  HepworthCo.,  129  N.  Y.  App.  Div.  914 505 

Bee  Publislung  Co.  v.  World  Publishing  Co. ,  82  N .  W.  28 373 

Beekmanv.  Marsters,  80  N.  E.  817 340 

Behre  v.  National  Cash  Register  Co.,  100  Ga.  213 372 

Bell  a;.  Midland  Ry.  Co.,  10  C.  B.  287 409 

Bell  &  Bogart  Soap  Co.  -y.  Petrolia  Mfg.  Co.,  54  N.  Y.  Supp 353 

Bement  v.  National  Harrow  Co.,  186  U.  S.  70 471 

Bender  et  al.  v.  Enterprise  Mfg.  Co.,  156  Fed.  641 446 

Benton  v.  Pratt,  2  Wend.  385 337 

Berridge  v.  Billinghurst,  Law  Joiu-nal,  Sept.  26,  1914,  p.  542 380 

BenyiJ.  Donovan,  188  Mass.  353 341 

Bessire  &  Co.  v.  Corn  Products  Manufacturing  Co.,  94  N.  E.  353 416 

Birmingham  Vinegar  Brewery  Co.  (Ltd.)  v.  Powell,  L.  R.  (1897)  A.  C.  710 449 

Bishop  V.  American  Preservers'  Co.,  157  111.  284 65 

Bishop  V.  Palmer  etal.,  146  Mass.  469 32 

Bissell  Chilled  Plow  Works  v.  T.  M .  Bissell  Plow  Works,  121  Fed.  357 433 

Bitterman  v.  Louisville  &  Nashville  R.  R.  Co.,  207  U.  S.  205 338 

Bixbyr.  Dunlap,  56  N.  H.  456 348 

Blauner  et  al.  v.  The  Williams  Co.,  36  N.  Y.  Misc.  173 411 

Bleistoiu  v.  The  Associated  Press,  136  N .  Y.  662 416 

Bloomington,  City  of ,  i;.  Wahl,  46  111.  489 57 

Blumhardti;.  Rohr,  70  Md.  328 371 

Board  of  Trade  1).  Cella  Commission  Co.  etal.,  145  Fed.  28 368 

Board  of  Trade  v.  Christie  Grain  &  Stock  Co.,  198  U.  S.  236 368 

Board  of  Trade  v.  Hadden-Krull  Co.  etal.,  109  Fed.  705 368 


TABLE   OF   CASES.  XXI 

Page. 

Board  of  Trade  v.  Tucker,  221  Fed.  305. 368 

Boggs  V.  Duncan-Schell  Furniture  Co.  et  al.,  163  Iowa  106 456 

Bohn  Mfg.  Co.  v.  W.  G.  Hollis  et  al.,  54  Minn.  223 401,  724,  731 

Boosing  V.  Dorman,  148  N.  Y.  App.  Div.  824 362 

Boots  V.  Grundy,  16  Times  Law  Reps.  457 395,404 

Bosi  V.  New  York  Herald  Co.,  68  N.  Y.  898 376 

Boston  Diatite  Co.  v.  Florence  Mfg.  Co.  et  al.,  114  Mass.  69 377,  394 

Boston  Glass  Manufactory  v.  Binney,  4  Pick.  428 346 

Boswell  V.  Mathie,  11  Sess.  Cas.  (4th  series)  1072 454 

Bourlier  Bros.  v.  Macauley,  91  Ky.  135 342 

Boutwell  et  al.  v.  Marr  et  al.,  71  Vt.  1 402 

Bovi-il  (Ltd.)  V.  Metrakos  et  al.,  17  La  Revue  de  Jiu-isprudence,  32 447 

Bowen  v.  Hall,  L.  R.  (1881)  6  Q.  B.  Div.  333 343, 344, 345,  348 

Bowen  v.  Speer,  166  S.  W.  1183 341 

Bowser  et  al.  v.  Bliss  et  al.,  7  Blackford  344 32 

Boynton  v.  Remington,  3  Allen  397 374 

Boynton  v.  Shaw  Stocking  Co.,  15  N.  E.  507 374 

Boyson  v.  Thorn,  33  Pac.  492 342 

Braham  v.  Beachim,  38  L.  T.  Reps.  640 449 

Brandreth  v.  Lance,  8  Paige  23 377 

Bratt  V.  Swift  et  al.,  99  Wis.  579 155 

Brenner  (John)  Brewing  Co.  v.  McGill,  23  Ky.  L.  R.  212 732 

Brewster  v.  Miller's  Sons  Co.  et  al.,  101  Ky.  368 733 

Briggs  (C.  A.)  Co.  v.  National  Wafer  Co.,  215  Mass.  100 436 

Brinsmead  (John)  &  Sons  (Ltd.)  v.  Brinsmead,  30  R.  P.  C.  493 451 

British  American  Tobacco  Co.  v.  British-American  Cigar  Stores  Co.,  211  Fed.  933  436 
British  Empire  Typesetting  Machine  Co.  etc.  v.  Linotype  Co.,  14  Times  Law 

Reps.  253 ;  79  Law  Times  Reps.  8;  81  Law  Times  Reps.  331 381 

British  Legal  Life  Assurance  &  Loan  Co.  (Ltd.)  v.  Pearl  Life  Assurance  Co.  (Ltd.) 

14  Session  Cases  (4th  series)  818 379 

Broadway  &  Locust  Point  Ferry  Co.  v.  Hankey,  31  Md.  346 57 

Brookhm  Distilling  Co.  v.  Standard  Distilling  and  Distributing  Co.,  120  N.  Y. 

App.  Div.  237 163 

Brown  v.  Benzingor,  118  Md.  29 427, 428, 429 

Brown  &  Pacific  Mail  S.  S.  Co.,  5  Blatch  525 8 

Brown  iJ.  Rounsavel,  78  111.  589 410 

Brown  v.  Vannaman,  85  Wis.  451 373 

Brown  &  Allen  et  al.  v.  Jacobs'  Pharmacy  Co.,  115  Ga.  429 399,  731 

Brown  (J.  S.)  Hardware  Co.  v.  Indiana  Stove  Works,  96  Tex.  453 347 

Buchanan  v.  Kerr  et  al.,  159  Pa.  St.  433 397 

Buffalo  Lubricating  Oil  Co.  v.  Everest,  3  How.  Prac.  Rep.  (N.  S.)  179 347 

Burgess  v.  Burgess,  3  De  G.  M.  &  G.  896 451 

Burlington  &  Hudson  County  Ferry  Co.  v.  Davis,  78  Iowa  133 57 

Burrows  v.  Interborough  Metropolitan  Co.,  156  Fed.  389 147 

Burr's  Damascus  Tool  Works  v.  Peninsular  Tool  Mfg.  Co.,  142  Mich.  417 373 

Butterick  Pul).  Co.  v.  Fisher,  203  Mass.  122 411 

Butterick  Publisliing  Co.  v.  Rose,  141  Wis.  533 173 

Buzby  V.  Keysone  Oil  &  Mfg.  Co.,  206  Fed.  136 437 

Cade  V.  Daly,  Irish  Reports  Chancery,  1910,  p.  306 235 

Cady  tJ  Schultz,  19  R.  I.  193 444 

Caldwell  v.  City  of  Alton,  37  111.  416 57 

California  Steam  Navigation  Co.  v.  Wright,  6  Cal.  258 35 

Calor  on  &  Gas  Co.  v.  Franzcll,  128  Ky.  715 414 

Canal  Co.  v.  Clark,  13  Wall.  311 431 


XXII  TABLE    OF    CASES. 

Page. 

Caribonum  Co.  v.  Le  Couch,  109  Law  Times  Reps.  385 365 

Carroll  v.  Giles,  30  S.  C.  412 35 

Carter  v.  Producers'  Oil  Co.  (Ltd.  ),  182  Pa.  St.  551 364 

Catt  V.  Tourle,  L.  R.  (1869)  4  Ch.  App.  654 417 

Cellular  Clotliing  Co.  (Ltd.)  v.  Maxton  &  Murray,  L.  R.  (1899)  A.  C.  326 447 

Celluloid  Mfg.  Co.  v.  Cellonite  Mfg.  Co.,  32  Fed.  94 437 

Central  Lumber  Co.  v.  South  Dakota,  226  U.  S.  157 192 

Central  New  York  Telephone  &  Telegraph  Co.  v.  Averill  et  al.,  199  N.  Y.  128  412-13 

Central  Ohio  Salt  Co.  v.  Guthrie,  35  Ohio  St.  666 48 

Central  Railroad  Co.  et  al.  v.  Collins  et  al.,  40  Ga.  582 58 

Central  Shade  Roller  Co.  v.  Cushman,  143  Mass.  353 54,  55, 414 

Chadwicki).  Covell,  151  Mass.  190 354 

Chambers  et  al.  v.  Baldwin,  91  Ky.  121 342 

Chapin  v.  Brown  Bros. ,  83  Iowa  156 51 

Chappel-y.  Brockaway,  21  Wend.  157 35,37 

Charleston  Natural  Gas  Co.  v.  Kanawha  Natural  Gas,  Light  &  Fuel  Co.  et  al., 

58W.  Va.  22 41 

Charlton  v.  The  New  Castle  &  Carlisle  Ry.  Co.  and  the  Northeastern  Ry.  Co.,  5 

Jurist,  N.  S.  1096 238 

Cheavin  v.  Walker,  L.  R.  (1877),  5  Ch.  Div.  850 455 

Chesapeake  &  Ohio  Fuel  Co.  v.  U.  S.,  105  Fed.,  93;  115  Fed.,  610 109,  722 

Chiatovich  ?;.  Hanchett  et  al.,  88  Fed.  873 457 

Chicago,  City  of,  v.  Rumpff  etal.,  45  111.  90 ^ 57 

Chicago  Gas  Light  &  Coke  Co.  v.  Peoples  Gas  Light  &  Coke  Co.,  121  111.  530. . .  41 
Chicago,  Milwaukee  &  St.  Paul  Railway  Co.  v.  Wabash,  St.  Louis  &  Pacific  Rail- 
way Co.,  61  Fed.  993 42 

Chicago,  St.  Louis  &  Northern  R.  R.  Co.  v.  Pullman  Southern  Car  Co.,  139  U. 

S.  79 ". 413 

Chicago,  Wilmington  &  VermiUon  Coal  Co.  et  al.  v.  People,  214  111.  421 165,  718 

Chickering  et  al.  v.  Chickering  &  Sons  et  al.,  215  Fed.  490 439 

Chiu-ton  V.  Douglas,  1  Johnson's  Chan.  Reps.  174 424 

Cincinnati  Bell  Foundry  Co.  v.  Dodds  et  al.,  10  Ohio  Decisions,  Reprint  154. . .  352 
Citizens  Light,  Heat  &  Power  Co.  v.  Montgomery  Light  &  Water  Power  Co.,  171 

Fed.  553 145,335,341,376 

Clark  V.  Crosby,  37  Vt.  188 411 

Clark  7).  Frank,  17  Mo.  App.  602 35 

Clark  Thread  Co.  v.  Armitage,  67  Fed.  896 431 

Clarkson  v.  The  Book  Supply  Co.,  170  111.  App.  86 371 

Cleland  v.  Anderson,  66  Nebr.,  252 726,727,731 

Cleveland  Retail  Grocers  Assn.  v.  Exton,  18  Ohio  C.  C.  321 732 

Clip  Bar  Mfg.  Co.  v.  Steel  Protected  Concrete  Co.,  209  Fed.  874 393 

Cohen  v.  Bell,  1910  Transvaal  Leader  Law  Reps.  331 379 

Cohen  v.  Kuschke  &  Co.  and  Koenig,  16  Times  Law  Reps.  489 422 

Coleman  v.  Southwick,  9  Johns  44 380 

Coca-Cola  Co.  v.  Branham  et  al.,  216  Fed.  264 441 

Coca-Cola  Co.  v.  Gay-Ola,  200  Fed.  720 434 

Colles  V.  Trow  City  Directory  Co.  et  al.,  11  Hun  397 458 

Collins  V.  American  News  Co.  et  al.,  69  N.  Y.  Supp.  638;  74  N.  Y.  Supp.  1123..  458 

Collins  V.  Commonwealth,  141  Ky.  564;  234  U.  S.  634 165 

Collins -y.  Locke,  L.  R.  (1879),  A.  C.  674 234 

Colton  V.  Deane,  7  N.  Y.  S.  R.  78 444 

Colton  V.  Thomas,  7  Phila.  257 444 

Columbia  v.  Lusk,  Ct.  Com.  Pleas,  Richmond  Co.,  S.  C,  September,  1909 515 


TABLE   OF   CASES.  XXHI 

•  Page. 

Commonwealth  v.  Emerson,  165  Mass.  146 513 

Commonwealth  v.  Gibson,  125  Ky.  401 515 

Commonwealth  v.  Grinstead,  108  Ky .  59 164 

Commonwealth  v.  Hodges,  137  Ky.  233 165 

Commonwealth  v.  International  Harvester  Co.  of  America,  131  Ky.  551;  137  Ky. 

668;  144  Ky.  403;  147  Ky.  564;  234  U.  S.  216 165 

Commonwealth  v.  Moorhead,  7  Pa.  Co.  Ct.  513 513 

Commonwealth  v.  Sisson,  178  Mass.  578 514 

Commonwealth  v.  Strauss,  191  Mass.  545 184 

Concaris  v.  Duncan  &  Co.  (1909),  Weekly  Notes,  51 286 

Connolly  v.  Union  Sewer  Pipe  Co.,  184  U.  S.  540 95,  97 

Consumers  Cordage  Co.  v.  Connolly,  31  Can.  Sup.  Ct.  Reps.  244 240 

Continental  Insurance  Co.  v.  Board  of  Fire  Underwriters  of  the  Pacific  et  al., 

67  Fed.  310 370,  377,  403,  731 

Continental  Securities  Co.  -?;.  Interborough  Rapid  Transit  Co.,  165  Fed.  945 147 

Continental  Wall  Paper  Co.  v.  Louis  Voight  &  Sons  Co.  148  Fed.  939;  212  U.  S. 

227 91,  92, 113, 117 

Cook  &  Bemheimer  Co.  v.  Ross  et  al.,  73  Fed.  203 443 

Cooper  i'.  .Twib ill,  3  Camp.  285n 417 

Copeland-Chatterson  Co.  v.  Business  Systems  (Ltd.),  8  Ont.W.R.  888;  10  Ont. 

W.  R.  819 367 

Corning,  in  re,  51  Fed.  205 466 

Corn  Products  Refining  Co.  v.  Oriental  Candy  Co.,  168  111.  App.  585 415-416 

Cote  z).  Murphy  etal.,  159  Pa.  St.  420 397 

Cottrell  V.  Babcock  Printing  Press  Mfg.  Co.,  54  Conn.  122 424, 429 

Courage  &  Co.  v.  Carpenter,  L.  R.  (1910)  1  Ch.  Div.  262 417 

Cousins  V.  Merrill,  16  Upper  Canada  C.  P.  114 379 

Covell  V.  Chadwick,  153  Mass.  263 354 

Craft  et  al.,  v.  McConoughy,  79  111.  346 49 

Craig  t;.  Dowding,  25  R.  P.  C.  259 395 

Cravens  v.  Carter  Crume  Co.,  92  Fed.  479 108 

Croft  V.  Day,  7  Beav.  84 452 

Croft  I'.  Richardson,  59  How.  Prac.  Reps.  356 393 

Crowther  v.  United  Flexible  Metallic  Tubing  Co.  (Ltd.),  22  R.  P.  C.  549 380 

Crump  t'.  Commonwealth,  84  Va.  927 406 

Crutcher  &  Starks  et  al.  v.  Starks  et  al. ,  161  Ky .  690 437 

Cruttwell  V.  Lye,  17  Vesey  335 423 

Cumberland  Glass  Mfg.  Co.  v.  De  Witt,  87  Atl.  927 340 

Cumberland  Telephone  &  Telegraph  Co.  v.  State  rel.  Atty.  General,  100  Miss. 

102 413 

Cummings  v.  Union  Blue  Stone  Co.  et  al.,  164  N.  Y.  401 176 

Curl  Bros.  v.  Webster,  L.  R.  (1904),  1  Ch.  Div.  685 430 

Daniel  v .  Swearingen,  6  S .  C .  297 348 

Darcy  v.  Allein,  11  Coke  84b 2,  63 

Davey  v.  Davey,  50  N.  Y.  Supp.  161 371 

Davis  t;.  New  England  Railway  Publishing  Co.  et  al.,  203  Mass.  470 387 

D.  C.  iJ.  Gregory,  35  Apps.  D.  C.  271 ■--  513 

D.  C.  1).  Kraft,  35  Apps.  D.  C.  253 513 

Deering  Harvester  Co.  v.  WTiitman  &  Barnes  Mfg.  Co.,  91  Fed.  376 446 

De  Francesco  v.  Barnum,  63  Law  Times  514 348 

De  Jong  V.  B.  G.  Behiman  Co.  etal.,  131  N.  Y.  Supp.  1083 347 

Delaware,  Lackawanna  &  Western  Ry.  Co.  v.  Frank  et  al. ,  110  Fed.  689 338 

Delz  V.  Winfree,  6  Tex.  Civ.  App.  11 733 

Denaby  &  Cadeby  Collieries  v.  Yorkshire  Miners'  Assn. ,  L.  R.  (1906)  A.  C.  384  . .  344 


XXrV  TABLE   OF   CASES. 

•  '  Page. 

Denney  v.  Northwest  Credit  Association,  55  Wash.  331 732,  733 

Denver  v.  Frueauff ,  39  Colo.  20 513 

Denver  Jobbers'  Assn.  etal.,  v.  People  ex  rel  Dickson,  Atty.  Gen.  122Pac.  405..       718 

De  Witt  Wire-Cloth  Co.  v.  New  Jersey  Wii-e  Cloth  Co.,  14  N.  Y.  Supp.  277 45 

Diamond  Match  Co.  v.  Roeber,  106  N.  Y.  473 29 

Distilling  &  Cattle  Feeding  Co.  v.  People,  156  111.,  448 67 

Dittgen  v.  Racine  Paper  Goods  Co.,  164  Fed.  85;  171  Fed.  631 390,  392 

Dodge  Co.  V.  Construction  Information  Co.  et  al.,  183  Mass.  62 368 

Doherty  &Co.  v.  Rice  etal.,  186  Fed.  204 152 

Dolph  V.  Troy  Laundry  Co.  28  Fed.  553 53 

Donovan  i;.  Pa.  Co.,  199  U.  S.  279 413 

DooLing  V.  B.udget  Publishing  Co.,  144  Mass.  258 376 

Doremus-i;.  Hennessy,  62  111.  App.  391;  Affd.  176  111.  608 338,395,400,406 

Dorn  &  McGinty  et  al.  v.  Cooper,  117  N.  W.  1;  127  N.  W.  661 371 

Doty^.  Martin,  32  Mich.  462 35 

Downs  V.  Bennett  et  al.,  63  Kans.  653 726,  731 

Downs -y.  U.  S.,  ]87U.  S.  496 289 

Dr.  Miles  Medical  Co.  v.  John  D.  Park  &  Sons  Co.,  220  U.  S.  373 119 

Dr.  Miles  Medical  Co.  v.  Piatt,  142  Fed.  606 340 

Drake  Hardware  Co.  v.  Wrought-Iron  Range  Co.,  78  N.  Y.  Supp.  1114 407 

Dredge  v.  Parnell,  13  R.  P.  C.  392 395,  544 

Drexel,  ex  parte,  147  Cal.,  763 516 

Du  Cros  (W.  &G.)v.  Gold,  29  Times  Law  Reps.  163 454 

Dudley  v.  Briggs,  141  Mass.,  582 386 

Dueber  Watch  Case  Mfg.  Co.  v.  Howard  Watch  Co.,  66  Fed,  637 475 

DueberWatchCaseMfg.  Co.  1).  Howard  Watch  &  Clock  Co.  et  al.,  24  N.  Y. 

Supp.  047 475 

Duffey  et  al.  v.  Shockey,  11  Indiana  70 33 

Dunlopetal.  v.  Gregory  et  al.,  ION.  Y.  241 32 

Dunlop's  Cable  News  Co.  v.  Stone,  15  N.  Y.  Supp.  2 416 

Dunlop  Pneumatic  Tyre  Co.  v.  Dunlop  Motor  Co.,  L.  R.  (1907)  A.  C.  430 450 

Dunshee  v.  Standard  Oil  Co.  et  al.,  152  Iowa  618;  165  Iowa  625 460 

Dust  Sprayer  Mfg.  Co.  v.  Western  Fruit  Grower,  126  Mo.  App.  139 376 

Du  Toit  V.  Robinsky  &  Gotz,  2  South  Africa  Reps.  Cape  Prov.  Div.  307 384 

Dwight-i;.   Hamilton,  113  Mass.  175 427 

Eastern  Extracting  Co.  v.  Greater  New  York  Extracting  Co.,  126  N.  Y.  App. 

Div.  928 349,  350,  354 

Eastern  Outfitting  Co.  !).  Manheim  et  al.,  110  Pac.  23 437 

Eastman  Kodak  Co.  v.  Reichenbach  et  al. ,  79  Hun.  183 349, 354,  355 

Eastman  Photographic  Materials  Co.  (Ltd.)  et  al.  v.  John  Griffith's  Cycle  Corp'n 

(Ltd.)  etal.,  15  R.  P.  C.  105 450 

Eastern  States  Lumber  Dealers'  Assn.  v.  U.  S.,  234  U.  S.,  GOO 476,  490,  714,  728 

Economist  Furnace  Co.  v.  Wrought  Iron  Range  Co.  et  al.,  86  Fed.  1010 407 

Electric  Renovator  Mfg.  Co.  v.  Vacuum  Cleaner  Co.  et  al.,  189  Fed.  754 390,  392 

Elgin  National  Watch  Co.  v.  Illinois  Watch  Case  Co.,  179  U.  S.  605 432 

Elkins-i).  Camden  &  Atlantic  Railroad  Co.,  36  N.  J.  Eq.  5 60 

Elliott  &  Co.  (Ltd.)  V.  Hodgson,  19  R.  P.  C.  518 455 

Elliott  Machine  Co.  v.  Center,  227  Fed.  124 497 

Emack  v.  Kane  et  al.,  34  Fed.  46 391 

Emery  et  al.  v.  The  Oliio  Caudle  Co.,  47  Ohio  St.  320 44,  718 

Empire  Steam  Laundry  v.  Lozier,  130  Pac.  1180 357, 358, 361 

Employing  Printers  Club  v.  Dr.  Blosser  Co.,  122  Ga.  509 347, 401,  730,  731 

Enfield  Toll  Bridge  Co.  v.  Hartford  &  New  Haven  R.  R.  Co.,  17  Conn.  40 57 


TABLE    OF   CASES.  XXV 

Page. 

Eno  V.  Dunn  &  Co.,  10  R.  P.  C.  261 452 

Enterprise  Mfg.  Co.  v.  Landers,  Frary  &  Clark  131  Fed.  240 434, 445 

Evans  v.  Harlow,  5  A.  &  E.  (N.  S.)  Q.  B.  624;  8  Jurist  571 382 

Everett  Piano  Co.  v.  Bent,  60  111.  App.  372 394 

Everett  Piano  Co.  v.  Maus,  200  Fed.  718 376 

Exchange  Telegraph  Co.  v.  Central  News  Co.  et  al.,  L.  R.  (1897)  2  Ch.  48 369 

Exchange  Telegraph  Co.  v.  Gregory  &  Co.,  L.  R.  (1895)  1  Q.  B.  147 344,  369 

Exchange  Telegraph  Co.  v.  Howard  et  al.,  22  Times  Law  Reps.  375 369 

Ex  parte  Drexel,  147  Cal.,  763 516 

Ex  parte  McKenna,  126  Cal.  429 515 

Ex  parte  Hutcliinson  (C.  C.  D.  Oregon),  137  Fed.  950 515 

Ex  parte  Hutchinson  (C .  C .  D .  Washington) ,  137  Fed .  949 515 

Express  Cases,  117  U.  S.  1 •- 413 

Faber  v.  Faber,  124  Fed.  603 433 

Fairbank(N.  K.)  Co.  v.  R.  W.  Bell  Mfg.  Co.,  77  Fed.  869 434 

Fairbank  (N.  K.)  Co.  v.  Dunn,  126  Fed.  227 434 

Fairbank  (N.  K.)  Co.  v.  Luckel,  King  &  Cake  Co.,  102  Fed.  327 441 

Fairbanks'!).  Leary,  40  Wis.  637 50 

Fairbanks  Co.  v.  Windsor,  124  Fed.  200 433 

Fairfield  v.  Lowy  and  another,  207  Mass.  352 426, 428 

Farmers'    Elevator    Co.    v.    Iowa    Implements    Dealers'    Association    et    al. 

(unreported) 399,  725 

Farquhar  Co.(Ltd.)  r.  National  Harrow  Co.,  102  Fed.  714 392 

Faulder  &  Co.  (Ltd.)  v.  Rushton  (Ltd.),  20  R.  P.  C.  477 452 

Faunce  v.  Searles,  142  N.  W.  816 341 

Faust  r.  Rohr,  SIS.  E.  1096 424 

Feigenspan  (Christian)  v.  Nizolek,  65  Atl.  703 411 

Ferris  v.  American  Brewing  Co. ,  155  Ind.  539 411 

Filler  v.  Joseph  Schlitz  Brewing  Co.,  223  Fed.  313 340 

Finck  et  al.,  trustees,  appellants,  v.  Schneider  Granite  Co.,  187  Mo.  244 153 

Findlay  (city  of)  v.  Pertz  etal.,  66  Fed.  427 420,421 

First  National  Bank  of  Jeannette,  Pa.,  v.  Missouri  Glass  Co.,  152  S.  W.  378. . .       470 

Fish  Bros.  Wagon  Co.  v.  La  Belle  Wagon  Works,  82  Wis.  546 429 

Fitch -D.  De  Young,  66  Cal.  339 372 

Fleetwood!'.  Read,  21  Wash.  547 515,516 

Florence  Mfg.  Co.  v.  J.  C.  Dowd  &  Co.,  178  Fed.  73 440 

Fonotipia  Co.  (Ltd.)  et  al.  v.  Bradley,  171  Fed.  951 368 

Ford  etal.  v.  Cliicago  Milk  Sliippers  Assn.,  155  111.  166 173,  718 

Forrest  v.  The  Manchester,  Sheffield  and  Lincolnsliire  Ry.  Co.,  4  De  Gex, 

F.  &  J.  126 461 

Forrest  Photographic  Co.  v.  Hutchinson  Grocery  Co.,  108  S.  W.  768 151 

Forster  Mfg.  Co.  v.  Cutter  Tower  Co.,  97  N.  E.  749 433 

Fort  Worth  &  Denver  (Uty  Ry.  Co.  v.  State,  99  Tex.  34 151 

Foss  V.  Roby,  195  Mass.  292 427, 428 

Fowler.  Park,  131  U.  S.  88 354 

Fralich  v.  Despar,  165  Pa.  24 350 

Francis  etal.  v.  Flinn,  118  U.  S.  385 376 

Francketal.  v.  Frank  Chicory  Co.  etal.,  95  Fed.  818 442 

FrankUn  Bank  of  Cincinnati  v.  Commercial  Bank  of  Cincinnati,  36  Oliio  St. 

350 58 

Franksv.  Weaver,  10  Beav.  297 389 

Frazer  &,  Co.  v.  Bombay  Ice  Manufacturing,  Indian  Law  Rep.,  Bombay  Series 
XXIX,  107 256 


XXVI  TABLE   OF   CASES. 

Page. 

Freisinger  r.  Moore,  65  N.  J.  Law,  286 371 

Fullers.  Hope,  163  Pa.  St.  62 411 

Funck-y.  Farmers'  Elevator  Co.  etal.,  142  Iowa,  621 364,400,725,731 

Gaines  v.  Whyte  Wine  Co. ,  81  S .  W.  648 435 

Gaines  et  al.  v.  Coates,  51  Miss.  335 57 

Gale  V.  Village  of  Kalamazoo,  23  Mich.  344 57 

Gamble  1'.  Montgomery,  147  Ala.  682 515 

Garret  i'.  Taylor,  Cro.  Jac.  567 408 

Garrett  etal.  v.  T.  H.  Garrett  &  Co.  78  Fed.  472 440 

General  Accident  Assurance  Corpn.  (Ltd.)  v.  Miller,  9  Scots  Law  Times,  510..  386 

GeoTgev.  Blow,  20  New  South  Wales  Law  Reps.  395 383 

George  &  Chapman  v.  East  Tennessee  Coal  Co. ,  15  Lea,  455 411 

Ghirardelli  Co.  (D.) -y.  Hunsicker  et  al.,  164  Cal.  355 172 

Gibbs  V.  Baltimore  Gas  Co.  of  Baltimore,  130  U.  S.  396 •  41 

Gibbs  V.  McNeeley,  102  Fed.,  594;  107  Fed.  210;  118  Fed.  120 78, 108,  722,  730 

Gibbs  I).  Smith,  115  Mass.  592 53 

Gillingham  V.  Beddow,  69  L.  J.  Ch.  527 429,430 

Gilly  V.  Hirsh,  122  La.  966 372,408 

Ginesii;.  Cooper  &  Co.,  L.  R.  (1880),  14  Ch.  Div.  596 430 

Glencoe  Sand  &  Gravel  Co.  v.  Hudson  Bros.,  etc.,  40  S.  W.  93 342 

Glenny  v.  Smith,  2  Drewry  &  Smale's  Reps.  476 454 

Globe  &  Rutgers  Fire  Insurance  Co.  v.  Firemen's  Fund  Insurance  Co.  et  al., 

97  Miss.  148 347, 401 

Gloucester  Ferry  Co.  v.  Pennsylvania,  114  U.  S.  196 76 

Gloucester  Isinglass  &  Glue  Co.  v.  Russia  Cement  Co.,  154  Mass.  92 55 

Gompers  et  al.  v.  Rochester,  52  Pa.  St.  194 35 

Gordon  v.  Knott  et  al.,  199  Mass.  173 426 

Gorham  Mfg.  Co.  v.  Emery-Bird-Thayer  Dry  Goods  Co.  et  al.,  92  Fed.  774 363 

Gossard  Co.  v.  Crosby,  132  Iowa,  155 362 

Graham  v.  J.  I.  Case  Threshing  Machine  Co.,  19  Man,  27 420 

Graham  (Peter)  v.  St.  Charles  Street  R.  R.  Co.  et  al.,  47  La.  Ann.  214 457 

Grand  Hotel  Co.  of  Caledonia  Springs  (Ltd.)  v.  Wilson  et  al.,  L.  R.  (1904)  A.  C. 

103 449 

Grand  Union  Tea  Co.  v.  Dodds,  164  Mich.  50 358,  361 

Grand  Union  Tea  Co.  v.  Lewitsky,  116  N.  W.  1090 157 

Grant  r.  Lea\itt,  18  R.  P.  C.  361 438 

GrasselUv.  Lowden,  11  Oliio  St.  349 35 

Green  v.  Archer,  7  Times  Law  Reps.  542 388 

Green  i;.  Davies,  83  N.  Y.App.  Div.  216 372 

Green  v.  The  London  General  Omnibus  Co.,  7  C.  B.  (N.  S.)  290 409 

Greene  (in  re),  52  Fed.  104 466 

Grenada  Lumber  Co.  v.  Mississippi,  217  U.  S.  433 152, 477,  714,  725 

Griffiths  et  al.  v.  Benn,  27  Law  Times  Reps.  346 382 

Grogan?'.  Chaffee,  156  Cal.  611 172 

Guardian  Fire  &  Life  Assurance  Co.   v.   Guardian  &   General   Insurance  Co. 

(Ltd.),  50  L.  J.  Ch.  253 450 

Gunter  V.  Astoretal.,  4  Moore  C.  P.  12 348 

GustFeistCo.  v.  Albertype  Co.,  109  S.  W.  1139 151 

Guth  Chocolate  Co.  v.  Guth,  215  Fed.  750 439 

Gwynn  v.  Citizens  Telephone  Co.,  69  S.  C.  434 413 

Hafer  &  Railway  Co.  etal.,  14  Cin.  Wkly.  Law  Bull.  68 8 

Haggi).  Darley,  47  L.  J.  567 365 


TABLE   OF   CASES.  XXVII 


Hall's  Appeal,  60  Pa.  St.  458 35 

Halsey  v.  Brotherhood,  L.  R.  (1880),  15  Ch.  Div.,  514;  L.  R.  (1881),  19  Ch.  Div. 

386 394 

Hambourg  v.  The  London  Mail  (Ltd.),  Law  Journal,  Oct.  31,  1914,  p.  597 380 

Hamilton  v.  Walters,  4  Upper  Canada  Q.  B.  24 384 

Hamilton  Mfg.  Co.  v.  Tubbs  Mfg.  Co.  216  Fed.  401 346,  353, 441 

Hamlynt).  John  Houston  &  Co.,  L.  R.  (1903)  1  K.  B.  81 423 

Hammond  V.  State,  78  Ohio  St.  15 209 

Hanbury  v.  Cundy,  58  Law  Times  Reps.  155 417 

Harding  v.  American  Glucose  Co.,  182  111.  551 68 

Hare  v.  The  London  &  Northwestern  Ry.  Co. ,  7  Jurist,  N.  S.  1 145 238 

Haribbhai  Maneklal  v.  Sharafali  Isabji,  Indian  Law  Rep.,  Bombay  Series,  Vol. 

XXII,  861 256 

Harkinsons  Appeal,  78  Pa.  St.  196 35 

Harrison  et  al.  v.  Lockart,  25  Ind.  112 35 

Hart  V.  Aldridge,  1  Cowper's  Reps.  54 348 

Hartmanv.  John  D.  Park  &  Sons'  Co.,  153  Fed.  24 118 

Hartnett  v.  Plumbers'  Supply  Assn.,  169  Mass.  229 733,  735 

Hartnett  et  al.  v.  Wilson  et  al.,  1  Victoria  Law  Times,  45 378 

Hartzler  v.  Goshen  Churn  &  Ladder  Co.,  104  N.  E.  34 433,  440 

Harvey  (G.  F.)  Co.  v.  National  Drug  Co.  etal.,  77  N.  Y.  Supp.  674 352 

Haskins^).  Royster,  70  N.  C.  601 348 

Hatchard  r.  Mege,  L.  R.  (1887),  18  Q.  B.  D.  771 378 

Hately  I'.  ElUott,  9  Ont.  Law  Rep.  185 239 

Hawaii  v.  Gunst  &  Co.,  18  Hawaii,  196 516 

Hawarden  v.  The  Youghiogheny  &  Lehigh  Coal  Co.,  Ill  Wis.  545 398,  727 

Hays  r.  Mather,  15  111.  App.  30 373 

Hayward  &  Co.  v.  Hayward  &  Sons,  L.  R.  (1886),  34  Ch.  Div.  198 379 

Hazlehurst  et  al.  v.  Savannah,  Griffin  &  North  Alabama  Railroad  Co.  et  al., 

43  Ga.  13 60 

Hearnetal.  v.  Schuchman,  141  N.  Y.  Supp.  242 505 

Heath  etal.  i;.  American  Book  Co.,  97  Fed.  533 339 

Heaton-Peninsular  Button  Fastener  Co.  v.  Eureka  Specialty  Co.  et  al.,  77  Fed. 

288 472 

Heim  Brewing  Co.  v.  Belinder,  97  Mo.  App.  64 153,734 

Heimbuecher  v.  Goff ,  Homer  &  Co.,  119  111.  App.  373 411 

Helmorei;.  Smith,  L.  R.  (1886),  35  Ch.  Div.  449 370,380 

Heminway  v.  Heminway,  58  Conn.  443 363 

Henkle  et  al.  v.  Schaub,  54  N.  W.  293  373 

Hennessey  et  al.  -u.  Wine  Growers'  Assn. ,  212  Fed.  308 443 

Hennessey  &  Co.  v.  Neary,  19  R.  P.  C.  36 453 

Henry  i;.  A.  B.  Dick  Co.,  224  U.  S.  1 473 

Heriot  v.  Stuart,  1-2  Espinasse  437 382 

Herman  Loog  i).  Bean,  L.  R.  (1884),  26  Ch.  Div.  306 380 

Herreshoff  v.  Boutineau,  17  R.  I.  3 35 

Herring-Hall-Marvin  Safe  Co.  v.  Hall's  Safe  Co.,  208  U.  S.  554 437 

Hewin  v.  Atlanta,  121  Ga.  723 515 

Hilton  V.  Eckersley,  6  El.  &  Bl.  47 234, 246 

Hippisley  t'.  Knee  Bros.,  L.  R.  (1905),  1  K.  B.  1 422 

Hires  v.  Villepigue,  196  Fed.  890 433 

Hodge,  executor,  v.  Sloan,  107  N.  Y.  244 35 

Hoffman  et  al.  v.  Brooks  et  al.,  6  Ohio  Dec.  Reprint  1215 45 


XXVm  TABLE   OF   CASES. 

Page. 

Holbrook  v.  Waters,  9  Howard's  Prac.  335 35 

Holeproof  Hosiery  Co.  v.  Fittsetal.,  167  Fed.  378 440 

Holmes  t'.  CUsby,  118  Ga.  820 370,374 

Holmes,  Booth  &  Haydens  v.  Holmes,  Booth  &  Atwood  Manufacturing  Co.,  37 

Conn.  278 - - 433 

Holt  V.  Henley,  193  Fed.  1020 497 

Home  Telephone  Co.  v.  Sarcoxie  Light  &  Telephone  Co.,  236  Mo.  114 413 

Hooker  i;.  Vandewater,  4  Denio  349 42 

Hookham  v.  Pottage,  27  Law  Times  Reps.  595 454 

Hopkins  v.  United  States,  171  U.  S.  578 77, 85 

Hopkins  Chemical  Co.  v.  Read  Drug  &  Chemical  Co.  of  Baltimore  City,  92 

Atl.  478 375 

Hostetter  Co.  v.  Sommers,  84  Fed.  333 434 

Houck  &  Dieter  1).  Anheuser-Busch  Brewing  Assn.,  88  Tex.  184 149 

Hovenden  &  Sons  v.  Millhoff ,  83  Law  Times  Reps.  41 422 

Howard  v.  Henriques,  5  N.  Y.  Super.  Ct.  Reps.  725 436 

Howe  Scale  Co.  v.  Wyckoff ,  Seamans  &  Benedict,  198  U.  S.  118 439 

Hubbard^).  Miller,  27  Mich.  15 36 

Hubbock  &  Sons  v.  Wilkinson,  Heywood  &  Clark,  L.  R.  (1899),  1  Q.  B.  86..  381,385 

Huessener  &  Schroeder,  Appeal  of,  6  Cr.  App.  Rep.  173 536 

Huff  V.  Watkins,  15  S.  C.  82 348 

Hughes  V.  Howe  Grain  &  Mercantile  Co.,  162  S.  W.  1187 437 

Hughes  V.  McDonough,  43  N.  J.  Law  459 386 

Hulen  V.  Earel,  73  Pac.  927 158 

Humes  v.  Fort  Smith,  93  Fed.  857 515,  516 

Humes  v.  Little  Rock,  138  Fed.  929 515 

Humphrey's  Homeopathic  Medicine  Co.  v.  Bell  et  al.,  2  N.  Y.  S.  R,  78 444 

Hunt  V.  New  York  Cotton  Exchange,  205  U.  S.  322 368 

Hunt,  Pros.  Atty.  of  Wayne  County  v.  Riverside  Cooperative  Club  et  al.,  140 

Mich.  538 719,721,727 

Hunt,  Roope,  Teague  &  Co.  v.  Ehrmann  Bros.,  27  R.  P.  C.  512 455 

Hutchinson,  ex  parte,  137  Fed.  949 515 

Hynds  v.  Fourteenth  Street  Store,  144  N.  Y.  Supp.  1030 373 

Illinois  Commission  Co.  et  al.  v.  Cleveland  Telegraph  Co.  et  al.,  119  Fed.  301. . .  368 

Illinois  Steel  Co.  v.  Brenshall,  141111.  App.  36 340 

In  re  Corning,  51  Fed.  205 466 

In  re  Drouin  et  al.  and  The  United  Shoe  Machinery  Co.  of  Canada,  The  Canadian 

Gazette  Oct.  26,  1912,  pp.  1319,  1323 541 

In  re  Greene,  52  Fed.  104 466 

In  re  National  Starch  Co.'s  Application,  25  R.  P.  C.  802 448 

In  re  Terrell,  51  Fed.  213 466 

In  re  Vintscher,  50  Fed.  459 501 

India  Bagging  Association  v.B.  Kock  &  Co. ,  14  La.  Ann.  168 39 

Ingersoll  et  al.  d.  Goldstein,  93  Atl.  193 183 

International  &  Great  Northern  Ry.  Co.  v.  Greenwood,  2  Tex.  Civ.  App.  76...  457 
International  Harvester  Co.  v.  Commonwealth  of  Missouri,  237  Mo.  369;  234 

U.  S.  199 94,154 

International  Harvester  Co.  of  America  r.  Commonwealth,  131  Ky.  551;  137 

Ky.  668;  144  Ky.  403;  147  Ky.  564;  234  U.  S.  216 165 

International  Silver  Co.  v.  Simeon  L.  &  George  H.  Rogers  Co.  et  al.,  110  Fed. 

955 439 

International  Silver  Co.  v.  WilUam  H.  Rogers,  67  Atl.  105 439 


TABLE    OF    CASES.  XXIX 

Page. 
International  Silver  Co.  v.  William  H.  Rogers  Corporation,  60  Atlantic  187. .  439, 440 

Inter-Ocean  Publishing  Co.  v.  Associated  Press,  184  111.  438 57, 416 

Iron  Moulders'  Union  v.  Allis-Chalmers  Co. ,  166  Fed.  45 341 

Iveson  V.  Moore,  1  Ld.  Raymond  486 409 

Jackson  z).  Morgan  etal.,  94  N.  E.  1021 342,348 

Jackson  et  al.  v.  Stanfield  et  al.,  137  Ind.  592 395, 397, 406,  724 

Jameson  (John)  &  Son  v.  Isaac  Clarke,  19  R.  P.  C.  255 455 

Jarrahdale  Timl^er  Co.  (Ltd.)  v.  Temperley  &  Co.,  11  Times  Law  Reps.  119. . .       385 

Jenkins  Bros.  v.  Kelley  &  Jones  Co.,  212  Fed.  328 446 

Jennings  v.  Jennings,  L.  R.  (1898)  1  Ch.  378 429, 430 

Jersey-Creme  Co.  v.  McDaniel  Bros.  Bottling  Co.,  152  S.  W.  1187 151 

Johns-Manville  (H.  W.)  Co.  v.  Lovell-McConnell  Mfg.  Co.,  212  Fed.  923 458 

Johnsons.  Hitchcock,  3  N.  Y.  Supp.  680 444 

Jones  V.  Baker,  7  Cow.  445 352 

Jones  1).  Lees,  1  H.  &  N.  189 419 

Jones  t;.  North,  L.  R.  19  Eq.  426 234 

Judd  V.  Harrington,  139  N.  Y.  105 412,  722 

Kansas  MilUng  Co.  v.  Kansas  Flour  Mills  Co.,  133  Pac.  542 433 

Kaufmans.  Kaufman,  123  N.  Y.  Supp.  699 439 

Keith  V.  Herchberg  Optical  Co.,  48  Ark.  138 414 

Kelley  v.  Ypsilanti  Dress-Stay  Mfg.  Co.,  44  Fed.  19 393 

Kennedy  v.  Press  Publisliing  Co.,  41  Hun.  422 376 

Kerr  v.  Gandy,  3  Times  Law  Reps.  75 379 

Kettle  River  Ry.  Co.  v.  Eastern  Ry.  Co.,  41  Minn.  461 414 

Keyzor  et  al.  v.  Newcomb,  1  F.  &  F.  559 378 

ladd  V.  Pearson,  128  U.  S.  1 76 

Kiernan  v.  The  Manhattan  Quotation  Telegraph  Co.,  50  How.  Prac.  194. 368 

Kinkead,  Reid  &  Co.  v.  The  Johannesburg  Chamber  of  Mines,  Official  Reports, 

IHgh  Court,  South  African  Republic  139  (1894) 409 

Kinnell  &  Co.  (Ltd.)  v.  A.  Ballantine  &  Sons,  47  Scot.  Law  Times  Reps.  227..      448 

Kinner  et  al.  v.  Lake  Shore  &  Mich.  So.  Ry.,  13-23  Ohio  C.  C.  Dec.  294 338 

Kinney  V.  Scarbrough  Map  Co.,  74  S.  E.  772 347 

KUngel's  Pharmacy  v.  Sharp  &  Dohme  et  al.,  104  Md.  218 395, 399,  718,  731 

Knickerbocker  Ice  Co.  v.  The  Gardiner  Dairy  Co. ,  69  Atl.  405 340 

Knight  &  Jillson  Co.  etal.  v.  Miller,  172  Ind.  27 398,719,721 

Knoedler  et  al.  v.  Broussod  et  al.,  47  Fed.  465;  55  Fed.  895 424 

Knott  V.  Morgan,  2  Keen's  Ch.  21"5 453 

Krigbaum  v.  Sbabaro  et  al. ,  138  Pac.  364 338 

L.  &N.  R.  R.  Co. -y.  Mottley,  219  U.  S.  467 497 

Labouchre  ^;.  Dawson,  L.  R.  (1871),  13  Eq.  322 429,430 

Lamb  ?;.  Evans,  62  L.  J.  Ch.  404 366 

Lament  CorUss  &  Co.  v.  Hershey,  140  Fed.  763 433 

Landon  et  al.  v.  Watkins,  61  Minn.  137 373 

Lange  v.  Werk,  2  Ohio  St.  520 31 

Lansburgh  v.  District  of  Columl)ia,  11  Apps.  D.  C.  512 613 

Larkin  etal.  v.  Long,  2  Irish  Heps.  285;  L.  R.  (1915),  A.  C.  814 405 

Latimer  v.  Western  Morning  News  Co. ,  25  Law  Times  Reps.  44 370, 378 

Lawlor  V.  Loewe,  208  U.  S.  274;  235  U.  S.  522 93,97,477 

Lawrence  et  al.  v.  Kidder,  10  Barbour  641 27, 28 

Lawrence  et  al.  v.  P.  E.  Sharpless  Co.,  208  Fed.  886 442 

La^\Tcnce  Manufacturing  Co.  v.  Tennessee  Manufactming  Co.,  138  U.  S.  537.  431, 432 

Lefebvre  v.  Knott,  13  Canadian  Crim.  Cases  223 239 

Leggott  V.  Barrett,  L.  R.  (1880),  15  Ch.  Div.  306 430 


XXX  TABLE   OF   CASES. 

Page. 

Le  Massena  v.  Storm,  62  N.  Y.  App.  Div.  150 376 

Leonard  v.  Bassindale,  46  Wash.  301 516 

Leonard  et  al.  v.  Abner-Driiry  Brewing  Co.  et  al.,  25  App.  D.  C.  161 401,  730 

Leslie -y.  Lorillard  et  al.,  HON.  Y.  519 35 

Lever  v.  Goodwin,  L.  R.  (1887),  36  Ch.  Div.  1 453 

Lever  Bros.  Boston  Works  v.  Smith,  112  Fed.  998 435 

Lewini;.  WelsbachLightCo.,81Fed.  904 392 

Lewis  V.  Bloede  et  al.,  202  Fed.  7 335,  337 

Lewis  V.  Huie-Hodge  Lumber  Co.  (Ltd.),  121  La.  658 457 

Liebig's  Extract  of  Meat  Co.  (Ltd.)  v.  Anderson,  55  Law  Times  Reps.  206  .. .  378, 383 

Liquid  Veneer  Co. -y.  Scott  etal.,  29  R.  P.  C  639 365 

Linoleum  Mfg.  Co.  v.  Nairn,  L.  R.  (1878),  7  Ch.  Div.  834 455 

Lippman  v.  Martin,  5  Ohio  N.  P.  Rep.  120 444 

Lister  &  Co. -y.  Stubbs,  L.  R.  (1890),  45  Ch.  Div.  1 423 

Litholite  (Ltd.),  v.  Travis  and  Insulators  (Ltd.),  30  R.  P.  C.  532 365 

Little  V.  Gallus  et  al.,  4  N.  Y.  App.  Div.  569.. 349,  350,  354 

Little  i;.  Tanner,  208  Fed.  605 515 

Live  Stock  Association  v.  Levy,  54  N.  Y.  Sup.  Ct.  Reps.  32 412 

Lloyd  Sabaudo  (The)  v.  Cubicciotti,  159  Fed.  191 416, 472 

Lloyd's  &  Dawson  Bros.  v.  Lloyds,  Southampton  (Ltd.),  28  Times  Law  Reps. 

338 450 

Locker  y.  American  Tobacco  Co.,  195  N.  Y.  565;  218  Fed.  447 477 

Lockport  Canning  Co.  v.  Pusateri,  139  N.  Y.  Supp.  640;  145  N.  Y.  Supp.,  130.       436 

Loewe  ?;.  Lawlor,  208  U.  S.  274;  235  U.  S.  522 93,97,477 

Logan  &  Sons  v.  Pyne,  43  Iowa  542 57 

London  &  North  Western  Railway  Co.  v.  Lancashire  &  Yorkshire  Railway  Co., 

L.  R.  (1867),  4Eq.  174 409 

London  Guarantee  Co.  v.  Horn,  206  111.  493 338 

Longi'.  Larkinetal.  (1914),  2  Irish  Reps.  285;  L.  R.  (1915),  A.  C.  814 344,405 

Long  v.  State,  74  Md.  565 513 

Long  et  al.  v.  Towl,  42  Mo.  545 1 53, 411 

Loog,  Herman  i;.  Bean,  L.  R.  (1884),26  Ch.  Div.  306 380 

Lough  v.  Outerbridge  et  al.  143  N.  Y.  271;  145  N.  Y.  601 413,455 

Louis  V.  Smellie,  73  Law  Times  Reps.  226 366 

Loven  v.  The  People  ex  rel.  Fahrney  &  Sons  Co.  158  111.  159 358 

Ludowese  v.  Farmers  Mutual  Cooperative  Co.,  164  Iowa  197 399, 411 

Lumley  v.  Gye,  2  El.  &  Bl.  216 335,  343,  344,  345 

Lycett  Saddle,  etc.,  Co.  v.  Brooks  &  Co.,  21  R.  P.  C.  656 395,544 

Lyne-y.  Nicholls,  23  Times  Law  Reps.  86 385 

Lyons  (J.)  &  Co.  (Ltd.)  v.  Lipton  (Ltd.), Law  Journal,  Sept. 26,  1914,  p.  542. .       380 

McAllister  v.  Howell,  42  Ind.  15 35 

McBeth-Evans  Glass  Co.  v.  Schnelbach  et  al.,  239  Pa.  76 349,  351,  354, 355 

McBirney  &  Johnston  White  Lead  Co.  v.  Consolidated  White  Lead  Co.,  8  Ohio 

Dec.  Reprint  762 48 

McCallCo.  ^;.0'Neil,  17  Ohio  N.  P.  (N.  S.)  17 161 

Mclntyre-y.  Weinert,  195  Pa.  St.  52 732 

McKenna,  ex  parte,  126  Cal.  429 515 

McLean  ?;.  Fleming,  96  U.  S.  245 433 

McRae  v.  Wilmington  &  Raleigh  R.  R.  Co.,  47  N.  C.  186 57 

Macauley  Bros.  v.  Tierney  et  al.,  19  R.  I.  255 396,  726,  731 

MacFarlane  v.  Dumbarton  Steamboat  Co.  (Ltd.),  36  Scottish  Law  Rep.  771 430 

Mahler  i;.  Sanche,  223  111.  136 353 

Malone  v.  Commonwealth  of  Kentucky,  234  U.  S.  639 165 


TABLE    OF   CASES.  XXXI 

Page. 

Mallory  v.  Hanaur  Oil  Works,  86  Tenn.  598 60 

Marais  v.  The  Volksstem  Co.,  3  0.  R.  66 380 

Marino  t'.  Di  Marco,  41  App.  D.  C.  76 371 

MarUn  Fire  Arms  Co.  v.  Shields,  171  N.  Y.  384 376,377 

Marsh  v.  Russell,  66  N.  Y.  288 53 

Marshall  f.  Pinkham,  52  Wis.  573 354 

Marshall  Engine  Co.  v.  New  Marshall  Engine  Co.  et  al.,  203  Mass.  410 425, 426 

Martell  v.  WTiite  et  al.,  185  Mass.  255 402, 406 

Martin  v.  Brown,  14  Western  Law  Reporter  237  (K.  B.  Manitoba) 367 

Mason  v.  Provident  Clotliing  &  Supply  Co.  (Ltd.),  L.  R.  (1913)  A.  C.  724 233 

Massam  v.  Thorley's  Cattle  Food  Co.,  L.  R.  14  Ch.  Div.  748 451 

Master  Builders  Association  et  al.  i;.  Domascio,  16  Colo.  App.  25 401 

Masters  v.  Lee,  39  Nebr.  574 734 

Matthews  et  al.  v.  Associated  Press,  136  N.  Y.  333 56, 416 

Maugeri;.  Dick,  55  How.  Prac.  132 377 

Mayor,  Aldermen,  and  Burgesses  of  the  Borough  of  Salford  v.  Lever,  L.  R. 

(1891)  1  Q.  B.  168. 421 

Measures  Bros.  v.  Measures,  L.  R.  (1910),  1  Cli.  336 366 

Mellwood  DistllUngCo.  v.  Harper,  167  Fed.  389 435 

Merchants'  Ad-Sign  Co.  v.  SterUng,  57  Pac.  468 157 

Merchants'  Assn.  of  New  Zealand  (Inc.)  et  al.  v.  H.  M.  the  King,  32  New  Zea- 
land Law  Rep.  1233 252 

Merchants'  Legal  Stamp  Co.  v.  Murphy,  107  N .  E.  968 150 

Merchants'  Legal  Stamp  Co.  i;.  Scott,  107N.  E.  969 150 

Merchants'  Syndicate  Catalogue  Co.  v.  Retailers  Factory  Catalogue  Co.  et  al., 

206  Fed.  545 361 

Merchants'  Trading  Stamp  Co.  v.  Mempliis,  101  Tenn.  181 515 

Merriam  (G.  &  C.)  Co.  v.  Ogiivie,  170  Fed.  167 446 

Merryweather  &  Sons  r .  Moore,  61  L.  J.  Ch.  505 365 

Metropohta'n  Electric  Supply  Co.  v.  Ginder,  L.  R.  (1901),  2  Ch.  799 418 

Midland  Pubhsliing  Co.  1'.  Implement  Trade  Journal  Co.  etal.,  IO8M0.  App. 223.      372 
Milburn  et  al.  v.  New  York,  Lake  Erie  &  Western  Railroad  Co.  et  al.,  64  How. 

Prac.  20 60 

Miller  V.  Green,  33  Nova  Scotia  517 372 

Mines  iJ.Scribner  etal.,  147  Fed.  927 475,728 

Minn.  Tribune  Co.  v.  Associated  Press,  83  Fed .350 416 

Mitchell  V.  International  Tailoring  Co.,  169  Fed.  145 393 

Mitchell  V.  Reynolds,  1  P.  Wms.  181 26-27 

Modesto  Creamery  v.  Stanislaus  Creamery  Co.  et  al. ,  142  Pac.  845 442 

Mogford  r.  Courtenay ,  45  Law  Times  Reps.  303 430 

Mogul  Steamslxip  Co.  v.  McGregor,  Gow  &  Co.,  L.  R.  (1888),  21  Q.  B.  D.  544; 

L.  R.  (1889),  23  Q.  B.  D.  598;  L.  R.  (1892),  A.  C.  25 234, 

236, 238, 395, 404, 406, 419, 420 

Monarch  Tobacco  Works  v.  American  Tobacco  Co.  et  al.,  165  Fed.  774 364, 465 

Montague  &  Co.  v.  Lowry,  193  U.  S.  38 77, 117,  727 

Montgomery  v.  Kelly,  142  Ala.  552 515 

Montgomery  (Thomas)  v.  Thompson  et  al.,  L.  R.  (1891),  A.  C.  217 449 

Montgomery  Ward  &  Co.  v.  South  Dakota  Retail  Merchants  &  Hardware  Dealers' 

Association  ct  al. ,  150  Fed.  413 376, 396,  724,  731 

Moore  and  Handley  Hardware  Co.  v.  Towers  Hardware  Co.,  87  Ala.  206 35 

More  etal.  v.  Bennett  etal.,  140  111.  69 44,718 

Morgan  r.  Andrews,  64  N.  W.  869 338 

30055°— 16 m 


XXXII  TABLE   OF   CASES. 

Page. 

Morison  v .  Moat,  9  Hare  241 364,  365 

Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,  68  Pa.  St.  173 46 

Morse  Twist  Drill  &  Machine  Co.  v.  Morse,  103  Mass.  73 35 

Moses  V.  Scott,  84  Ala.  608 58 

Motor  Accessories  Mfg.  Co.  v.  Marshalltown  Motor  Material  Mfg.  Co.,^  149  N.  W. 

184 432 

Mowryt'.  Raabeetal.,  89  Cal.  606 371,373 

Muetze  v.  Tuteuer,  77  Wis.  236 732,  733 

MiiUer  V.  Boliringer,  3  Pa.  Co.  Ct.  144 411 

Munn  V.  Illinois,  94  U.  S.  113 57 

My  Maryland  Lodge  v.  Adt,  100  Md.  238 406 

Myers  v.  Kalamazoo  Buggy  Co. ,  54  Mich.  215 429 

Myers  v.  Tuttle,  183  Fed.  235 428 

Nash  1,'.  United  States,  229  U.  S.  373 120 

National  Bank  of  the  Metropolis  v.  Sprague  et  al. ,  20  N.  J.  Eq.  159 52 

National  Biscuit  Co.  v.  Pacific  Coast  Biscuit  Co.  et  al.,  91  Atl.  126 441 

National  Distilling  Co.  v.  Cream  City  Importing  Co.,  86  Wis.  352 415 

National  Fire  Insurance  Co.  v.  SuUard,  97  N.  Y.  App.  Div.  233 360 

National  Gum  &  Mica  Co.  v.  Braendly,  51  N.  Y.  Supp.  93 351 

National  Harrow  Co.  i).  Hench,  76  Fed.  667;  83  Fed.  36 115,116 

National  Phonograph  Co.  -?;.  Edison-Bell  Consolidated  Phonograph  Co.,  L.  R. 

(1908)  iCh.  335 344,345 

National  Starch  Co.  's  AppUcation  (in  re),  25  R.  P.  C.  802 448 

National  Telegraph  News  Co.  v.  Western  Union  Telegraph  Co.,  119  Fed.  294.  .       368 
National  Tube  Co.  v.  Eastern  Tube  Co.  et  al.,  3  Ohio  C.  C.  Rep.  (N.  S.)  459; 

69  Ohio  560 349, 353 

N.  E.  Awl  Co.  V.  Marlborough  Awl  Co.,  168  Mass.  154 434 

Nester  et  ah  v.  Continental  Brewing  Co.  et  al.,  161  Pa.  St.,  473 718 

Nettles  1).  Somervell,  6  Tex.  Civ.  App.  627 732 

New  Haven  R.  R.  v.  Interstate  Commerce  Commission,  200  U.  S.  404 18 

New  Iberia  Extract  of  Tabasco  Pepper  Co.  v.  E.  Mcllhenny's  Son  et  al.,  61 

So.  131 373,394 

New  Kleinfontein  Co.  v.  Superintendent  of  Laborers  (1906)  Transvaal  Law 

Reps.  S.C.  241 344 

New  York  and  Chicago  Grain  and  Stock  Exchange  v.  Board  of  Trade  of  City 

of  Chicago  et  al.,  127  111.  153 57 

New  York  Filter  Co.  v.  Schwarzwalder  et  al.,  58  Fed.  577 393 

New  York  Trap  Rock  Co.  v.  Brown  et  al.,  N.  J.  Law  536  (1898) 414 

Newell  V.  How,  31  Minn.  235 373 

Newell  et  al.  v.  Meyendorff ,  9  Mont.  254 415 

Nichol  V.  Martyn,  1-2  Espinasse,  732 348 

Nickels  v.  Prewitt  Auto  Co.,  149  S.  W.  1094 185 

Nicol  (D.  &  J.)  V.  Trustees  of  the  Harbor  of  Dundee,  1914  Session  Cases  374; 

L.  R.  (1915),  A.  C.  550 461 

Noakes  &  Co.  (Ltd.)  v.  Day,  L.  R.  (1910),  1  Ch.  Div.  270 417 

Nokes  V.  Mueller,  72  111.  App.  431 444 

Nonpareil  Cork  Mfg.  Co.  v.  Keasbey  &  Mattison  Co.  et  al.,  108  Fed.  721 375 

North  Cheshire  &  Manchester  Brewery  Co.  (Ltd.)  v.  Manchester  Brewing  Co. 

(Ltd.),  L.  R.  (1899),  A.  C.  83 450 

North  Western  Salt  Co.  v.  Electrolytic  Alkali  Co.,  L.  R.  (1914),  A.  C.  461 236 

Northern  Securities  Co.  v.  U.  S.,  193  U.  S.  197 14,73,96,103 

Norwich  Gas  Light  Co.  v.  Norwich  City  Gas  Co.,  25  Conn.  19 57 

Notaseme  Hosiery  Co.  v.  Straus  etal.,  201  Fed.  99;  209  Fed.  495 442 

Oetzmann  &  Co.  v.  Long  &  Co.,  London  Times,  July  7,  1896 422 


TABLE   OF   CASES.  XXXIH 

Page. 

Oilure  Mfg.  Co.  v.  Pidduck-Ross  Co.,  38  Wash.  137 515,  516 

O'Keefe  v.  Somerville,  190  Mass.  110 515 

Old  Corner  Book  Store  v.  Upham  et  al. ,  194  Mass.  101 425 

Olive  &  Sternenberg  v.  Van  Patton  et  al.,  7  Tex.  Civ.  App.  630 401,  725,  731 

Oliver  et  al.  v.  Gilmore,  52  Fed.  562 40 

Olnistead  v.  Distilling  &  Cattle  Feeding  Co. ,  77  Fed.  265 466 

Ontario  Copper  Lightning  Rod  Go.  v.  Hewitt,  30  Ontario  Common  Pleas  172.  .       379 

Oregon  Steam  Navigation  Co.  v.  Winsor,  87  U.  S.  64 31,  32 

Over  V.  Byram  Foundry  Co.,  37  Ind.  App.  452 411 

Owen  County  Bm-ley  Tobacco  Society  v.  Brumback,  128  Ky.  137 165 

Oxypathor  Co.  v.  De  Cordero  et  al.,  149  N.  Y.  Supp.  513 361 

Pacific  Factor  Co.  v.  Adler,  90  Cal.  110 37,  414 

Paine  Lumber  Co.  (Ltd.)  et  al.  v.  Neal  et  al.,  212  Fed.  259;  214  Fed.  82 176 

Palmer  v.  Stebbins  et  al.,  3  Pick.  188 410 

Panama  &  South  Pacific  Telegraph  Co.  v.  Indiarubber  G.  P.  &  T.  Works  Co., 

32  Law  Times  Reps.  517 420 

ParazoneCo.  (Ltd.)  v.  Gibson,  21  R.  P.  C.  317 448 

Park  V.  Hartman,  153  Fed.  24 354 

Park  &  Sons  Co.  v.  NationalAMiolesale  Druggists'  Assn.  et  al.,  50  N.  Y.  Supp. 

1060 731 

Passaic  Print  Works  v.  Ely  &  Walker  Dry  Goods  Co.,  105  Fed.  163;  181  U.  S.  617.       456 
Patterson  et  al.  v.  U.  S.     (See  U.  S.  v.  Patterson.) 

Payton  v.  SnelUng,  Lampard  &  Co.  (Ltd.),  L.  R.  (1901)  A.  C.  308 453 

P.  B.  &  W.  R.  R.  Co. -y.  Schubert,  224  U.  S.  603 497 

Peabody  v.  Norfolk,  98  Mass.  452 350,  354 

Pearson  v.  Pearson,  L.  R.  (1884)  27  Ch.  Div.  145 430 

Peerless  Pattern  Co.  i;.  Pictorial  Review  Co.,  132  N.  Y.  Supp.  37 362 

Pennsylvania  Iron  Works  Co.  v.  Henry  A^oght  Machine  Co.,  96  S.  W.  551 372 

People  V.  Dwyer  et  al.,  145  N.  Y.  Supp.  748;  160  N.  Y.  App.  Div.  542;  215 

N.  Y.  48 176,  720 

People  V.  Dycker,  72  N.  Y.  App.  Div.  308 514 

People  V.  Everest  et  al.,  51  Hun  19 408 

People  1-.  Gillson,  109  N.  Y.  389 512 

People  r.  Milk  Exchange,  145  N.  Y.  267 51,718 

People  V.  North  River  Sugar  Refining  Co.,  54  Hun  354;  121  N.  Y.  582. . . .  8,  61,  62,  65 

People  V.  Sheldon  et  al.,  139  N.  Y.  251 176,  720 

People  V.  Edward  Pergoli  and  James  Flood,  N.  Y.  Law  Journal,  Jan.  14  1907. .      505 

Peoples.  Zimmerman,  102  N.  Y.  App.  Div.  103 514,517 

People  ex  rel.  Peabody  v.  Chicago  Gas  Trust  Co. ,  130  111.  268 60 

People  ex  rel.  Pinckney  v.  New  York  Board  of  Underwriters,  54  How.  Prac.  240.        56 
People  ex  rel.  Postal  Telegraph-Cable  Co.  v.  Hudson  River  Telephone  Co.,  19 

Abbott's  New  Cases  466 57 

People's  Tobacco  Co.  v.  American  Tobacco  Co.,  170  Fed.  396 346 

Perkins  v.  Pendleton  et  al.,  90  Me.  166 338,  348 

Phila.  Extracting  Co.  v.  Keystone  Extracting  Co.,  176  Fed.  830 352 

Pick- Williamson  Heating  &  Ventilating  Co.  v.  Miller  &  Harris,  118  S.  W.  376.      415 

Pillsbury-Washburn  Flour  Mills  v.  Eagle,  86  Fed.  608 43? 

Pinet(F.)  et  cie  t-.  Maison  Louis  Pinet  (Ltd.),  15  R.  P.  C.  65 451 

Pittsburg  Carbon  Co.  (Ltd.)  v.  McMillin,  receiver,  119  N.  Y.  46 64 

Pocahontas  Coke  Co.  v.  Powhatan  Coal  Co.,  60  W.  Va.  508 47 

Pomeroy  Ink  Co.  v.  Pomeroy,  77  N.  J.  Eq.  293 352 

Pope-Tiu-nbo  I'.  Bedford,  127  S.  W.  426 153 


XXXIV  TABLE   OF   CASES. 

Page. 

Portland  Ry.  Co.  v.  Oregon  R.  R.  Comm.,  229  U.  S.  397 497 

Powell  &  Thomas  v.  Evan  Jones  &  Co.,  L.  R.  (1905)  1  K.  B.  11 423 

Pratt's  Appeal,  117  Pa.  St.  401 433 

Presbury  v.  Fisher  &  Bennett,  18  Mo.  50 35 

Prescott  V.  Bidwell,  99  N.  W.  93 158 

Pressed  Steel  Car  Co.  v.  Standard  Steel  Car  Co.,  210  Pa.  St.  464 362 

Prest-0-Lite  Co.  v.  Davis  et  al.,  209  Fed.  917;  215  Fed.  349 369, 446 

Prince  Albert  t).  Strange  et  al.,  18  L.  J.  (N.  S.)  Ch.  120 366 

Printing  <fe  Numerical  Registering  Co.  v.  Sampson,  L.  R.  (1875)  19  Eq.  462. . .       419 

Proctor  &  Collier  Co.  v.  Mahin  et  al.,  93  Fed.  875 360 

Public  Opinion  Puolishing  Co.  v.  Ransom,  148  N.  W.  838 158 

Publishers  of  the  Observer  (Ltd.)  v.  Advertiser's  Protection  Society  (Ltd.) 

etal.,  London  Times,  Feb.  3,  1910,  p.  3 382 

Pudsey  Coal  Gas  Co.  v.  Corporation  of  Bradford,  L.  R.  (1873)  15  Eq.  167 461 

Punch  V.  Boyd  et  al.,  16  L.  R.  (Ireland,  1885)  476 405 

Purington  etal.  v.  Hinchliff,  120  111.  App.  523;  219  111.  159 403,731 

Queen  v.  American  Tobacco  of  Canada,  3  La  Revue  de  Jurisprudence  453. . .       420 

Queen  Insurance  Co.  v.  State,  86  Tex.  250 171 

Quinn  v.  Leathern,  L.  R.  (1901)  A.  C.  495 343,  345 

Railroad  Co.  v.  Ellerman,  105  U.  S.  166 461 

Ramharter  v.  Olson  et  al.,  128  N.  W.  806 375 

Ranft  V.  Reimers,  200  111.  386 424, 428, 429, 458 

Ratcliffe  ?;.  Evans,  L.  R.  (1892)  2  Q.  B.  524 385 

Raymond  v.  Leavitt,  46  Mich.  447 37 

Raymond  v.  Russell  et  al.,  143  Mass.  295 377 

Raymond  v.  Yarrington  et  al.,  73  S.  W.  800 341 

Rea  et  al.  v.  Buckland,  11  Western  Australian  L.  R.  2 243, 406 

Read  v.  The  Friendly  Society  of  Operative  Stone  Masons  of  England  et  al., 

L.  R.  (1902)  2  K.  B.  732 344 

Reddaway  r.  Banham,  L.  R.  (1896)  A.  C.  199 452 

Reddaway  t).  Flynnetal.,  30  R.  P.  C.  16 365 

Reddaway  v.  Hemp-Spinning  Co.,  L.  R.  (1892)  2  Q.  B.  639 447 

Reeves  v.  Decorah  Farmers'  Cooperative  Society  et  al.,  160  Iowa  194. .  399, 411,  722 

Retail  Lumber  Dealers'  Assn.  v.  Mississippi,  95  Miss.  337 725,  731 

Renter's  Tel.  Co.  r.  Byron,  43  L.  J.  Ch.  (N.  S.)  661 365 

Rex  V.  Beckett,  20  Ont.  Law  Rep.  401 239 

Rex  V.  Clark,  14  Can.  Crim.  Cas.  57 239 

Rex  r .  Cope  et  al.,  1  Strange  144 409 

Rex  V.  Elliott,  9  Ont.  Law  Rep.  648 239 

Rex  V.  Gage,  13  Canadian  Crim.  Cases  415 239 

Rex  V.  Jakeman,  24  Cox's  C.  C.  153 461 

Rex  V.  McGuire,  7  Ont.  Wkly.  Rep.  225 239 

Rex  V.  McMichael,  10  Ont.  Wkly.  Rep.  268 239 

Rex  V.  Master  Plumbers'  Assn.,  14  Ont.  Law  Rep.  295 239 

Rex  V.  Scott  (1907),  Victorian  Law  Reps.  471 538 

Rex  V.  Stevenson  (1907),  Victorian  Law  Reps.  475 538 

Rex  V.  Vici,  18  Can.  Crim.  Cases  51 537 

Rex  V.  Waddington,  1  East  143 26 

Rex  V.  Walz,  C.  C.  C.  621 536 

Rexi;.  \\Tiitaker,  L.  R.  (1914),  3  K.  B.  1283 423 

Reynolds  r.  Plumbers'  Material  Protective  Assn.,  63  N.  Y.  Supp.  303;  169 

N.  Y.  614 732,733 

Reynolds  Tobacco  Co.  v.  Allen  Bros.  Tobacco  Co.,  151  Fed.  819 433,  442 


TABLE   OF   CASES.  XXXV 

Page. 

Rice  i;.  Manley,  66  N.  Y.  82 337 

'Ricev.  Standard  Oil  Co.,  134  Fed.  464 346,494 

Richardson  i;.  Buhl,  77  Mich.  632 63,66 

Ridgway  Co.  v.  Amalgamated  Press  (Ltd.),  28  Times  Law  Reps.  149 450 

Ripley  t).  Bandy,  14  R.  P.  C.  591 454 

Ripy  (J.  W.)  &  Son  v.  Art  Wall  Paper  Mills,  136  Pac.  1080 410 

Robb^.  Green,  L.  R.  (1895),  2  Q.  B.  Div.  l;s.  c.ib.  315 366 

Robinson  v.  Eau  Claire  Book  &  Stationeiy  Co.  et  al.,  85  N.  W.  983 371 

Robinson  V.  Surbmban  Brick  Co.,  127  Fed.  804 34 

Robison-j;.  Texas  Pine  Land  Assn.,  40  S.  W.  843 457 

Rocky  Mountain  Bell  Telephone  Co.  v.  Utah  Independent  Telephone  Co.  et  al., 

31  Utah  377 458 

Rogers  (William)  Mfg.  Co.  v.  Rogers  Mfg.  Co.,  16  Phila.  178 439 

Roller  t).  Ott,  14  Kans.  609 414 

RolUns-i;.  Hinks,  L.  R.  (1872),  13  Eq.  355 394 

Roseetal.  v.  Miles,  4  M.  &  Sehv.  101 409 

Roseneau  v.  Empire  Circuit  Co.  et  al.,  131  N.  Y.  App.  Div.  429 342,  416 

Rosenwasser  v.  Amusement  Enterprises,  150  N.  Y.  Supp.  561 505 

Rourke  et  al.  v.  Elk  Drug  Co.  et  al.,  75  N.  Y.  App.  Div.  145 403 

Rowelli).  Rowell,  122  Wis.  1 424 

Royal  Baking  Powder  Co.  v.  Royal,  122  Fed.  337 434 

Royal  Warrant  Holders  Assn.  v.  Kitson,  26  R.  P.  C.  157 547 

Royal  Warrant  Holders  Assn.  v.  Slade  &  Co.  (Ltd.),  25  R.  P.  C.  245 547 

Rubber  &  Celluloid  Harness  Trimming  Co.  v.  Rubber  Bound  Brush  Co.  et  al., 

88  At.  210 440 

Russell  V.  New  York  Produce  Exchange,  58  N.  Y.  Supp.  842 734 

Russell  ct  al.  v.  Webster,  23  Weekly  Reporter  59 378 

Russell  et  al.  v.  AMlkes,  27  Upper  Canada  Q.  B.  280 379 

Rylands  v.  Ashley's  Patent  Bottle  Co.,  7  R.  P.  C.  175 365 

Saddlery  Hardware  Mfg.  Co.  v.  Hillsborough  Mills,  68  N .  H.  216 411 

Salford  (Mayor,  etc.)  v.  Lever,  L.  R.  (1891),  1  Q.  B.  168 421 

Salmon  v.  Isaac,  20  Law  Times  Reps.  885 381 

Salomon  tJ.  Hertz  et  al.,  40  N.  J.  Eq.  400 363 

Sammons  v.  Kearney  Power  &  Irrigation  Co.  77  Nebr.  580 413 

Samson  Cordage  Works  v.  Pmitan  Cordage  Mills,  211  Fed.  603 433,  434 

Samuel  Bros.  &  Co.  v.  Hostetter  Co.,  118  Fed.  257 443 

Samuels  et  al.  v.  Oliver  et  al.,  130  111.  73 37 

Sanford  v.  Miller,  80  N.  J.  Law  411 505 

Santa  Clara  Valley  Mill  &  Lumber  Co.  v.  Hayes  et  al.,  76  Cal.  387 39 

Saxby  v.  Easterbrook  and  Hannaford,  L.  R.  (1878),  3  C.  P.  D.  339 379 

Sayre  v.  Loxiisville  Union  Benefit  Association,  62  Ky.  143 43 

Schanketal.  v.  Schuchman,  212  N.  Y.  352 505 

Schlitz  (Joseph)  Bre^ving  Co.  v.  Nielsen,  77  Nebr.  868 411 

Schlitz  Brewing  Co.  v.  Tra\i  &  Corstorta,  179  111.  App.  269 411 

Schonwald  et  al.  v.  Ragains,  122  Pac.  203 336,  337-338 

Schulten  v.  Bavarian  Brewing  Co.,  96  Ky.  224 733 

Schwalm  i-.  Hoknes  &  Co.,  49  Cal.  665 411 

Schwahn  et  al.  v.  Miele  et  al.,  203  Fed.  176 442 

Schwanbeck  Bros.  v.  Backus  .&  Sons,  148  Mich.  508 393 

Scott  and  Others  r.  Magistrates  of  Glasgow,  36  Scottish  Law  Rep.  458 235,  405 

Scottish  Cooperative  ^^^lolesale  Society  v.  Glasgow  Fleshers'  Trade  Defence 

Assn. ,  35  Scottish  Law  Rep.  645 235, 405 

Scottish  Union  &  National  Insiu-ance  Co.  v.  Dangaix,  103  Ala.  388 360 


XXXVI  TABLE    OF    CASES. 

Page. 

Seeman  et  al.  v.  Zechnowitz,  121  N.  Y.  Supp.  125 442 

Sheppard  Publishing  Co.  v.  Press  Publishing  Co.,  10  Ontario  Law  Reps.  243...       386 

Shoemaker  v.  South  Bend  Spark  Arrester  Co.,  22  L.  R.  A.  332 394 

Siegert  v.  Gandolfi  et  al.,  149  Fed.  100 436 

Simmons  Hardware  Co.  v.  Waibel  et  al.,  11  L.  R.  A.  267 361 

Simmons  Medicine  Co.  et  al.  v.  Simmons,  81  Fed.  163 352 

Simons  v.  Bumham,  102  Mich.  189 373 

Singer  Mfg.  Co.  r.  Domestic  Sewing  Machine  Co.  et  al.,  49  Ga.  70 377,  388 

Singer  Mfg.  Co.  v.  Jupe  Mfg.  Co.,  163  U.  S.  169 446 

Singer  Sewing  Machine  Co.  v.  Union,  etc.,  Co.,  Holmes  (Fed.  cases)  253 414 

Sirkin  v.  The  Fourteenth  Street  Store,  54  N.  Y.  Misc.  135;  55  N.  Y.  like.  288; 

124  N.  Y.  App.  Div.  384 504,505 

Skrainka  v.  Scharringhausen,  8  Mo.  App.  523 55 

Slaughter  v.  Thacker  Coal  and  Coke  Co.,  55  W.  Va.  642 46 

Slaughterhouse  Cases,  83  U.  S.  36 57 

Sleeper  v.  Baker,  22  N.  Dak.,  386 342 

Sloman  v.  Cliisholm,  22  Upper  Canada,Q.  B.  20 379 

Smith  1'.  Cooper,  5  Abb.  N.  C.  274 444 

Smith  V.  Kernan,  8  Ohio  Dec.  Reprint  32 358, 361 

Smith's  Appeal,  113  Pa.  State  579 31 

Smithies  v.  National  Association  of  Plasterers,  L.  R.  (1909)  1  K.  B.  310 344 

Snow  &  Bush  v.  Judson,  38  Barbour  210 .' 393 

Snyder  Pasteurized  Milk  Co.  r.  Burton,  80  N.  J.  Eq.  185 424,  428 

Societe  Francaise  Des  Asphaltes  v.  Farrell,  1  Cababe  &  Ellis,  563 382 

Somu  Pillai  v.   Municipal  Coimcil,   Mayavaram,   Indian  Law  Rep.   Madras 

Series  XXVIII  520 255 

South  Royalton  Bank  v.  Suffolk  Bank,  27  Vt.  505 458 

South  Wales  Miners  Federaltion  et  al.  v.  Glamorgan  Coal  Co.  et  al.,  L.  R. 

(1905)  A.   C.   239 344,345 

Southern  Fii-e  Brick  &  Clay  Co.  v.  Garden  City  Sand  Co.  et  al.,  223  111.  616 411 

Southern  Pacific  Co.  v.  Interstate  Commerce  Commission,  220  U.  S.  536 124 

Southwick  V.  Stevens,  10  Johns.  443 372 

Spalding  &  Bros.  i'.  Gamage,  110  Times  Law  Reps.  530 455 

Spaulding  et  al.  v.  Evenson  et  al.,  149  Fed.  913;  150  Fed.  517 403, 407 

Sperry  &  Hutchinson  v.  Pommer,  199  Fed.  309 335,  337 

Sperry  &  Hutchinson  Co.  v.  Associated  Merchants'  Stamp  Co.,  208  Fed.  205..       339 

Sperry  &  Hutcliinson  Co.  v.  Dan\ille,  Corp.  Ct.  Dan\dlle,  Va.,  Oct.,  1910 515 

Sperry  &  Hutchinson  Co.  v.  Fenster  et  al.,  219  Fed.  755 497 

Sperry  &  Hutchinson  Co.  r.  Owensboro,  151  Ky.  389 515 

Sperry  &  Hutchinson  Co.  v.  Tacoma,  68  Wash.  254 515 

Sperry  &  Hutcliinson  Co.  v.  Tacoma,  190  Fed.  682 515 

Standard  Faslaion  Co.  v.  Siegel-Cooper  Co.,  157  N.  Y.  60 411 

Standard  Oil  Co.  v.  Doyle,  118  Ky.  662 337, 406, 459 

Standard  Oil  Co.  t'.  Dunshee,  152  Iowa  618,  165  Iowa  625 460 

Standard  Oil  Co.  i'.  State,  100  S.  W.  705 160 

Standard  Oil  Co.  v.  U.  S.  (see  U.  S.  v.). 

Standard  Oil  Co.  of  Ky.  v.  State,  104  Miss.  886 188, 192 

Standard  Oil  Co.  of  Ky.  v.  Tennessee,  217  U.  S.  413 160,  337 

Standard  Paint  Co.  v.  Trinidad  Asphalt  Manufacturing  Co.,  220  U.  S.  446 441 

Standard  Sanitary  Manufacturing  Co.  v.  U.  S.,  226  U.  S.  20 116,  471, 476,  484 

Standard  Varnish  Works  v.  Fisher,  Thorsen  &  Co.,  153  Fed.  928 441 

Stanton  v.  Allen,  5  Denio  434 42 

Star  Mill  &  Elevator  Co.  v.  Fort  Worth  Grain  Elevator  Co.,  146  S.  W.  604 185 

State  (see  People). 


TABLE   OF   CASES.  XXXVII 

Page. 

State  V.  Adams  Lumber  Co.,  81  Nebr.  392 155,  720, 726,  727 

State  V.  Arkansas  Lumber  Co.  et  aL,  169  S.  W.  145 154,  727 

State  V.  Armour  Packing  Co.,  173  Mo.  356 175 

State  V.  Associated  Press,  159  Mo.  410 416 

State  V.  Assiu-ance  Companies,  251  Mo.  278 175 

State  V.  Bridgeman  and  Russell  Co.,  117  Minn.  186 191 

State  V.  Gaspare  et  al.,  115  Md.  7 517 

State  V.  Continental  Tobacco  Co.,  177  Mo.  1 175 

State  V.  Coyle,  122  Pac.  243 198 

State  V.  Coyle,  130  Pac.  316 149 

State  V.  Dalton,  22  R.  I.  77 514 

State  V.  Dalton  et  al.,  83  S.  E.  693 326, 407 

States.  Dodge,  76  Vt.  197 514 

State  V.  Drayton,  82  Nebr.  254 192 

State  V.  Fairmont  Creamery  Co.  of  Nebraska,  153  Iowa  702 191 

State  V.  Firemen's  Fund  Ins.  Co.  et  al.,  52  S.  W.  595 175, 719 

State  V.  Frank  et  al.,  169  S.  W.  333 172 

State  V.  Friedman,  D.  C.  Wapello  County,  Iowa,  Oct.  1910 517 

State  V.  Fullerton  Lumber  Co.  et  al.,  152  N.  W.  708 147 

States.  Hawkins,  95  Md.  133 514,517 

State  V.  International  Harvester  Co.  of  America,  106  Pac.  1053 160 

State  V.  Kansas  City  Live  Stock  Exchange  et  al.  and  Traders  Live  Stock  Ex- 
change, 109  S.  W.  675 153 

State  V.  Merchants  Trading  Stamp  Co.,  114  La.  529 515 

State  i).  Milwaukee  Gas  Light  Co.,  29  Wis.  454 57 

State  V.  Minneapolis  Milk  Co.,  144  N.  W.  417 165 

State  V.  Nebraska  DistilUng  Co.,  29  Nebr.  700 63 

State  V.  Omaha  Elevator  Co.  et  al.,  75  Nebr.  637 186 

State  i;.  Phipps  et  al.,  50  Kans.  609 170 

State  V.  Pitney,  79  Wash.  608 515,  516, 517 

State  V.  Polar  Wave  Ice  &  Fuel  Co.,  169  S.  W.  126 175 

State  ('.  Portland  Natural  Gas  &  Oil  Col. ,  153  Ind.  483 57 

State  V.  Racine  Sattley  Co.,  134  S.  W.  400 185 

Stater.  Ramseyer,  73  N.  H.  31 514 

State  V.  Shugart,  138  Ala.  86 514 

State  V.  Smiley,  65  Kans.  240 160 

State  V.  Sperry  &  Hutclunson,  110  Minn.  378 517 

State  V.  Sperry  &  Hutchinson  Co.,  94  Nebr.  785 513 

Stater.  Standard  Oil  Co.  etal.,  116  S.  W.  902 153,500 

State  V.  Standard  Oil  Co.  of  New  Jersey  et  al.,  173  Fed.  177 500 

State  i;.  Walker,  105  La.  492 514 

State!'.  Wilson,  73  Kans.  343 719 

State  ex  inf.  Atty.  General  v.  Ark.  Lbr.  Co.  et  al.,  169  S.  W.  145. ...  716,  720,  721,  730 

State  ex  rel.  Berryhill  v.  St.  Paul  Gas  Light  Co.,  92  Minn.  467 411 

State  ex  rel.  Crow,  Attorney  Genergl  v.  Fireman's  Fund  Ins.  Co.,  52  S.  W.  595.       717 

State  ex  rel.  Young  v.  Standard  Oil  Co.,  Ill  Minn.  85 191 

State  of  Ohio  r.  Standard  Oil  Co.,  49  Ohio  St.  137 8, 52 

Steers  v.  U.  S.,  192  Fed.  1 96 

Stein  V.  National  Life  Association,  105  Ga.  821 359 

Steketee  v.  Kimm  et  al.,  48  Mich.  322 373 

Sterling  Remedy  Co.  v.  Eureka  Chemical  &  Mfg.  Co.,  70  Fed.  704 441 

Sterling  Remedy  Co.  i-.  Spermine  Medical  Co.,  112  Fed.  1000 435 

Sternberg  Mfg.  Co.  v.  Miller,  Du  Brul  &  Peters  Mfg.  Co.,  170  Fed.  298 370 


XXXVIir  TABLE   OF    CASES. 

Page. 

Stines  v.  Dorman,  25  Ohio  St.  580 35 

Stevens  &  Co.  v.  Stiles,  29  R.  I.  399 357, 359, 361 

Stewart  1).  Hook,  118  Ga.  445 354 

Stoc'kijort  District  Waterworks  Co.  z).  Mayor,  etc.,  of  Manchester  et  al.,  9  Jurist 

(N.  S.)266 461 

Stones;.  Gossetal.,  65  N.  J.  Eq.  756 352,354,355 

Straus  V.  American  Publishing  Assn.,  177  N.  Y.  473;  193  N.  Y.  496;  199.  N.  Y. 

548;  231  U.  S.  222 176,475,476,728,731 

Street  v.  Union  Bank  of  Spain  and  England,  L.  R.  (1885),  30  Ch.  Div.  156 458 

SulUvani;.  Rime,  150  N.  W.  556 149 

Summers  v.  Boyce  et  al.,  97  Law  Times  Reps.  505 366 

Sumwalt  Ice  Co.  v.  Knickerbocker  Ice  Co.,  80  Atl.  48 337 

Superior  Coal  Co.  v.  DarUngton  Lumber  Co. ,  236  111.  83 414 

Swain  v.  Johnson  et  al.,  65  S.  E.  619 342 

Swale  V.  Ipswich  Tannery,  11  Commercial  Cases  (Mathew),  88 420,  423 

Swan  V.  Tappan,  5  Cash.  104 376 

Sweeney  v.  Smith  et  al.,  167  Fed.  385 342 

Swift  &  Co.  1).  U.  S.,  196  U.  S.  375 734 

Sykes  v.  Sykes,  3  B.  &  C.  Reps.  541 447 

Tabor  t'.  Hoffman,  118  N.  Y.  30 350,354 

Taffs  V.  Beesley ,  16  Australian  L.  T.  59 243,  405 

Tallerman  v.  Dowsing  Radiant  Heat  Co.,  L.  R.  (1900),  1  Ch.  Div.  1 389 

Tanqueray,  Gordon  &  Co.  v.  Gordon  D.  &  D.  Co.,  213  Fed.  510 442 

Tarleton  v.  McGawley,  Peake's  N.  P.  205 408 

Taylor  v .  Blanchard,  13  Allen  370 27,  28 

Taylor  Iron  &  Steel  Co.  v.  Nichols  et  al.,  61  Atl.  946;  69  Atl.  186 351,  362 

Tei^cheri'.  Levy,  23  R.  P.  C.  117 455 

Telegraph  Co.  i; .  Crane,  160  Mass.  50 55 

Temperton  v.  Russell  et  al.,  L.  R.  (1893),  1  Q.  B.  715 343,  344,  345 

Tenn.  Coal  Co.  v.  Kelly,  163  Ala.  348 342 

Ten-ell,  in  re.,  51  Fed.  213 466 

Texas  &  Pacific  Railway  Co.  v.  Southern  Pacific  Railway  Co.,  41  La.  Ann.  970.         42 

Thacker  Coal  &  Coke  Co.  v.  Burke,  59  "\V.  Va.  253 348 

Thomas  r .  Miles,  2  Ohio  St.  274 31 

Thomas  v.  Railroad  Co.,  101  TJ.  S.  71 58 

Thomsen  v.  Union  Castle  Mail  S.  S.  Co.  et  al.,  166  Fed.  251 79 

Thorley's  Cattle  Food  Co.  v.  Massam,  L.  R.  (1877),  6  Ch.  Div.  574;  L.  R.  (1880), 

14  Ch.  Div.  763 370,  378 

Thornton  v.  Sherratt,  8  Taunt.  529 417 

Thum  (0.  &  W.)  Co.  v.  Tloczynski,  114  Mich.  149 350,  .355 

Tipperary  Cooperative  Creamery  Society  v.  Hanley,  Irish  Reports  K.  B.  1912, 

p.  586 ; 235 

Tobias  v.  Harknd,  4  Wend.  537 375 

Tode  et  al.  v.  Gro.ss,  127  N.  Y.  480 35 

Tolman  v.  Mulcahy,  103  N.  Y.  Supp.  936 361 

Townsend  v.  Hurst,  37  Miss.  679 427 

Tozerv.  U.  S.,  52  Fed.  917 120 

Trapp  V.  Dubois,  78  N.  Y.  Supp.  505 732 

Trego  1'.  Hunt,  L.  R.  (1896)  A.  C.  7 423,424,429,430 

Trentman  et  al.  v.  Wahrenburg  et  al.,  65  N.  E.  1057 410 

Tubular  Rivet  &  Stud  Co.  v.  Exeter  Boot  &  Shoe  Co.,  159  Fed.  824 340 

Tuck  &  Sons  v.  Priester,  L.  R.  (1887 )  19  Q.  B.  Div.  629 366 

Tugman  v.  City  of  Chicago,  78  111.  405 57 

Tumlin  t.  State,  141  Ga.  613 517 


TABLE    OF    CASES.  XXXIX 

Page. 

Tunstall  et  al.  v.  Stearns  Coal  Co.,  192  Fed.  808 346 

Turner's  Motor  Mfg.  Co.  (Ltd.)  v.  Miesse  Petrol  Car  Syndicate  (Ltd.),  21 R.  P.  C. 

531 450 

Turtoni;.  Turton,  L.  R.  (1889),  42  Ch.  Div.  128 451 

Ulery  v.  Chicago  Lia- e  Stock  Exchange,  54  111.  App.,  233 732,  733 

Underwood  and  Son  v.  Barker,  L.  R.  (1899)  1  Ch.  300 237 

Union  Associated  Press  v.  Heath,  63  N.  Y.  Supp.  96 372 

Union  S\dtch  &  Signal  Co.  i>.  Sperry,  169  Fed.  926 352 

Union  Trust  &  Sa\dngs  Bank  of  East  St.  Louis  et  al.  r.  Kinloch  Long  Distance 

Telephone  Co.,  258  111.  202 413 

United  Electric  Co.  v.  Creamery  Package  Co.  et  al.,  203  Fed.  53 393 

United  Jewelers  Mfg.  Co.  v.  Keckley,  77  Kans.  797 514 

United  Shoe  Machinery  Co.  v.  La  Chappelle,  99  N.  E.  289 473 

United  Shoe  Machinery  Co.  of  Canada  v.  Brunet,  L.  R.  (1909)  A.  C.  330 419 

United  States  Seeded  Raisin  Co.  v.  Griffin  &  Skelley  Co.,  126  Fed.  364 471 

United  States  Tobacco  Co.  v.  American  Tobacco  Co.,  163  Fed.  701 Ill,  113 

Urmiston  v.  \VTiitelegg,  63  L.  T.  455;  7  T.  L.  Reps.  295 234 

U.  S.  V.  Addyston  Pipe  &  Steel  Co.,  85  Fed.  271;  175  U.  S.  211 12, 

55,  76,  78, 107, 112, 113,  475,  497 

U.  S.  V.  Aluminum  Co.  of  America,  decree 481,  493 

U.  S.  V.  American-Asiatic  S.  S.  Co.  et  al.,  220  Fed.  230 82,  465,  483 

U.  S.  V.  American  Coal  Products  Co.  et  al.,  decree 480,  482 

U.  S.  V.  American  Thread  Co.,  decree 479,  480, 481,  483,  484,  485,  491,  492 

U.  S.  V.  American  Tobacco  Co.  etal.,  191  Fed.  371 463,474,482,486 

U.  S.  V.  American  Tobacco  Co.  et  al.,  221 U.  S.  106 16, 

18,  20,  75,  83,  88,  99, 100, 102, 120, 463,  735 

U.  S.  V.  Anderson,  171  U.  S.  604 723 

U.  S.  V.  Burroughs  Adding  Machine  Co.,  decree 387, 487,  500 

U.  S.  V.  Carter,  217  U.  S.  286 420,421 

v.  S.  V.  Central-West  Publishing  Co.  et  al.,  decree 370, 

479,  480,  481,  485,  487,  492,  494,  495 

U.  S.  V.  Chesapeake  &  Ohio  Fuel  Co.,  105  Fed.  93;  115  Fed.  610 109,  722 

U.  S.  V.  The  Coal  Dealers'  Assn.  of  California,  85  Fed.  252 723,  727 

U.  S.  V.  Debs  etal.,  64  Fed.  724;  158  U.  S.  564 94 

U.  S.  v.  Eastern  States  Retail  Lumber  Dealers'  Assn.  et  al. .  234  U.  S.  600 476, 

490,  714,  728 

U.  S.  V.  E.  C.  Knight  Co.,  156  U.  S.  1 11,74,75 

U.  S.  V.  E.  I.  du  Pont  de  Nemours  &  Co.,  188  Fed.  127 101, 102 

U.  S.  V.  E.  I.  du  Pont  de  Nemours  &  Co.,  decree 480, 481 

U.  S.  V.  General  Electric  Co.  et  al.,  decree 480, 482, 485, 486,  494 

U.  S.  V.  Great  Lakes  Toeing  Co.  et  al.,  208  Fed.  733;  217  Fed.  656 463, 468, 469 

U.  S.  V.  Great  Lakes  Towing  Co.  et  al.,  decree 481, 484 

U.  S.  V.  Hambiu-g-Amerikanische  Packet- Fahrt-Actien-Gesellschaft,  200  Fed. 

806 , 81 

U.  S.  V.  Hamburg-American  S.  S.  Line  et  al.,  216  Fed.  971 82,  464, 465, 472, 483 

U.  S.  V.  Hopkins,  171  U.  S.  579 723 

U.  S.  V.  International  Harvester  Co.,  214  Fed.  987 102,  465 

U.  S.  V.  JelUco  Mountain  Coal  &  Coke  Co.  et  al.,  46  Fed.  432 106,  716,  722,  727 

U.  S.  V.  Joint  Traffic  Association,  171  U.  S.  505 73,  83,  85,  87,  89,  96 

U.  S.  V.  Keystone  Watch  Case  Co.,  218  Fed.  502 470, 496 

U.  S.  V.  MacAndrews  &  Forbes  Co.,  149  Fed.  823 114 

U.  S.  V.  National  Assn.  of  Retail  Druggists,  decree 492,  724,  729 

U.  S.  r.  National  "\Miolesale  Jewelers'  Assn.  ot  al. ,  decree 489,  490.  492,  728 

U.  S.  V.  New  Departure  Mfg.  Co.,  decree 491.  492.  716,  724,  729 


XL  TABLE   OF   CASES. 

Page. 

U.  S.  ».  Pacific  &  Arctic  Railway  &  Navigation  Co.  et  al.,  228  U.  S.  87 82, 464 

U.  S.  V.  Pacific  Coast  Plumbing  Supply  Assn.  et  al.,  decree 489, 490, 491, 492,  729 

U.  S.v.  Patten,  226  U.  S.  525 114,115 

U.  S.  V.  Patterson  et  al.,  201  Fed.  697;  205  Fed.  293;  222  Fed.  599.  .  329,  386, 463,  473 

U.  S.  V.  Philadelpliia  Jobbing  Confectioners'  Assn.  et  al.,  decree 490,492,  729 

U.  S.  V.  Prince  Line  (Ltd.)  et  al.,  220  Fed.  230 82, 467, 486 

U.  S.  V.  Southern  AMiolesale  Grocers'  Assn.,  207  Fed.  434 492,  715,  723,  728 

U.  S.  V.  Southern  Wholesale  Grocers'  Assn.,  decree 488, 490 

U.  S.  V.  Standard  Oil  Co.  of  N.  J.,  173  Fed.  177;  221  U.  S.  1 4, 

6, 16, 17, 18,  75, 83, 86,  90, 104, 112, 120, 416, 500 

U.  S.  t'.  Swift  &  Co.,  122  Fed.  534;  196  U.  S.  375 106,107 

U.  S.  V.  Trans-Missoiu-i  Freight  Assn.,  166  U.  S.  290 11, 83,  84, 85, 87, 89,  95, 105 

U.  S.  V.  Union  Pacific  R.  R.  Co.,  226  U.  S.  470 96 

U.  S.  V.  Workingmen's  Amalgamated  Council  of  New  Orleans,  54  Fed.  994 94 

U.  S.  Telephone  Co.  v.  Central  Union  Telephone  Co. ,  202  Fed.  66 413 

Van  Deman  &  Lewis  Co.  v.  Rast,  208  Fed.  827 515 

Van  Marter  v.  Babcock,  23  Barb.  633 37, 411 

Vegelan  v.  Guntner,  167  Mass.  92 406 

Vintschger,  in  re,  50  Fed.  459 501 

Victor  Safe  &  Lock  Co.  r.  Deright,  147  Fed.  211 376 

Victor  Talking  Machine  Co.  v,  Armstrong,  132  Fed.  711 369 

Victor  Talking  Machine  Co.  v.  Lucker,  150  N.  W.  790 406,  457 

Virtue  v.  Creamery  Package  Mfg.  Co.  et  al. ,  227  U.  S.  8 472 

Von  Bremen  v.  McMonnies  et  al.,  200  N.  Y.  41 424,  427,  429 

Vulcan  Detinning  Co.  v.  American  Can  Co. ,  67  Atl.  339 363 

Vulcan  Powder  Co.  v.  Hercules  Powder  Co.  et  al.,  96  Cal.  510 157 

Waddell  v.  Roxburgh,  21  Session  Cases  (4th  series)  883 378 

Wade  V.  William  Barr  Dry  Goods  Co.,  155  Mo.  App.  405 420,  421 

Walker  v.  Cronin,  107  Mass.  551 346 

Walsh  V.  Association  of  Master  Plumbers,  97  Mo.  App.  280 185,  719,  727,  731 

Walsh  et  al.  v.  Dwight  et  al.,  40  X.  Y.  App.  Div.  513 456 

Wampole  v.  Karn,  11  Ont.  Law  Rep.  619 239 

Warfield  v.  Booth,  33  Md.  63 427 

Warner  v.  Clark,  45  La.  Ann.  863 372 

Warren  v.  The  D.  AV.  Kam  Co.,  15  Ontario  Law  Reps.  115 389 

Warren  Featherbone  Co.  i'.  Landauer,  151  Fed.  130 393 

Warren  Mills  v.  New  Orleans  Seed  Co.,  65  Miss.  391 408 

Washington  Post  (The)  and  Durham  Duplex  Razor  Co.  v.  O'Donnell,  43  App. 

D.  C.  215 372 

Waterman  (L.  E.)  Co.  v.  Modern  Pen  Co.,  235  U.  S.  88 439 

Waters-Pierce  Oil  Co.  v.  State,  106  S.  W.  918;  212  U.  S.  86 171 

Waters-Pierce  Oil  Co.  v.  Texas,  19  Tex.  Civ.  App.  1;  177  U.  S.  28 171 

Watertown  Thermometer  Co.  v.  Pool  et  al.,  51  Hun  157 29,  30 

Watkins  v.  Landon,  54  N.  W.  193 354 

Weegham-i^  Killefer  et  al.,  215  Fed.  168 348 

Weiboldt  v^  Standard  Fashion  Co.,  80  111.  App.  67 •.       415 

Weidman  v.  Shragge,  46  Can.  Sup.  Ct.  Reps.  1 240 

Weinstock,  Lubin  &  Co.  i'.  H.  Mark's,  42  Pac.  142 443 

Weller  etal.  v.  Hersee,  10  Hun  431 35 

Wells  &  Richardson  Co.  v.  Abraham  et  al.,  146  Fed.  190 340 

Welsbach  Light  Co.  v.  American  Lamp  Co.,  99  Fed.  501 393 

Wentzel  v.  Barbin,  189  Pa.  St.  502 428 

Werner  v.  Vogeli,  10  Kans.  App.  536 732 


TABLE   OF   CASES.  XLI 

Page. 

Wesley  v.  Native  Lumber  Co.  etal.,  97  Miss.  814 457 

Wessell  et  al.  v.  Havens  et  al.,  91  Nebr.  426 424 

West  Va.  Transportation  Co.  v.  Standard  Oil  Co.  et  al.,  50  W.  Va.  611 376 

West  Virginia  Transportation  Co.  v.  Oliio  Ri\-er  Pipe  Line  Co.  et  al.,  22  W.  Va. 

600 57,  414 

Western  Counties  Manure  Co.  v.  Lawes  Chemical  Manure  Co.,  L.  R.  (1874),  9  Ex. 

218 383 

Western  Union  Telegraph  Co.  v.  Pritchett,  108  Ga.  411 732 

Western  Woodenware  Association  v.  Starkey,  et  al.,  84  Mich.  76 27,  28,  29,  34 

Westervelt  et  al.  v.  National  Paper  &  Supply  Co.,  57  N.  E.  552 350,  354 

Westminister  Laundry  Co.  r.  Hesse  Envelope  Co.,  156  S.  W.  767 369 

Weston  V.  Barnicoat,  175  Mass.  454 732,  733 

Wheeler-Stenzel  Co.  v.  American  Window  Glass  Co.  et  al.,  202  Mass.  471 336,  340 

^Vl^eeler-Stenzel  Co.  v.  National  Window  Glass  Jobbers'  Assn.,  152  Fed.  864. .  110, 113 

\X\nte  V.  Mellin,  L.  R.  (1895),  A.  C.  154 384 

^^^lite  V.  Parks,  93  Ga.  633 732 

White  V.  Trowbridge,  216  Pa.  St.  11 424 

White  (S.  S.)  Dental  Mfg.  Co.  v.  Hertzberg,  51  S.  W.  355 151 

^Miite  Dental  Mfg.  Co.  v.  Mitchell,  188  Fed.  1017 352 

Wliitehead  et  al.  v.  Kitson,  119  ]\fass.  484. 377,  394 

A^liitney  et  al.  v.  Slaj-ton,  40  Maine,  224 33,34 

Wliitson  V.  Col.  Phono.oTaph  Co. ,  18  App.  D.  C.  565 414 

Wliitwell  V.  Continental  Tobacco  Co.  et  al.,  125  Fed.  454 469 

Wickens  v.  Evans,  3  Y.  &  J.  318 233 

WieriJ.  Allen,  51  N.  H.  177 373 

Wiggins  1'.  Bisso,  92  Tex.  219 171 

Wiggins  Sons  Co.  v.  Cott-A-Lapp  Co.,  169  Fed.  150 355 

Wilder  Mfg.  Co.  v.  Corn  Products  Refining  Co.,  236  U.  S.  165 467 

Wiley  r.  Baumgardner  et  al.,  97  Ind.  66 32 

Wilkins  (Fred.)  &  Bros.  r.  Weaver,  L.  R.  (1915),  2  Ch.  322 348 

Williams  v.  Farrand,  88  Mich.  473 424,  429 

Wilson -u.  Dubois,  35  Minn.  471 376 

Winchester  Repeating  Arms  Co.  v.  Butler  Bros. ,  128  Fed.  976 461 

Windisch-Muhlhauser  Bremng  Co.  v.  Bacom,  21  Ky.  L.  R.  928 732 

Winnipeg  Steel  Granary  &  Culvert  Co.  (Ltd.)  v.  Canada  Ingot  Iron  Culvert  Co. 

(Ltd.)  et  al.,  7  Dominion  Law  Reps.  707 537 

Winston  v.  Beeson,  135  N.  C.  271 515 

Winterton  (H.  E.)  Gum  Co.  v.  Autosales  Gum  &  Chocolate  Co.,  211  Fed.  612. .       442 

Wirtz  V.  Eagle  Bottling  Co.,  50  N.  J.  Eq.  164 433 

Witkop  &  Holmes  Co.  v.  Boyce,  112  N.  Y.  Supp.  874;  115  N.  Y.  Supp.  1150; 

118  N.  Y.  Supp.  461 355,  356,  357,  361 

Witkop  &  Holmes  Co.  v.  Boyce,  61  X.  Y.  Misc.  126 359 

Witkop  &  Holmes  Co.  v.  Great  Atlantic  &  Pacific  Tea  Co.,  124  N.  Y.  Sup.  956.  356,  357 

Wolf  Bros.  &  Co.  V.  Hamilton  Brown  Shoe  Co.,  206  Fed.  611 434 

Wolkowsky  &  Garfunkel,  65  Fla.  10 373 

Wood  V.  Texas  Ice  &  Cold  Storage  Co.,  171  S.  W.  497 186 

Wood  (Walter  A.)  Mowing  &  Reaping  Co.  r.  Greenwood  Hardware  Co.,  75 

S.  C.  378 160.  415 

Woodhouse  v.  Powles,  43  Wash.  617 732 

Woochuff  V.  Berry,  40  Ark.  251 53 

Woods  r.  Hart,  50  Nebr.  497 414 

Wortliington  r.  Houghton  et  al.,  109  Mass.  481 371 

Wrenr.Weild,  L.  R.  (1869), 4Q.  B.  730 394 

Wrigley  (WilUam),  jr.,  Co.  v.  L.  P.  Larson,  jr.,  Co.  et  al.,  195  Fed.  568 442 


XLII  TABLE    OF   CASES. 

Page. 

Yale  &  Towne  Mfg.  Co.  v.  Adler,  154  Fed.  37 445 

Yale  &  Towne  Mfg.  Co.  v.  Worcester  Mfg.  Co.,  205  Fed.  952 434,  446 

Yeakley  v.  Gaston,  111  S.  W.  768 427 

Yeatman  v.  Homberger  &  Co.,  107  Law  Times  Reps.  742 448 

Young  V.  Commonwealth,  101  Va.  853 514 

Young  t'.  Macrae,  3  B.  &  S.  264 382,384 

Young  etal.  v.  Kuhn,  71  Tex.  645 371 

Yovattr.  Winyard,  1  Jacob  &  Walker,  394 364 

Zanturjian  v.  Boornazian,  25  R.  I.  151 429 


CONTINENTAL  EUROPEAN  COURTS  i. 

Austria, 
k.  k.  oberster  gerichtshof  (imperial-royal  supreme  court.) 

Entscheidung  v.  20.  Jan.  1898  (Oleumproducenten) 266 

Entscheidung  v.  6.  Apr.  1899  (Federweissproducenten") 266 

Entscheidung  v.  12.  Mai  1899 664 

Entscheidung  v.  12.  Sept.  1906  (Genossenschaft  der  osterreichisch-ungarischen 

Dextrinfabriken) 268 

Entscheidung  v.  19.  Juli  1911 669 

Entscheidung  v.  7.  Mai  1912  (Bastbiinderfabrikanten) 267 

Entscheidung  v.  10.  Juni  1913  (P.  Betonbauunternehmung  w.  Ed.  A.  u.  Kon- 

sorten) 266 

K.  K.  VERWALTUNGSGERICHTSHOF   (iMPERIAL-ROYAL   ADMINISTRATIVE   COURT). 

Erkenntnis  v.  4.  Okt.  1882  (Zadik  w.  Poppovits  ca.  K.  K.  Handels-Min.  und  T. 

Zackerl) 663 

Erkenntnis  v.  7.  Jan.  1909 666 

Erkenntnis  v.  7.  Mai  1913 666 

MISCELLANEOUS. 

Erkenntnis  des  Handelsministeriums  v.  2.  Okt.  1907  (Josef  Kfenekca.  Handels- 

ministerium) 667 

Entscheidung  des  Handelsministeriums  v.  6.  Marz  1908 665 

Entscheidung  des  Ministeriums  des  Innern  v.  5.  Nov.  1902 665 

Urteil  des  Landesgerichts  Laibach  v.  4.  Miirz  1912 669 

Entscheidung  der  Statthalterei  in  Lemberg  v.  5.  Miirz  1912 665 

Urteil  des  Kreisgericht  Olmutz  v.  15.  Apr.  1912 670 

Belgium. 

couRS  d'appel  (courts  of  appeal). 

Bruxelles,  29  mars  1877  (Hansotte  et  Cie.  c.  Mondron  et  consorts) 281 

Bruxelles,  5  mai  1904  (Nyssens  et  de  Buyser  c.  Bodart) 282 

Bruxelles,  3  juin  1909  (Etat  Fran^aise  c.  B.  -) 591 

Bruxelles,  29  juill.  1909  (Societe  en  Nom  CoUectif  Hollier-Larousse  et  Cie.  c. 

L.  Tietz,  etc.) 593 

1  Including  Egyptian.  The  coixrt  decisions  are  arranged  alphabetically  by  countries,  giving  the  deci- 
sions of  the  highest  courts  first  and  placing  the  decisions  in  chronological  order,  under  each  court.  The 
reports  of  cases  for  many  courts  in  European  countries, especially  in  Germany,  do  not  systematically 
indicate  the  parties,  but  they  have  been  shown  where  available.  In  some  other  instances  descriptive 
titles  have  been  used  to  identify  the  case. 


TABLE   OF   CASES.  XLIII 

Page. 

Bruxelles,  11  nov.  1910  (Becker  et  consorts  c.  Helman) 590 

Bruxellep,  24  juill.  1913  (Sociote  cooperative,  pour  la  vente  du  petit  granit  c. 

la  societe  anonyme  d'Ogne-Sprimont) 282 

Gand,  9  janv.  1907  (De  Beozicres  c.  De  Taepe) 281 

Gand ,  3  mars  1911  ( Verhelst  et  consorts  c .  Denys  et  consorts) 591 

Liege  24.  fev.  1909  (Procureur  generale  c.  Societe  anonyme  des  verreries  de 

L'ancre) 281 

Liege,  26  juill.  1910  (Tinchant  c.  Duchateau) 592 

Liege,  13  juill.  1912  (Larose  c.  Tinchant) 592 

TRIBUNALS    DE    COMMERCE  (TRIBUNALS    OP   COMMERCE). 

Anvers,  27   juin   1899,  Societe  anonyme  pour  I'exploitation  de  la  machine  a 

decouper  le  bois  c.  La  Societe  anonyme  I'Aigle) 595 

Bnixelles,  4  juill.  1898  (Societe  anonyme  "Manufacture  de  Biscuits  Parein  " 

c.  Societe  anonyme  ' '  Victoria  " 595 

Bruxelles,  21  mars  1905  (Soc.  Napoleon  Riuskopf  c.  Soc.  Cohn-Donnay  et  Cie 

etal) 592 

Bruxelles,  15  nov.  1906  (Schepens  et  Cie.  c.  Sythoff  et  Meeuwissen) 594 

Bruxelles,  12  nov.  1907  (Gripekoven  c.  S.) 283,  593 

Bruxelles,  30  janv.  1908  (Societe  M.  c.  Societe  0.  et  associes) 594 

Bruxelles,  6  nov.  1911  (Societe  Turkische  Cigarette  et  Tabac  Fabrick  c.  Societe 

des  grands  magasins  Leonhard  Tietz) 593 

Bruxelles,  25  oct.  1912  (Bargeaud  c.  H.) 595 

Bruxelles,  7  dec.  1912  (Wilford  c.  E.  et  B.) 591 

Gand,  30  juin  1906  (Ledant  c.  Lefebvre) 594 

Liege,  10  nov.  1903  (Societe  des  Usines  Aubiy  c.  Bebelman) 590 

Denmark. 

HOJESTERET   (SUPREME   COURt). 

Dom  av  28.  Jan.  1913  (Det  Offentlige  mod  Tiltalte  Materialist  Hans  Trojel)... .  674* 

Dom  av  3.  Juni  1913  (Det  Offentlige  mod  Tiltalte  Cigarhandler  Carl  Rasmussen)  674 

Dom  av  3.  Okt.  1913  (Bache  mod  Direktor  Carl  Christian  Rammel) 675 

Dom  av  6.  Okt.  1913  (Bache  mod  Christiansen) 674 

Dom  av  7.  Nov.  1913  (Direktor  American  Tobacco  Comp.  Alfred  Christensen 

mod  de  Kobenhavnske  Handelsforeningers  Faellesrepraesentation) 674 

Dom  av  12.  Feb.  1914  (Faellesforeningen  for  Danmarks  Brugsforeningen  mod 

A/S  Aalborg  Portland  Cement  Fabrik) 287 

Dom  av  21.  Okt.  1914  (Bache  mod  Johan  Gresel) 674 

Egypt. 

Cour  d'Appel,  Alexandrie,  15  mars  1899 557 

Cour  d'Appel,  Alexandrie,  30  mars  1904 557 

Trib.  comm.,  Alexandrie,  17  mars  1913  (Ibrahim  bey  Sid  Ahmeh  c.  The  Tele- 
phone Cy .  of  Egypt) 557 

France. 

cour  de  cassation  (supreme  court). 

Arret  du  25  janv.  1838  (Bimar,  Glaizes  etc.  c.  Duroux) 270 

Arrdt  du  31  aout  1838  (Mille  et  autres  fabricants  de  sonde  de  Marseille  c.  Min- 

ist^re  public) 270 

Arret  du  15  mai  1857  (Gouyer  c.  Min.  pub.) 272 


XLIV  TABLE    OF   CASES. 

Page. 

Arrdt  du  11  fev.  1859  (Coumerie  c.  Pellieux  et  Maz^-Launay) 272 

Arret  du  8  janv.  1863  (Rigot) 272 

Arret  du  27  mars  1877  (A.  et  M.  Landon  c.  Renault) 570 

Arret  du  11  fev.  1879  (Coumerie  c.  Pellieux  et  Maze-Launay) 270 

Arret  du  5  aout  1890  (Picon  et  Cie.  c.  Mollier) 565 

Arret  du  17  janv.  1894  (Bessand,  Blanchard,  Rochard  &  Cie.  c.  Godard) 582 

Arret  du  28  nov.  1895  (Beaucamps  c.  Dessaux) 562 

Arret  du  28  nov.  1898  (Lecomte  c.  Lambert  et  fils  et  Debeaiivais) '  584 

An-et  du  30  oct.  1901  (Voisin  c.  Juppet) 564 

Arret  du  18  nov.  1904  (Botta  et  Perier  c.  Dubonnet) 561 

An-et  du  25  oct.  1907  (Gaucher  et  Baley  c.  Manufacture  frangaise  d'armes  et 

cycles) 562 

Arrgt  du  6  janv.  1908  (J.  c.  P.) 558 

Arret  du  27  mai  1908  (Doeuillet  et  Cie.  c.  Raudnitz) 584 

Arret  du  15  fev.  1909  (Champigny  et  Cie.  c.  Yvon) 566 

Arret  du  13  juill.  1912  (Soc.  fran^aise  des  munitions  de  chasse  c.  Leroy) 561 

couRS  d'appel  (courts  of  appeal). 

Aix,  16  janv.  1908  (Revel  pere  et  fils  et  Courtinat  c.  Ogliastro  et  autres) 565 

JBesanfon,  24  nov.  1880  (Damelit  c.  Moulin) 579 

Bordeaux,  9  fev.  1885  (Laporte  c.  Paul  Dupont  fils) 588 

Bordeaux,  2  janv.  1900  (Mallebray  c.  Compagnie  generale  des  chaux  de  Saint- 

Astier  et  autres) 272 

Bordeaux,  19  juill.  1902  (Gautier  freres  c.  Moyet-Gautier) 563 

Dijon,  13  aout  1860  (Mulcey  c.  Boyer) 582 

Douai,  15  juill.  1887  (Wallaert  freres  c.  Boutry  Droulers) 584 

Douai,  30  janv.  1912  (Petite.  Paquin) 584 

Grenoble,  26  juin  1912  (J.  Simon  et  Cie.  c.  Schickle) 575 

Lyon,  21  avril  1896  (A. et  autres  c.  Germain-Pernet) '. 271 

Lyon,  29  juin  1904  (Geoffray,  Jacquet  et  Guillermain  c.  Maurage) 586 

Lyon,  6  juill.  1912  (Laniel  c.  Societe  des  Grands  Magasins  des  Cordeliers) 566 

Montpellier,  23  aout  1875  (F.  Prot  et  Cie.  c.  Mongauzi) 566 

Nancy,  20  avril  1899  (Soc.  la  Franfaise) 582 

Nancy,  2  juill.  1906  (Didier  c.  Laurent)... 574 

Nancy,  25  nov.  1911  (Tilguin  et  Cie.  c.  Societe  des  Engins  Graisseurs) 569 

Orleans,  29  mars  1889  (Beauvois,  dit  Demonchaux  c.  Chollet  et  Courel) 580 

Orleans,  9  dec.  1891  (Levy  c.  Saintin  et  Flisseau) 581 

Paris,  3  aout  1858  (Barbier  c.  Simon) 573 

Paris,  21  mai  1865 570 

Paris,  23  avril  1869  (Sabatou  c.  Bardou) 578 

Paris,  2  dec.  1869  (Lamoureux  et  Chouet  c.  Calame  et  Fleck) 579 

Paris,  31  juill.  1874  (Moet  et  Chandon  c.  Moet  et  Cie. .) 571 

Paris,  14  dec.  1888  (Lherault  c.  Lebeuf) 582 

Paris,  5  aout  1890  (Secretan  c.  Min.  Publ.) 271 

Paris,  14  avril  1891  (Cajot  et  Cie.  c.  Ferry  et  May) 271 

Paris,  11  mars  1892  (Petithomme  c.  Pigeon) 571 

Paris,  23  juin  1896  (Compagnie  d'assiirances  generales  c.  Mutual  Life,  Baudrj' 

et  Beziat  d  Audibert) 577 

Paris,  1  aout  1901  ( Amieux  et  Comp.  c.  La  Laiterie  du  Nord) 575 

Paris,  8  juin  1904  (Marina  Dubonnet  c.  Mercier) 575 

Paris,  18  juin  1908  (Societe  de  librairies  et  imprimeries  horticoles  c.  Amaud 

&  Cie.  et  Brancher) 574 


TABLE    OF   CASES.  XLV 

Page. 

Paris,  8  juill.  1910  (Balzard  et  Cie.  c.  Lanoelle  et  Cie.) 571 

Paris,  6  avril  1911  (Compagnie  Generale  des  Phonographes  c.  Compagnie  des 

Cinematographes  Theophile  Pathe) 572 

Paris,  20  nov.  1912 583 

Paris,  9   mai   1913  (Faivre  et  aiitres  c.  Soc.  Fran^aise  des  Automobiles  de 

Place) 586 

Pan,  18  juin  1897  (Lambert- Violet  c.  Maumus) 578 

Pan,  18  mai  1910  (Vallet  c.  Le  Meneust) 572 

Rennes,  4  juin  1883 583 

Eiom,  28  mars  1900  (Bougerolle  c.  Guillot) 583 

Riom,  1  dec.  1903 573 

Toulouse,  17  fev.  1904  (Lebrasseur  c.  Canonne) 573 

Toulouse,  18  janv.  1906  (Organ  c .  Compagnie  Bordelaise) 578 

TRIBUNALS    DE    COMMERCE    (TRIBUNALS   OF  COMMERCE). 

Melun,  11  dec.  1906  (Baillet,  Boudier  et  autres  c.  Crestey) 576 

Perigueux,  2  juin  1899  (Mallebray  c.  Compagnie  generale  des  Chaux  de  Saint- 

Astier  et  autres) 271 

Reims,  9  sept.  1904  (Francois  c.  Jules  Mumm  &  Cie.) 577 

Rouen,  4  juin  1877  (Levy,  Jacob  et  Legrand  c.  Francfort  et  Kahn) 581 

Rouen,  17  janv.  1906  (Javal  et  Parquet  c.  Brunschwig) 579 

Seine,  22  mai  1867  (Mondin  et  Cie.  c.  Sari  et  autres) 571 

Seine,  9  juin  1876  (Rame  c.  Besland  et  Galempoix) 583 

Seine,  7  avril  1881  (Banque  parisienne  c.  Perret) 574 

Seine,  21  mai  1884  (Galignani's  Messenger  c.  Morning  News) 576 

Seine,   27  juin  1907   (Chambre  syndicale  des  fabricants   d'armes  de  Saint 

Etienne  c.  Pigeon) 577 

Seine,  7  nov.  1908  (Societe  des  Engins  Graisseurs  c.  Hamelle) 573 

Seine,  13  nov.  1909  (Societe  des  Eaux  minerales  de  Vittel  c.  Brunet) 580 

Seine,  25  nov.   1909  (Chambre  Syndicale  des  Eaux  Gazeuses  et  Landinet  c. 

Plarut) 565 

MISCELLANEOUS. 

Trib.  civ.  Lannion,  9  juin  1908  (Henri  Morvan  c.  Societe  Morvan  freres) 588 

Trib.  civ.  Seine,  26  avril  1898  (Vilcocq.  c.  Quidet  pere  et  fils  et  Marchandise) . .  567 

Trib.  corr.  Seine,  11  mars  1911  (Vve.  Waldeck-Rousseau) 567 

Trib.  civ.  Seine,  30  juin  1913  (Massiot  c.  Baudin) 586 

Germany. 

reichsgericht  (imperial  court). 

Urteil  V.  25.  Juni  1890  in  Civilsachen  (Borsenverein  der  deutschen  Buchhandler)  260 

Urteil  V.  17.  Nov.  1891  in  Civilsachen  (Holzhandlerverein) 261 

Urteil  V.  4.  Feb.  1897  in  Civilsachen  (B.  w.  Sachsischen  Holzstoff-Fabrikanten- 

Verband) 258 

Urteil  V.  13.  Nov.  1897  in  Civilsachen  (Liebig  Extract  of  Meat  Co.,  Ltd.,  w.  0.).  699 

Urteil  V.  5.  Jan.  1900  in  Civilsachen  (W.  v.  Biela  w.  Schreiber) 642 

Urteil  V.  29.  Nov.  1900  in  Strafsachen  (Rheiuisch-Westfalische  Sprengstoff- 

Aktiengesellschaft) 257 

Urteil  V.  19.  Feb.  1901  in  Civilsachen  (Gewerkschaft  d.  Zeche  ver.  Hannibal  w. 

Rheinisch-Westfalisches  Kohlensyndikat) 260 

Urteil  V.  11.    April   1901   in   Civilsachen  (Bl.    w.    D.    A.    Dampschiffahrts- 

Gesellschaft) 262,  655 


XLVI  TABLE   OF   CASES. 

Page. 

Urteil  V.  6.  Miirz  1902  in  Civilsachen  (R.  w.  Verein  der  K.  'er  Arzte) 262 

Urteil  V.  14.  Dez.  1902  in  Civilsachen  (Artistische  Union  w.  den  Borsenverein 

derdeiitschen  Buchhandler) 653 

Urteil  V.  11.  Juli  1904  in  Civilsachen  (H.  w.  St.  Wive) 261 

Urteil  V.  2.  Feb.  1905  in  Civilsachen  (Feingoldschlager-Vereinigung  w.  H.  imd 

B.) 263,  655 

Urteil  V.  3.  Marz  1905  in  Civilsachen  (Eagle  Oil  Co.  of  N.  Y.  w.  Vacuum  Oil  Co.) .  699 

Urteil  V.  17.  Marz  1905  in  Civilsachen  (K.  w.  H.) 261 

Urteil  V.  20.  Sept.  1910  in  Strafsachen 632 

Urteil  V.  28.  Nov.  1910  in  Strafsachen 639 

Urteil  V.  6.  Dez.  1910  in  Strafsachen 628 

Urteil  V.  4.  April  1911,  in  Strafsachen 645 

Urteil  V.  16.  Mai  1911  in  Civilsachen 700 

Urteil  V.  26.  Mai  1911  in  Strafsachen 630,  631 

Urteil  V.  16.  Juni  1911  in  Strafsachen 631 

Urteil  V.  6.  Okt.  1911  in  Strafsachen  (Schuhhaus  Sambrander) 633 

Urteil  V.  12.  Dez.  1911  in  Strafsachen 645 

Urteil  V.  29.  Marz  1912  in  Civilsachen 656 

Urteil  V.  15.  April  1912  in  Civilsachen 660 

Urteil  V.  3.  Mai  1912  in  Civilsachen 654 

Urtei]  V.  22.  Okt.  1912  in  Strafsachen 628 

Urteil  V.26.  Nov.  1912  in  Civilsachen 658 

Urteil  V.  16.  Jan.  1913  in  Civilsachen 661 

Urteil  V.  7.  Feb.  1913  in  Civilsachen 658 

Urteil  V.  12.  Marz  1913  in  Strafsachen 631 

Urteil  V.  4.  April  1913  in  Strafsachen  (Konkurswaren) 630 

Urteil  V.  4.  April  1913  in  Strafsachen  (Betriebsgeheimnisse) 646 

Urteil  V.  23.  Mai  1913  in  Strafsachen 636 

Urteil  V.  27.  Mai  1913  in  Civilsachen  (Deutsche  Verkaufsgesellschaft  w.  Deutsch- 

Amerikanische  Petroleum  Gesellschaft) 260 

Urteil  V.  12.  Juni  1913  in  Civilsachen 628 

Urteil  V.  10.  Juli  1913  in  Civilsachen 660,  661 

Urteil  V.  28.  Okt.  1913  in  Civilsachen 657 

Urteil  V.  28.  Nov.  1913  in  Civilsachen 660 

Urteil  v.  10.  Marz  1914  in  Civilsachen 628 

Urteil  V.  20.  Marz  1914  in  Ci\alsachen 657 

Urteil  V.30.  Miirz  1915  in  Civilsachen  (A.  G.  Adler  Compagnie-Dresden) . . .  261,  659 

OBERLANDESGERICHTE  (SUPERIOR    COURTs). 

Bayern,  7.  April  1888  (Ziegeleibesitzer  Vereinigung) 260 

Breslau,  12.  Dez.  1913 652 

Celle,  12.  Feb.  1910 627 

Celle,  19.  Juni  1912 630 

Dresden,  3.  Feb.  1911 642 

Frankfurt  a/M,  11.  Mai  1910 641 

Hamburg.  26,  Juni  1914 651 

Hamm.  15,  Marz  1912 658 

Jena.  4,  Mai  1913 651 

Kiel,  15.  June  1911 659 

Kiel,  25.  Marz  1913 657 


TABLE    OF   CASES.  XLVII 

KAMMERGERICHT    (PRUSSIAN    SUPERIOR    COURT). 

Page. 

Berlin,  4.  Feb.  1911 654 

Berlin,  3.  Jan.  1912 655 

Berlin,  22.  Nov.  1913 651 

LANDESGERICHTE    (STATE   COURTS).  . 

Danzig,  6 .  Juli  1911 653 

Coin,  30.  Sept.  1912 644 

Hungary. 

Obergericht,  Jan.  1912  (Submissionskartell) 269 

Italy. 

corte  di  cassazione  (supreme  courts). 

Napoli,  5  aprile  1906  (P.  :\I.— Colombo) 274 

Napoli,  26  maggio  1903  (Algranati  c.  Societa  Viteria) 275 

Torino,  18  novembre  1909  (Mantovani  e.  C.  c.  Rosenthal,  Fleischer  &  Co) 597 

Torino,  9  settembre  1913  (Vassallo  c.  Pattarino) 599 

Torino,  12  gennaio  1914  (Capelini  c.  Jensch) 599 

CORTE   d'aPPELLO    (COURTS   OP  APPEAL). 

Catania,  29  dicembre  1911  (Narcisi  c.  Idonia) 600 

Milano,  12  settembre  1906  (Ferrario  c .  Gilardoni) 599 

Milano,  7  agosto  1907  (Kahn  c.  Levi) 600 

Milano,  11  ottobre  1907  (Barbareschi  c.  Heimann) 600 

Milano,  19  novembre  1907  (Van  Baerle  e  C.  c.  Heiman  e  C.) 599 

Milano,  1  febbraio  1911  (Industria  Italiana  dei  Disinfettanti  c.  Brioschi) 600 

Napoli,  2  luglio  1900  (Ferro-Cobianchi  c.  Algranati) 275 

Napoli,  27  novembre  1905  (Fratelli  Branca  c.  Fratelli  Branca  fu  Carlo  e  C). . .  601 

Parma,  21  maggio  1912  (Prati  c.  Garo\-i) 599 

Torino,  15  maggio  1912   (Consorzio  Agrario  Cooperativo  di  Torino  c.  Martin 

Cultivator  Co.) 598 

TRIBUNAL!    (TRIBUNALS). 

Milano,  3  luglio  1900 600 

Venezia,  14  aprile  1904  (Societa  Salviati  Jesumm  C.  L..c.  Ditta  Pauly  e  C.)  . .  276,  598 

Parma,  25  febbraio  1910  (Soc.  fornai  e  pastai  c.  Finella) 275 

The  Netherlands. 

hooge  ra.\d  (^supreme  court). 

Beslissing  van  6.  April  1883  (J.  C.  Elzer  tegen  P.  L.  de  Gavere) 607 

Beslissing  van  29.  Juni  1883  (J.  C.  Cornelissen  tegen  H.  W.  Renter) 607 

Beslissing  van  6.  Jan.  1905  (J.  J.  B.  Iveni=,  jr.  tegen  De  naamlooze  venootschap 

The  Singer  Manufacturing  ("o.) 608 

LOWER   COURTS. 

Amsterdam,  13.  Juni  1899 608 

Amsterdam,  7.  Juni  1910  (Bond  van  Nederlandsch  Grossiers  in  Fruit  tegen  A. 

Bosnak) 284 

Arnhem,  16.  Jan.  1895 609 

Breda,  24.  Miirz  1896 610 

Breda,  30.  Juni  1896  (M.  P.  E.  L.  tegen  Ha.  M.) 610 

30035°— 16 IV 


XLVIII  TABLE    OF   CASES. 

Page. 

Groningen,  3.  Marz  1899 608 

Hertogenbusch,  5.  Mai  1900 609 

Leeuwarden,  23.  Mai  1900 608 

Rotterdam,  21.  Marz  1898 610 

Rotterdam,  6.  Nov.  1901 610 

Rotterdam,  11.  Nov.  1909,  Arbitrale  Uitspraken  (van  Deventer  tegen  Maseland 

en  N.  V.  Zuld-HoUandsche  Glasblazerij) 283 

Zwolle,  14.  Marz  1894 608,609 

Zwolle,  29.  April  1903 : 608 

Russia. 

Kievskii  Okruzhnyi  Soud,  13.  marta  1895  (Otchet  po  delu  sindikata  sakharoza- 

vodchikov  s  O.  N .  Baskovoi) 288 

Petrikovskii  Okruzhnyi  Soud,  marta  1909  (Glue  Manufacturers) 288 

Peterburgskii  Kommerchereskii  Soud,  1914  (Produgol) 288 

Spain. 

tribunal  supremo  (supreme  court). 

Sentencia  de  30  de  diciembre  de  1907  (Guillermo  Llambras  Malla) 603 

Sentencia  de  8  de  julio  de  1911  (Monnegrat  y  Naline) 603 

Sentencia  de  24  de  abril  de  1909  (Lopez  de  Tejada  Serrano) 604 

Switzerland. 

schweizerisches  bundesgericht  (swiss  federal  court). 

Urteil  V.  18.  Dez.  1891  (Orell  Fiissli  c.  Schweizerisches  Vereinssortiment) 612 

Arret  du  20  mai  1893  (Ricqles  &  Co.  c.  Bonnet  &  Co.) 611 

Urteil  V.  24.  Juni  1911  (Verband  nordwestschweizerische  Milchgenossenschaften 

gegen  Birsecksche  Produktions-  und  Konsumgenossenschaft) 279 

Arret  du  26  avril  1913  (Societe  des  Marchands  de  Combustibles  de  La  Chaux-de- 

Fonds  et  consorts  c.  Cooperative  des  Syndicats  de  La  Chaux-de-Fonds) 612 

Arret  du  31  mai  1913  (Ostschweizerische  Miihlenaktiengesellschaft) 279 

CANTONAL   COURTS. 

Obergericht  Ziirich,  12  mai  1894 613 

Handelsgericbt  Bern,  15.  Dez.  1913  (Jordi-Kocher  und  Kons.  c.  Moses  Bem- 
heim) 613 


LETTERS  OF  TRANSMITTAL. 


Department  of  Commerce, 

Office  of  the  Secretary, 

Washington,  March  15,  1915. 
Sir  :  I  transmit  herewith  a  report  of  the  Commissioner  of  Corpora- 
tions on  Trust  Laws  and  Unfair  Competition.  This  report  deals 
principally  with  the  legislation  and  judicial  decisions  of  the  United 
States  and  of  the  chief  foreign  countries  with  respect  to  industrial 
combinations  and  unfair  competition. 
Very  respectfully, 

William  C.  Redfield,  Secretary. 
The  President. 


Department  of  Commerce, 

Bureau  of  Corporations, 

Washington,  March  15,  1915. 
Sir:  I  have  the  honor  to  transmit  herewith  a  report  on  Trust  Laws 
and  Unfair  Competition  made  to  the  President  under  your  direction, 
and  in  accordanc;^  with  the  law  creating  the  Bureau  of  Corporations. 
This  report  deals  principally  with  the  legislation  and  judicial  decisions 
of  the  United  States  and  of  the  chief  foreign  countries  with  respect  to 
industrial  combinations  and  unfair  competition. 

I  desire  to  mention  as  especially  contributing,  under  my  direction, 
to  the  preparation  of  this  report,  Messrs.  Francis  Walker,  Adrien  F. 
Busick,  Morten  Q.  Macdonald,  E.  O.  Merchant,  William  F.  Notz,  and 
Ernest  S.  Bradford,  of  this  Bureau. 
Very  respectfully, 

Joseph  E.  Davies, 
Commissioner  of  Corporations. 
To  Hon.  William  C.  Redfield, 

Secretary  of  Commerce. 

XLIX 


LETTER  OF  SUBMITTAL. 


Department  of  Commerce, 

Bi'REAu  OF  Corporations, 

Washington,  March  15,  1915. 

Sir  :  I  have  the  honor  to  submit  herewith  a  report  on  Trust  Laws 
and  Unfair  Competition. 

The  Bureau  first  directed  its  attention  to  this  subject  in  connection 
with  proposed  legislation  to  supplement  the  antitrust  laws,  under- 
taken by  the  Sixty-third  Congress,  in  order  that  it  might  be  able,  in 
so  far  as  desired,  to  furnish  information  thereon  to  the  legislative 
branch  of  the  Government.  Furthermore,  in  comiection  with  the 
decision  of  Congress  to  estabhsh  a  Federal  Trade  Commission  and  to 
grant  to  it  certain  functions  regarding  unfair  methods  of  competi- 
tion, the  Bureau  made  a  general  investigation  of  the  laws  regarding 
such  competitive  methods.  Much  information  was  collected  in  a 
form  adapted  to  the  purpose  in  view,  and  it  was  thought  that  it  would 
be  useful  to  the  general  public.  For  this  reason,  therefore,  and 
without  presuming  to  make  a  dogmatic  interpretation  of  the  law, 
it  is  deemed  advisable  to  publish  this  material  in  the  present  form. 

Among  the  chief  subjects  discussed  are  Federal  antitrust  legislation, 
the  judicial  decisions  thereunder,  and  the  influence  of  such  legislation 
on  forms  of  busmess  organization,  the  antitrust  laws  of  the  several 
States,  the  legislation  of  foreign  countries  with  regard  to  combina- 
tions, and  the  laws  and  judicial  decisions  in  the  United  States  and 
various  foreign  countries  with  regard  to  unfair  or  unlawful  competi- 
tion. 

EFFECT    OF    LEGISLATION    OX    BUSINESS    ORGANIZATION. 

A  comparison  of  the  development  of  antitrust  legislation  in  the 
United  vStates  and  its  judicial  interpretation  with  the  contempora- 
neous development  of  the  forms  of  business  organization  would  seem 
to  justify  the  conclusion  that  the  law  has  been  an  important  factor 
in  shaping  the  fonns  of  business  organization.  For  example,  while 
combinations  to  suppress  competition  in  the  form  of  holding  com- 
panies were  at  one  time  thought  by  some  to  be  k^vful,  and  at  any 
rate  were  frequently  resorted  to,  the  clear  denunciation  of  this  form 
of  monopoUstic  combination  in  a  decision  by  the  Supreme  Court  in 
1904  substantially  put  an  end  to  the  formation  of  combinations  of 

LI 


Lil  LETTEE   OF   SUBMITTAL. 

this  sort.  Ill  1911  a  decision  of  the  Supreme  Court  condemned  a 
merger  of  competing  corporations  which  was  monopolistic  m  effect, 
and  smce  then  combinations  of  this  form  and  character  have  been 
seldom  attempted. 

SCOPE    OF   THE    SHERMAN    LAW. 

The  judicial  interpretation  of  the  Sherman  Antitrust  Law,  espe- 
cially in  more  recent  decisions,  indicates  (1)  that  it  is  adapted  to 
prevent  aU  kinds  of  contracts  or  combinations  which  directly  or 
hurtfuUy  restram  trade  or  commerce  subject  to  Federal  control,  or 
monopoUze  or  attempt  to  monopohze  it,  although  the  means  of 
restraint  employed  are  so  various  and  changing  that  it  would  be 
difficult  to  define  aU  of  them  specifically  by  statute;  (2)  that  the 
present  judicial  interpretation  of  interstate  commerce  is  such  as  to 
leave  practically  no  twihght  zone  which  can  not  be  reached  either  by 
Federal  or  State  law;  (3)  that  combinations  of  persons  in  whatever 
walks  of  life  in  so  far  as  they  are  engaged  in  such  commerce  are  within 
the  scope  of  its  provisions,  and  in  particular  that  combinations  of 
manufacturers  engaged  in  such  commerce  are  comprehended  by  the 
law  notwithstanding  that  an  early  decision  of  the  Supreme  Court 
gave  rise  to  some  doubts  as  to  the  extent  to  wliich  manufacturmg 
combinations  were  contrary  to  the  law. 

Although  the  Shennan  Antitrust  Law,  therefore,  is  comprehensive 
in  its  scope,  it  is  not  so  clearly  established  that  the  judicial  decisions 
afford  a  basis  for  determinmg  with  exactness  the  lawfulness  or  unlaw- 
fuhiess,  when  taken  severally,  of  many  particular  devices  that  have 
been  used  collectively  to  control  the  market.  Ahnost  every  decision 
has  been  based  on  a  complex  set  of  facts  and  the  use  of  a  number 
of  different  devices  to  restrain  trade. 

RECENT   FEDERAL   ANTITRUST    LEGISLATION. 

The  Clayton  Act  of  October  15,  1914,  was  designed  in  part  to 
establish  more  definitely  the  unlawfuhiess  of  some  of  these  devices 
to  lessen  competition,  especially  with  respect  to  (1)  price  discrimina- 
tion, (2)  exclusive  contracts,  (3)  the  holding  by  one  corporation  of 
stock  in  another  corporation,  and  (4)  the  employment  by  different 
corporations  of  common  directors.  This  act  also  modifies  in  some 
particulars  the  provisions  of  the  antitrust  acts,  especially  with  regard 
to  labor  and  agricultural  organizations,  and  changes  in  certain  respects 
the  methods  of  procedure  and  the  remedies  in  the  enforcement  of 
the  antitrust  laws.  Tlie  provisions  of  this  law,  however,  have  not 
yet  been  judicially  interpreted  and  are  merely  set  forth  in  this 
report  together  with  those  of  earher  antitrust  laws. 


LETTER    OF    SUBMITTAL.  LIII 

STATE    ANTITRUST    LAWS. 

Almost  all  the  48  States  of  the  Union  have  passed  laws  against 
trusts  and  combinations;  the  comparative  study  of  these  laws  which 
is  made  in  this  report  affords  a  useful  basis  for  determinmg  the  most 
effective  system  of  State  legislation.  In  certain  directions  the 
States,  prior  to  the  enactment  of  the  Federal  Trade  Commission  Act 
and  the  Clayton  Act,  had  gone  further  than  Congress  in  forbiddmg 
specific  forms  of  unfah  competition.  Tlie  broad  field  of  corporation 
law  is  one  in  which  the  Federal  Government  has  not  attempted  any 
general  legislation,  and  the  report  refers  to  this  subject  only  inci- 
dentally in  respect  to  State  legislation.  Undoubtedly  extensive 
reforms  in  State  corporation  laws  are  desirable  not  only  to  make 
them  more  effective  m  preventing  abuses,  but  also  to  make  them  as 
nearly  uniform  as  possible  for  the  general  convenience  of  the  business 
world. 

TRUST   LAWS    IN    FOREIGN    COUNTRIES. 

In  foreign  countries  the  greatest  diversity  exists  with  respect  to 
trust  legislation.  England  has  no  prohibitory  legislation,  and  in  the 
interpretation  of  the  common  law  the  courts  appear  to  favor  freedom 
of  contract  more  than  freedom  of  industry.  In  the  great  English 
colonies,  however,  where  conditions  are  most  nearly  like  those  in  the 
United  States,  monopolistic  combinations  are  generally  forbidden. 
The  laws  of  Germany  allow  a  freedom  of  contract  even  wider  than 
those  of  England,  and  generally  uphold  combinations  or  cartels  even 
when  they  are  practically  monopohstic  in  character,  while  in  France 
such  combinations  are  prohibited  in  so  far  as  they  tend  to  disturb 
the  natural  course  of  prices  as  determmed  by  free  competition.  In 
Austria  such  combinations  are  invahd  but  not  prohibited  by  the 
criminal  law.  A  similar  diversity  of  law  is  found  in  other  European 
countries. 

One  of  the  most  remarkable  features  in  the  polic}^  of  certain  foreign 
countries  is  the  enactment  of  laws  which  restrict  competition  in  cer- 
tain industries  or  even  make  obhgatory  the  combination  of  com- 
petitors, as,  for  example,  in  the  potash  mdustry  in  Germany,  the 
sulphur  industry  m  Italy,  and  the  petroleum  industry  in  Roumania. 

FEDERAL   TRADE    COMMISSION    AND    UNFAIR    COMPETITION, 

The  act  approved  September  26,  1914,  establishmg  a  Federal 
Trade  Commission  gives  extensive  administrative  powers  to  the 
commission  with  respect  to  corporation  activities  and  the  enforce- 
ment of  the  antitrust  laws,  and  also  gives  it  the  quasi  judicial  function 
of  determining  questions  of  unfair  methods  of  competition.  Tlie 
powers  of  this  commission  are  extended  under  the  Clayton  Act  to 
determine  questions  concernmg  certain  devices  to  lessen  competition, 


LiV  LETTEE    OF    SUBMITTAL. 

referred  to  above,  which  are  unlawful  under  the  said  act,  in  so  far  as 
these  devices  are  used  by  corporations  under  its  jurisdiction. 

MEANING    OF    UNFAIR    METHODS    OF    COMPETITION. 

This  report  shows  what  practices  have  generally  been  regarded  as 
mifair  methods  of  competition  by  business  men,  economic  writers, 
and  public  men  in  the  United  States,  and  also  what  practices  have 
been  characterized  as  such  by  the  Department  of  Justice  or  by  the 
courts  in  the  administration  of  the  antitrust  laws.  FurtheiTQore, 
it  shows  various  competitive  practices  which  at  common  law  the 
courts  have  termed  unfair  competition  or  which  they  have  held 
could  not  be  justified.  These  decisions  give  a  much  wider  scope  to 
the  term  than  has  been  generally  recognized.  In  presentmg  this 
information,  however,  it  is  not  intended,  in  this  report,  to  limit  or 
define  the  term  "unfair  methods  of  competition." 

UNFAIR    COMPETITION    IN    FOREIGN    COUNTRIES. 

A  broad  survey  is  also  made  of  legislation  on  the  subject  of  unfair 
competition  in  the  chief  European  countries,  with  some  illustrations 
of  the  apphcations  of  these  laws  m  the  jurisprudence  of  the  respective 
countries.  In  some  countries  reliance  is  chiefly  placed  on  general 
provisions  of  the  civil  codes,  while  other  countries  have  elaborate 
special  laws  prohibitmg  particular  practices.  Tlie  present  tendency 
is  to  combme  both  of  these  systems.  In  most  foreign  countries  the 
basic  idea  of  unfair  competition  is  an  act  which  unjustly  injures  a 
competitor,  and  comparatively  little  consideration  is  given  to  the 
question  of  the  effects  on  the  general  public. 

RELATION     OF     UNFAIR     COMPETITION     TO     MONOPOLISTIC     PRACTICES. 

In  the  United  States,  on  the  other  hand,  the  apphcation  of  the 
term  "unfair  competition"  in  legal  decisions  and  in  legislation  indi- 
cates that  the  effects  on  the  general  public  are  considered.  In  certain 
classes  of  cases,  when  determining  whether  a  method  of  competition 
is  unfau'  or  not,  the  question  whether  it  tends  to  lessen  competition  or 
to  bring  about  a  monopoly  appears  to  be  of  primary  importance.  It 
appears  that  Congress  was  conscious  of  this  identity  between  unfair 
methods  of  competition  and  certain  practices  to  lessen  competition, 
and  therefore  provided  that  the  quasi  judicial  fmictions  of  the  Federal 
Trade  Commission  concerning  unfair  methods  of  competition  should 
apply  to  those  devices  to  lessen  competition  which  are  prohibited 
under  the  Clayton  Act. 

Very  respectfully, 

Joseph  E.  Da  vies. 

Commissioner  of  Corporations. 

The  President. 


TRUST  LAWS  AND  UNFAIR  COMPETITION. 


CHAPTER  I. 
BRIEF  HISTORICAL  VIEW  OF  ANTITRUST  LEGISLATION. 

Section  1.  Introductory. 

Efforts  to  obtain  monopolistic  control  of  the  market  have  existed 
to  a  gi'eater  or  less  extent  in  almost  all  periods  of  civilization.  The 
general  existence  of  legislation  against  such  efforts  is  itself  evidence 
of  tliis  fact.  The  degree  to  which  monopolistic  conditions  have 
arisen  from  time  to  time  has  depended  on  a  great  variety  of  complex 
economic  conditions  and  also  on  the  general  character  of  the  laws 
regulating  property  and  business.  The  opposing  tendencies  of  com- 
petition and  of  monopoly,  however,  have  almost  always  been  present. 

The  recent  development  of  large  combinations  and  monopolies  in 
the  United  States,  as  well  as  in  various  foreign  comitries,  has  been 
especially  striking,  because  it  followed  an  era  in  which  competition 
had  been  strongly  developed.  This  pronounced  competitive  era  was 
apparently  the  result  of  several  historical  circumstances,  among 
which  may  be  mentioned  the  development  of  the  factory  system  of 
production,  the  improvement  of  means  of  transportation  and  com- 
munication, the  development  of  more  Hberal  laws  of  commercial  inter- 
course between  nations,  and  the  influence  of  the  economic  doctrme 
of  free  trade  and  free  industry. 

In  the  United  States  in  the  early  part  of  the  nineteenth  century, 
competition  was  more  limited  locally  than  to-day,  and  in  particular 
places  was  apparently  often  modified  to  a  considerable  extent  by 
local  imderstandings  among  competitors  as  well  as  by  the  natural 
limitation  of  competition  through  the  protection  afforded  by  costs  of 
transportation,  difficulty  of  communication,  etc.  With  the  improve- 
ment in  means  of  transportation  and  communication,  and  the  devel- 
opment of  nation-wide  and  worl(l-A\dde  competition,  the  protection 
afforded  to  particular  concerns  by  local  position  or  local  understand- 
ings disappeared  to  a  large  extent  and  gave  rise  to  efforts  at  combina- 
tion and  control  of  the  market  on  a  larger  scale. 

The  problem  of  monopt)ly  in  the  present  day,  therefore,  is  not  a 
new  one,  although  the  material  interests  mvolved  in  a  particular 

30035°— 16 1  1 


2  EEPOKT   OF    THE    COMMISSIONP^R   OF    COEPOEATIONS. 

case  may  be  of  much  greater  magnitude.  Legislation  for  the  purpose 
of  destroying  monopoly  to-day,  as  in  former  historical  periods,  is  only 
one  of  the  factors  to  be  relied  on,  because  as  long  as  the  fundamental 
laws  of  property  and  of  trade  contemplate  and  favor  a  system  of 
individual  activity  and  free  contract  the  power  of  competition  vnW. 
assert  itseh  to  a  wide  extent,  even  though  monopolistic  agreements 
are  not  prohibited.  Furthermore,  if  the  law,  wliile  allowing  free  con- 
tract in  general,  prohibits  such  kinds  of  contracts  and  associations  as 
have  the  express  purpose  or  tendency  to  create  in  a  monopohstic  con- 
trol of  the  market,  competition  wiU  be  stimulated  and  monopoly 
generally  prevented. 

Section  2.  English  law  regarding  monopolies  and  restraint  of  trade. 

Monopolies  by  Crow^n  patent. — Under  the  Tudors  the  Crown 
developed  the  practice  of  grantmg  patents  of  monopoly  for  the  general 
trade  of  the  country  for  the  enrichment  of  courtiers  and  capitalists. 
These  grants  became  particularly  numerous  and  obnoxious  in  the  time 
of  Elizabeth,  and  m  1601,  after  Parliamentary  protest,  many  of  them 
were  abolished.  In  1602  was  decided  the  so-called  Case  of  Monopolies 
(Darcy  v.  Mien,  11  Coke,  84).  The  court  declared  illegal  a  Crown 
patent  of  monopoly  for  makmg  playing  cards  as  contrary  to  the  com- 
mon law  and  to  divers  acts  of  Parliament  (e.  g.,  9  Edward  III,  cap.  1, 
2;  25  Edward  III,  cap.  2).  It  enumerated  the  evils  of  monopoly  as 
tending  (1)  to  increase  prices,  (2)  to  deteriorate  the  quality  of  com- 
modities, and  (3)  to  reduce  artificers  to  idleness  and  beggary.  Never- 
theless, the  grants  of  monopolies  by  Crown  patent  continued  on  an 
even  larger  scale  in  the  reign  of  James  I,  and  this  led  to  the  passage  of 
the  Antimonopoly  Act  of  1624  (21  James  I,  cap.  3) .  This  act  abolished 
many  monopolies,  but  specially  sanctioned  some  of  them.  More- 
over, this  law  was  frequentl}^  disregarded  thereafter.  The  Long 
Parliament  in  1640  declared  most  of  the  monopolies  void,  but  some 
contmued  in  existence  and  others  were  created  during  the  period  of  the 
Restoration.  Monopoly  by  patent  of  the  Crown  was  finally  abolished 
in  1689.  Monopoly  by  act  of  Parliament  remained  lawful,  but  this 
power  has  not  been  exercised  with  respect  to  trade  in  Great  Britam. 

Engrossing,  regrating,  forestalling,  price  agreements,  etc. — 
There  were  various  ancient  criminal  statutes  agamst  engrossmg,  re- 
grating,  and  forestalling,  as  for  example,  5  and  6  Edward  VI,  cap. 
14  (1552).  These  laws  were  repealed  by  12  George  III,  cap.  71 
(1772).  Briefly,  the  elements  of  these  offenses  at  the  common  law, 
as  defined  by  Coke  and  Hawldns,  were  as  follows:  Engrossing  con- 
sisted m  the  buying  up  of  large  quantities  of  an  article  for  the  pur- 
pose of  selling  it  at  an  unreasonable  price;  regrating  mcluded  every 
practice  or  device  by  act,  conspiracy,  or  spreading  reports  for  the 
purpose  of  enhancing  the  prices  of  victuals;  forestalling  consisted  in 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  6 

buying  victuals  on  the  way  to  market  with  the  purpose  of  sellmg 
them  at  higher  prices.  Under  the  common  law  such  acts  remained 
criminal  until  the  law  was  amended  by  7  and  8  Victoria,  cap.  24 
(1844).  The  only  relic  of  these  criminal  laws,  apparently,  is  the 
prohibition  against  attempts  to  affect  prices  by  spreading  false  reports 
or  by  preventing  goods  from  being  brought  to  market  by  force  or  by 
threats.  There  were  also  ancient  criminal  statutes  against  conspira- 
cies and  agreements  to  fix  prices  and  the  wages  and  hours  of  labor, 
for  example,  2  and  3  Edward  VI,  cap.  15  (1549).  These  were  repealed 
by  5  George  IV,  cap.  95  (1824). 

Agreements  in  restraint  of  trade  tending  to  fix  prices  or 
TO  CONTROL  THE  MARKET. — The  ancicut  commou-law  rule  that  agree- 
ments tending  to  fix  prices  or  control  the  market  may  be  null  and 
void  as  in  restraint  of  trade  appears,  however,  to  be  still  in  force  in 
England,  though  considerably  modified  by  recent  decisions. 

Most  of  the  cases  on  restraint  of  trade  relate  to  covenants  for  the 
sale  of  a  business  and  the  subsequent  abstention  of  the  seller  from 
competition  with  such  business,  or  between  an  employer  and  an  em- 
ployee, whereby  the  latter  agrees  not  to  compete  in  certain  ways 
after  the  expiration  of  his  time  of  service,  and  do  not  relate  to  the 
question  of  control  of  the  market,  price  fixing,  etc.  The  early 
rule  for  such  contracts  appears  to  have  been  that  any  contract 
b}^  which  a  trader  or  artisan  sold  his  business  and  agreed  not 
to  engage  in  his  occupation  in  any  part  of  the  kingdom  was 
void,  because  it  tended  to  make  him  a  pubhc  charge  and  deprived 
the  pubhc  of  his  services.  Such  consequences  made  it  an  unrea- 
sonable agreement  from  the  point  of  view  of  such  person,  and  also 
made  it  contrary  to  pubhc  pohcy .  The  buyer  was  held  not  to  be  enti- 
tled to  any  more  protection  from  future  competition  than  was  necessary 
to  make  the  contract  an  equitable  one  to  him.  Wliile  the  particular 
rules  as  to  what  terms  were  to  be  l^egarded  as  unreasonable  and  what 
terms  as  against  pubhc  pohcy  were  changed  considerably  in  the 
course  of  time  with  changing  economic  conditions  and  opinions, 
these  two  judicial  principles  of  the  reasonableness  of  the  r(^strictions 
imposed  with  respect  to  the  interests  of  the  parties  and  of  the  pub- 
hc pohcy  of  such  restrictions  have  conthiued  to  be  regarded  by  the 
courts  down  to  the  present  time.  In  the  development  of  the  doctrine 
the  question  of  reasonableness  was  one  that  related  primarily  to  the 
contracting  parties,  and  not  to  the  pubhc.  However,  any  decision 
as  to  pubhc  pohcy  necessarily  involved  the  reasonableness  of  the 
terms  of  the  agreement  from  the  pubhc  point  of  ^aew.  Restraint  of 
trade  in  this  form  is,  however,  of  onty  incidental  importance  with 
relation  to  the  question  of  monopohstic  agreements. 

The  cases  in  Enghsh  law  wliich  relate  to  monopohstic  agreements 
are  not  numerous,  and,  although  a  price  agreement  has  been  declared 


4  REPORT  OF   THE   COMMISSIONER   OP   CORPORATIONS. 

void,  it  is  not  clear  how  far  such  agreements  are  valid  or  invalid.  A 
brief  statement  of  the  recent  cases  on  this  subject  is  given  in  Chapter 
V  (pp.  233-238). 

The  connection  between  the  ideas  of  monopoly,  engrossing,  and 
restraint  of  trade,  as  they  developed  in  the  Enghsh  law,  was  set 
forth  in  the  opinion  of  Chief  Justice  White  in  the  Standard  Oil  case,^ 
as  follows: 

(a)  It  is  certain  that  at  a  very  remote  period  the  words  "contract  in  restraint  of 
trade"  in  England  came  to  refer  to  some  voluntary  restraint  put  by  contract  by  an 
individual  on  his  right  to  carry  on  his  trade  or  calling.  Originally  all  such  contracts 
were  considered  to  be  illegal,  because  it  was  deemed  they  were  injurious  to  the  public 
as  well  as  to  the  individuals  who  made  them.  In  the  interest  of  the  freedom  of  indi- 
viduals to  contract  this  doctrine  was  modified  so  that  it  was  only  when  a  restraint  by 
contract  was  so  general  as  to  be  coterminus  with  the  kingdom  that  it  was  treated  as 
void.  That  is  to  say,  if  the  restraint  was  partial  in  its  operation  and  was  otherwise 
reasonable  the  contract  was  held  to  be  valid: 

(6)  Monopolies  were  defined  by  Lord  Coke  as  follows: 

"A  monopoly  is  an  institution,  or  allowance  by  the  King  by  his  grant,  commission, 
or  otherwise  to  any  person  or  persons,  bodies  politic  or  corporate,  of  or  for  the  sole 
buying,  selling,  making,  working,  or  using  of  anything,  whereby  any  person  or  per- 
sons, bodiQs  politic  or  corporate,  are  sought  to  be  restrained  of  any  freedom  or  liberty 

that  they  had  before,  or  hindered  in  their  lawful  trade." 

*  *  *  *  *  -    *  * 

The  frequent  granting  of  monopolies  and  the  struggle  which  led  to  a  denial  of  the 
power  to  create  them,  that  is  to  say,  to  the  establishment  that  they  were  iucompatil^le 
with  the  English  constitution  is  known  to  all  and  need  not  be  reviewed.  The  evils 
wliich  led  to  the  public  outcry  against  monopolies  and  to  the  final  denial  of  the  power 
to  make  them  may  be  thus  summarily  stated:  (1)  The  power  which  the  monopoly 
gave  to  the  one  who  enjoyed  it  to  fix  the  price  and  thereby  injme  the  pubUc;  (2)  the 
power  which  it  engendered  of  enabling  a  limitation  on  production;  and,  (3)  the 
danger  of  deterioration  in  quality  of  the  monopolized  article  wliicli  it  was  deemed  was 
the  inevitable  resultant  of  the  monopolistic  control  over  its  production  and  sale.  As 
monopoly  as  thus  conceived  embraced  only  a  consequence  arising  from  an  exertion  of 
sovereign  power,  no  express  restrictions  or  prohibitions  obtained  against  the  creation 
by  an  individual  of  a  monopoly  as  such.  But  as  it  was  considered,  at  least  so  far  as 
the  necessaries  of  life  were  concerned,  that  individuals  by  the  abuse  of  their  right  to 
contract  might  be  able  to  usurp  the  power  arl^itrarily  to  enhance  prices,  one  of  the 
wrongs  arising  from  monopoly,  it  came  to  be  that  laws  were  passed  relating  to  offenses 
such  as  forestalhng,  regrating  and  engrossing  by  which  prohibitions  were  placed  upon 
the  power  of  individuals  to  deal  under  such  circumstances  and  conditions  as, 
according  to  the  conception  of  the  times,  created  a  presumption  that  the  dealings  were 
not  simply  the  honest  exertion  of  one's  right  to  contract  for  his  own  benefit  unaccom- 
panied by  a  wrongful  motive  to  injure  others,  but  were  the  consequence  of  a  contract 
or  course  of  dealing  of  such  a  character  as  to  give  rise  to  the  presiunption  of  an  intent 

to  injure  others  through  the  means,  for  instance,  of  a  monopolistic  increase  of  prices. 
******* 

As  by  the  statutes  providing  against  engrossing  the  quantity  engrossed  was  not 
required  to  be  the  whole  or  a  pioximate  part  of  the  whole  of  an  article,  it  is  clear  that 
there  was  a  wide  difference  between  monopoly  and  engrossing,  etc.  But  as  the  prin- 
cipal wrong  which  it  was  deemed  would  result  from  monopoly,  that  is,  an  enhance- 
ment of  the  price,  was  the  same  wrong  to  which  it  wa^  thought  the  prohibited  engross- 

1221  U.  S.,  51-55. 


TRUST  LAWS  AND  UKFAIR  COMPETITIOK.  5 

mcnt  would  give  rise,  it  came  to  pass  that  monopoly  and  engrossing  were  regarded  as 

vii'tually  one  and  the  same  thing.     In  other  words,  the  prohibited  act  of  engrossing 

because  of  its  inevitable  accomplishment  of  one  of  the  evils  deemed  to  be  engendered 

by  monopoly,  came  to  be  refen-ed  to  as  being  a  monopoly  or  constituting  an  attempt 

to  monopolize. 

*  *  *  *  *  *  * 

And  by  operation  of  the  mental  process  which  led  to  consideiing  as  a  monopoly  acta 

which  although  they  did  not  constitute  a  monopoly  were  thought  to  produce  some  of 

its  baneful  effects,  so  also  because  of  the  impediment  or  burden  to  the  due  course  of 

trade  which  they  produced,  such  acts  came  to  be  referred  to  as  in  restraint  of  trade. 
******* 

Generalizing  these  considerations,  the  situation  is  this:  (1)  That  by  the  common 
law  monopolies  were  unlawful  because  of  their  restrictions  upon  indi\idual  freedom 
of  contract  and  their  injury  to  the  public.  (2)  That  as  to  necessaries  of  life  the  free- 
dom of  the  individual  to  deal  was  restricted  where  the  nature  and  character  of  the 
dealing  was  such  as  to  engender  the  presumption  of  intent  to  bring  about  at  least  one 
of  the  injuries  which  it  was  deemed  would  result  from  monopoly,  that  is  an  undue 
enhancement  of  price.  (3)  That  to  protect  the  freedom  of  contract  of  the  individual 
not  only  in  his  own  interest,  but  principally  in  the  interest  of  the  common  weal,  a 
contract  of  an  indi\'idual  by  wliich  he  put  an  unreasonable  restraint  upon  himself 
as  to  carrying  on  his  trade  or  business  was  void.  And  that  at  common  law  the  evils 
consequent  upon  engrossing,  etc.,  caused  those  tilings  to  be  treated  as  coming  within 
monopoly  and  sometimes  to  be  called  monopoly  and  the  same  considerations  caused 
monopoly  because  of  its  operation  and  effect,  to  be  brought  within  and  spoken  of  gen- 
erally as  impeding  the  due  course  of  or  being  in  restraint  of  trade. 

Section  3.  Law  regarding  monopolies  and  restraint  of  trade  in  the 
United  States  prior  to  the  Antitrust  Act. 

Common  law  regarding  restraint  of  trade  and  monopoly. — 
The  common  law  in  the  United  States  has  been  interpreted  to  re- 
strict the  right  of  contract  more  extensivel}"  than  in  England,  par- 
ticularly in  regard  to  the  hmitations  imposed  by  pubhc  poUcy. 

Prior  to  1890  the  usual  kind  of  contract  in  restraint  of  trade  with 
the  purpose  of  limiting  competition  and  obtaining  control  of  the 
market,  or  monopoly,  was  an  agreement  regarding  production  or 
prices,  or  a  pool.  The  legal  ''trust,"  which  was  first  apphed  to  this 
purpose  about  1880,  as  well  as  the  method  of  holding  companies, 
which  came  into  use  a  few  years  after,  will  be  considered  below.  Such 
agi'eements  or  pools  took  various  forms,  but  generally  provided  for 
some  system  of  restricting  output,  cornering  the  supply,  dividing 
markets,  fixing  prices,  dividing  profits,  or  estabhshing  a  conmion 
seUing  agency.  Buying  out  competitors  in  a  wholesale  way  was 
apparently  of  rare  occurrence.  Such  agreements  have  almost  always 
been  held  in  restraint  of  trade  and  void  as  against  public  policy. 
A  largo  number  of  the  decisions  made  in  the  United  States  under 
the  common  law,  covering  various  forms  of  combination,  are  briefly 
discussed  in  Chapter  II  of  this  report.     (See  p. 24.) 

The  development  in  the  United  States  of  the  doctrine  of  restraint 
of  trade  and  of  monopoly  at  the  common  law,  particularly  mth  rela- 
tion to  such  acts  as  were  contrary  to  public  policy  and  therefore 


6  REPORT  OF   THE   COMMISSIONER  OP   CORPORATIONS. 

void,  has  been  stated  by  Chief  Justice  Wliite  in  the  opinion  of  the 
Supreme  Court  in  the  Standard  Oil  case:^ 

In  this  country  also  the  acts  from  which  it  was  deemed  there  resulted  a  part  if  not 
all  of  the  injurious  consequences  ascribed  to  monopoly,  came  to  be  refen-ed  to  as  a 
monopoly  itself.  In  other  words,  here  as  had  been  the  case  in  England,  practical 
common  sense  caused  attention  to  be  concentrated  not  upon  the  theoretically  correct 
name  to  be  given  to  the  condition  or  acts  which  gave  rise  to  a  harmful  result,  but  to 
the  result  itself  and  to  the  remedying  of  the  evils  which  it  produced.  The  statement 
just  made  is  illustrated  by  an  early  statute  of  the  Province  of  Massachusetts,  that  is, 
chap.  31  of  the  laws  of  1778-1779,  by  which  monopoly  and  forestalling  were  expressly 
treated  as  one  and  the  same  thing. 

It  is  also  true  that  while  the  principles  concerning  contracts  in  restraint  of  trade, 
that  is,  voluntary  restraint  put  by  a  person  on  his  right  to  pursue  his  calling,  hence 
only  operating  subjectively,  came  generally  to  be  recognized  in  accordance  with  the 
English  rule,  it  came  moreover  to  pass  that  contracts  or  acts  which  it  was  considered 
had  a  monopolistic  tendency,  especially  those  which  were  thought  to  unduly  dimin- 
ish competition  and  hence  to  enhance  prices — in  other  words,  to  monopolize — came 
also  in  a  generic  sense  to  be  spoken  of  and  treated  as  they  had  been  in  England,  as  re- 
stricting the  due  course  of  trade,  and  therefore  as  being  in  restraint  of  trade.  The 
dread  of  monopoly  as  an  emanation  of  governmental  power,  while  it  passed  at  an 
early  date  out  of  mind  in  this  country,  as  a  result  of  the  structiu'e  of  our  Government, 
did  not  serve  to  assuage  the  fear  as  to  the  evil  consequences  which  might  arise  from 
the  acts  of  individuals  producing  or  tending  to  produce  the  consequences  of  monop- 
oly. It  resulted  that  treating  such  acts  as  we  have  said  as  amounting  to  monopoly, 
sometimes  constitutional  restrictions,  again  legislative  enactments  or  judicial  deci- 
sions, served  to  enforce  and  illustrate  the  purpose  to  prevent  the  occurrence  of  the 
evils  recognized  in  the  mother  country  as  consequent  upon  monopoly,  by  providing 
against  contracts  or  acts  of  individuals  or  combinations  of  individuals  or  corporations 
deemed  to  be  conducive  to  such  results.    *    *    * 

It  will  be  found  that  as  modern  conditions  arose  the  trend  of  legislation  and  judicial 
decision  came  more  and  more  to  adapt  the  recognized  restrictions  to  new  manifesta- 
tions of  conduct  or  of  dealing  which  it  was  thought  justified  the  inference  of  intent 
to  do  the  wrongs  which  it  had  been  the  purpose  to  prevent  from  the  beginning.    *   *  * 

Without  going  into  detail  and  but  very  briefly  surveying  the  whole  field,  it  may  be 
with  accuracy  said  that  the  dread  of  enhancement  of  prices  and  of  other  wrongs  which 
it  was  thought  would  flow  from  the  undue  limitation  on  competitive  conditions  caused 
by  contracts  or  other  acts  of  individuals  or  corporations,  led,  as  a  matter  of  public 
policy,  to  the  prohibition  or  treating  as  illegal  all  contracts  or  acts  which  were  un- 
reasonably restrictive  of  competitive  conditions,  either  from  the  nature  or  character 
of  the  contract  or  act  or  where  the  surrounding  circumstances  were  such  as  to  justify 
the  conclusion  that  they  had  not  been  entered  into  or  performed  with  the  legitimate 
purpose  of  reasonably  forwarcfing  personal  interest  and  developing  trade,  but  07i  the 
contrary  were  of  such  a  character  as  to  give  rise  to  the  inference  or  presumption  that 
they  had  been  entered  into  or  done  with  the  intent  to  do  wrong  to  the  general  public 
and  to  limit  the  right  of  individuals,  thus  restraining  the  free  flow  of  commerce  and 
tending  to  bring  about  the  evils,  such  as  enhancement  of  prices,  which  were  considered 
to  be  against  public  policy.  It  is  equally  true  to  say  that  the  survey  of  the  legislation 
in  this  country  on  this  subject  from  the  beginning  will  show,  depending  as  it  did  upon 
the  economic  conceptions  which  obtained  at  the  time  when  the  legislation  was 
adopted  or  judicial  decision  was  rendered,  that  contracts  or  acts  were  at  one  time 
deemed  to  be  of  such  a  character  as  to  justify  the  inference  of  wrongful  intent  which 
were  at  another  period  thought  not  to  be  of  that  character.  But  this  again,  as  we 
have  seen,  simply  followed  the  line  of  development  of  the  law  of  England. 

1221U.S.,  56-59. 


•  TEUST    LAWS   AND  UNFAIR  COMPETITION.  7 

Trusts. — The  fact  that  agreements  for  fixing  prices,  or  otlierwise 
attempting  to  control  the  market,  were  generally  held  invalid  at  the 
common  law  was  apparently  the  cause  for  the  perversion  of  the  legal 
"trust"  to  accomphsh  the  same  purpose. 

The  trust  was  an  ancient  device  by  which  the  legal  ownership  and 
management  of  property  could  be  put  in  the  hands  of  one  person 
(trustee)  while  the  beneficial  interest  remamed  in  another  person 
(cestui  que  trust).  This  device  was  largely  employed  for  the  benefit 
of  minors  or  for  the  management  of  23roperty  in  which  there  were 
several  beneficiaries,  or  a  beneficiary  with  a  limited  interest. 

The  first  appUcation  of  this  device  for  the  purpose  of  forming 
a  combmation  to  control  the  market  is  attributed  to  the  Standard 
Oil  Co.  Before  1879  this  combmation  had  been  held  together  very 
largely  by  means  of  exchanging  the  stock  of  the  Standard  Oil  Co.  for 
the  stock  of  other  companies,  such  stock  being  held  in  the  name  of 
some  individual  connected  with  the  Standard  and  for  the  Standard's 
benefit. 

On  April  8,  1879,  a  trust  agreement  was  made  among  all  the 
stockliolders  of  the  Standard  Oil  Co.  of  Cliio  whereby  the  stocks  of 
30  separate  companies  named  in  the  agreement  were  turned  over 
to  three  trustees  to  hold  temporarily  for  the  benefit  of  said  stock- 
holders. This  trust  agreement  was  succeeded  by  a  more  elaborate  one 
dated  January  2,  1882.  Tliis  named  nine  trustees  for  specified  terms, 
and  also  pro\dded  the  means  of  electing  their  successors.  To  these 
trustees  were  confided  the  ownership  and  management  of  all  the 
property  of  tlie  various  individuals  who  as  stockholders  or  partners 
were  associated  together  in  the  Standard  Oil  combination.  In  re- 
spect to  some  companies,  only  a  part  of  the  stock  was  owned  by  such 
persons.  It  was  pro%dded  that  the  trustees  should  issue  "Standard 
Oil  trust  certificates"  of  a  par  value  of  $100  each,  such  certificates  to 
be  issued  to  eacli  person  joinmg  in  the  agreement  in  proportion  to  the 
value  of  the  interest  which  he  conveyed  to  the  trust.  Such  certificates 
were  to  represent  the  beneficial  interests  of  the  parties  to  the  trust 
agreement.  The  distribution  of  dividends  was  to  be  made  at  the 
discretion  of  the  trustees  to  the  holders  of  the  trust  certificates.  It 
was  provided  that  the  trust  iniglit  continue  during  the  fives  of  the 
survivors  and  survivor  cf  the  trustees  named  in  the  agreement  and 
for  21  years  thereafter,  but  that  it  could  be  ternunated  under  certain 
conditions  at  an  earfier  date,  but  not  before  a  period  of  10  years. 

The  Standard  Oil  Trust  was  organized  substantially  like  the 
holding  company  of  later  date,  which  is  discussed  below.  It  was 
imitated  by  several  other  great  monopolistic  combuiations,  namely, 
the  Whiskey  Trust,  the  Cotton  Seed  Oil  Trust,  and  the  Sugar  Trust. 

The  procuring  of  a  monopoly  by  a  "trust"  agreement  was  held 
by  the  courts  to  be  contrary  to  law  and  agaiust  pubfic  poficy. 


8  REPORT   OF   THE   COMMISSIONER   OP   CORPORATIONS. 

The  first  great  trust  case  was  decided  in  1890  iii  People  v.  North 
River  Sugar  Refining  Co.^  The  North  River  Sugar  Refining  Co. 
was  a  corporation  of  the  State  of  New  York  which  had  been 
absorbed  by  the  Sugar  Refijieries  Co.,  or  Sugar  Trust,  in  1887. 
About  23  sugar-refinmg  companies  were  combined  in  this  trust, 
which  thus  obtained  about  90  per  cent  of  the  total  production  of 
refined  sugar  in  the  United  States.  The  capital  stock  of  the  North 
River  Sugar  Refining  Co.  was  put  in  the  hands  of  the  board  of  trus- 
tees and  the  former  shareholders  received  in  return  the  shares  of  the 
trust.  These  trustees  chose  and  controlled  the  officers  of  the  North 
River  Sugar  Refining  Co.,  and  for  a  time  they  shut  down  the  plant. 
A  suit  was  instituted  by  writ  of  quo  warranto  to  forfeit  the  charter 
of  the  North  River  Sugar  Refining  Co.  in  1888.  The  court  of  appeals 
held  that  the  defendant  had  violated  and  abused  its  franchises  by 
entermg  into  the  combination  under  the  trust  deed.     (See  p.  62.) 

The  Standard  Oil  Trust  was  declared  illegal  in  1892  as  a  consequence 
of  similar  proceedings  begun  in  Ohio  about  1890,  Tliis  combination 
was  held  ultra  vires,  contrary  to  pubHc  pohcy,  and  void.  (State  v. 
Standard  Oil  Co.).^    (See  p.  62.) 

These  decisions  made  it  clear  that  the  trust  device  for  combining 
competitors  to  control  the  market  was  unlawful. 

Holding  companies. — The  holding  company  was  next  tried  as  a 
means  of  obtaining  monopolistic  control.  It  is  important,  therefore, 
to  consider  briefly  certain  features  of  State  corporation  laws  prior 
to  the  Sherman  Act. 

At  the  beginning  of  tl\e  nineteenth  century  there  were  only  a  few 
corporations,  mostly  in  Massachusetts.  Such  corporations  were  all 
organized  under  special  grant  of  the  legislature.  The  first  State  to 
have  anything  approaching  a  general  incorporation  act  was  New 
York;  a  general  law  for  organizing  manufacturing  corporations  was 
enacted  in  1811  which  limited  the  capital  stock  to  $100,000.  After 
that,  general  incorporation  laws  were  gradually  adopted  in  other 
States,  but  States  having  such  laws  were  in  the  minority  at  the  middle 
of  the  nineteenth  century. 

Except  in  a  few  States,  the  common  law  was  mterpreted  in  the 
sense  that  no  corporation  could  hold  the  stocks  of  another  corpora- 
tion, and  some  States  forbade  such  holdings  by  statute.     (See  p.  58.) 

For  a  long  time  also  corporations  were  not  generally  authorized 
to  consolidate.  In  New  York,  for  example,  the  consohdation  of 
manufacturing  corporations  was  first  permitted  in  1867,  and  was 
confined  to  those  engaged  in  the  same  branch  of  industry.  This 
privilege  was  extended  in  1892. 

Regarding  the  legal  possibiUty  of  formmg  corporate  consolidations 
by  means  of  a  holding  company,  Judge  Edward  B.  Wliitney,  formerly 

1 121  N.  Y.,  582.    Compare  Brown  v.  Pacific  Mail  S.  S.  Co.,  5  Blatch.,  525  (1867),  and  Hafer  v.  Railway 
Co.  et  al.,  14  Cin.  Wkly.  Law  Bull.,  68  (1885). 
2  49  Ohio  St.,  137. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  9 

an  Assistant  Attorney  General  of  the  United  States,  made  the  fol- 
lowing statement : 

In  New  York,  for  instance,  the  first  act  enabling  one  industrial  to  purchase  and 
hold  stock  of  another  was  passed  in  1853,  permitting  a  manufacturing  company  to- 
purchase  mining  stock  in  certain  cases.  The  principle  was  extended,  but  in  a  very 
restricted  form,  in  1866  and  1876.  It  did  not  become  general,  or  permit  the  buying 
stock  of  a  competitor,  for  sixteen  years  later  still.  In  Kew  Jersey  the  movement 
began  in  a  very  small  way  in  1883.  The  present  statutes,  which  permit  any  com- 
pany to  purchase  stock  of  a  rival  for  control,  are  more  recent  even  than  the  Sherman 
Antitrust  Law.  They  were  in  all  probability  adopted,  although  the  legislatures  did 
not  know  it,  for  the  very  purpose  of  circumventing  that  law.  They  date  in  New 
York  from  1892.  In  New  Jersey  their  development  was  from  1888  to  1893.  Before 
that  the  holding  corporation,  now  so  familiar,  was  a  rarity. 

Thus  all  the  trusts  are  in  part  a  product  of  artificial  conditions  produced  by  human 
legislation,  while  some  of  the  most  dangerous,  or  at  least  the  most  unpopular,  among 
them  are  a  product  of  legislation  obtained  by  their  own  lawyers  and  legislative  agents, 
put  quietly  through  under  the  cover  of  the  antitrust  agitation,  while  the  public,  led 
by  the  newspapers,  were  looking  somewhere  else.' 

It  is  noteworthy,  though  perhaps  merely  a  coincidence,  that  the 
New  Jersey  laws  permitting  such  holding  companies  were  passed 
between  1888  and  1893,  while  the  legal  proceedings  against  the  trust 
form  of  combmation  were  first  begun  in  New  York  in  1888. 

There  seems  to  be  but  little  doubt  that  those  interested  in  forming 
large  corporate  combinations  hoped  to  obtain  a  secure  legal  basis 
in  tlie  holding  company,  as  the  pool  and  trustdiad  both  been  declared 
invalid  (though  not  criminal)  at  the  common  law. 

Section  4.  Legislation    against    combinations  prior    to  the    Sherman 
Antitrust  Act. 

State  antitrust  laws. — The  development  of  great  monopolistic 
combinations  attracted  much  pubhc  attention  during  the  eighties, 
and  especially  the  formation  of  trusts,  such  as  the  Standard  Oil 
Trust  and  the  Sugar  Refineries  Co. 

The  fact  that  tliese  existed*  in  spite  of  their  supposed  illegality  at 
the  common  law  made  it  seem  desirable  to  those  who  opposed  such 
monopoUstic  combinations  to  prohibit  them  under  the  crimmal  law. 

Consequent!}'',  several  States  during  the  later  eighties  passed 
so-called  antitrust  statutes  prohibiting  trusts  and  other  combinations 
in  restraint  of  trade  or  tending  to  monopoly.  Among  the  States 
wliich  passed  such  laws  prior  to  the  Sherman  Antitrust  Act  were 
the  following:  Maine,  1889;  Michigan,  1889;  Tennessee,  1889;  Texas, 
1889;  Iowa,  May  0,  1890;  Kentucky,  May  20,  1890. 

In  this  connection  it  may  be  noted  that  several  States  prior  to 
1890  had  constitutional  provisions  declaring  monopohes  or  combi- 
nations in  restraint  of  trade  unlawful.  Among  them  may  be  noted 
Arkansas,  Georgia,  Kentucky,  Tennessee,  and  Texas. 

1  American  Economic  Association.  Papers  and  Proceedings  of  the  Seventeenth  Annual  Meeting 
(Chicago,  1904),  Part  n,  pp.  3-4.  * 


10  EEPORT   OF   THE   COMMISSIONER   OF   COEPORATIONS. 

Interstate  Commerce  Act  of  1887. — The  way  for  a  Federal  law 
against  trusts  was  paved  by  the  Interstate  Commerce  Act  of  1887, 
which,  among  other  tilings,  provided  that  rates  in  interstate  commerce 
should  be  reasonable  and  prohibited  discrimination  and  railway  pool- 
iner  in  interstate  commerce.  Tliis  law  also  established  a  commission 
to  supervise  the  enforcement  of  the  law  and  to  decide  complaints 
regarding  rates  and  discriminations. 

This  Federal  railway  law  was  itseK  preceded  by  laws  of  a  similar 
character,  in  several  of  the  States,  relating  to  intrastate  commerce. 

Section  6.  Sherman  Antitrust  Act  of  1890. 

Just  as  several  of  the  States  had  found  it  expedient  to  pass  criminal 
laws  against  trusts,  so  the  Federal  Government  was  impelled  to  legis- 
late in  a  like  manner.  This  seemed  especially  desirable  for  the  reason 
that  these  combinations  were  generally  of  such  magnitude  that  their 
commerce  was  largely  of  an  interstate  character  and  afFected  the 
country  as  a  whole.  Moreover,  the  Federal  Government  was  regarded 
as  more  able  to  successfully  combat  them,  more  likely  to  do  so,  and  by 
enforcing  a  general  rule  more  apt  to  operate  with  equality  than 
could  be  expected  from  the  local  application  of  diverse  laws  in  the 
several  States.  Another  reason  for  such  Federal  legislation  was  the 
fact  that  the  common  law  did  not  apply  in  the  Federal  jurisdiction 
except  in  certain  cases  where  the  Federal  courts  applied  the  laws  of 
the  States  in  which  the  question  arose,  and  without  express  legislation 
there  was  nothing  to  prevent  the  formation  of  such  combinations  nor 
any  means  of  enforcing  the  law  by  penalties. 

Consequently,  in  1890  a  bill  to  prohibit  such  combinations  was 
introduced  in  Congress  by  Senator  Sherman,  and  after  earnest  debate 
and  careful  revision  the  so-called  Sherman  Antitrust  Act  was  passed 
on  July  2,  1890.  The  provisions  of  this  law  and  some  of  the  judicial 
decisions  thereunder  are  described  in  detail  in  Chapter  III.  Broadly 
stated,  this  law  prohibited,  mider  severe  penalties,  every  contract  or 
combination  in  restraint  of  interstate  or  foreign  commerce,  and 
every  monopolization  or  attempt  to  monopolize  the  same,  and  pro- 
vided additional  remedies,  includmg  suit  in  equity  by  the  Federal 
Government,  to  restram  such  combinations,  and  action  at  law  for 
triple  damages  by  private  parties  injured  thereby.  By  this  law,  there- 
fore, acts  which  at  common  law  were  invalid,  were  made  criminal 
offenses  so  far  as  they  related  to  commerce  among  the  States  and 
with  foreign  nations,  while  special  remedies  were  established  both  at 
law  and  in  equity. 

Section  6.  Early  judicial  interpretation  (1890-1901). 

Ineffective  enforcement  of  the  law. — While  both  criminal 
and  civil  suits  to  enforce  the  Antitrust  Act  were  brought  almost 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  11 

inmiediately  after  its  passage,  the  results  during  the  first  decade  of 
its  existence  were,  on  the  whole,  unsatisfactory.  Various  factors  are 
alleged  to  have  contributed  to  this  result.  Among  these  are  the  fol- 
lowing: The  serious  business  depression  existing  from  1893  to  1896; 
the  alleged  lack  of  sympathy  on  the  part  of  some  Attorneys  General 
with  the  purposes  of  the  law;  the  decision  in  the  Knight  case 
(referred  to  below) ;  and  perhaps  to  some  extent  the  lack  of  adequate 
appropriations  for  the  prosecution  of  such  suits.  Several  criminal 
cases  were  brought  at  the  very  beginning,  and  some  failed,  it  is  alleged, 
on  account  of  faulty  indictments.  One,  at  least,  of  the  Attorneys 
General  was  apparently  very  much  opposed  to  the  enforcement  of 
the  law,  and  several  of  them  showed  but  sUght  activity  in  initiatmg 
suits  against  offenders.  This  attitude  was  taken  in  spite  of  the  exist- 
ence and  contemporary  organization  of  notorious  combinations. 

In  the  following  sections  a  few  of  the  leading  judicial  decisions 
will  be  briefly  noted,  and  their  apparent  effect  upon  the  economic 
development  suggested. 

Knight  case  (1895). — The  effectiveness  •  of  the  act  received  a 
severe  blow  from  the  decision  in  the  Knight  case,^  which  was  a  pro- 
ceeding in  equity  against  the  American  Sugar  Refining  Co.  (Sugar 
Trust),  and  the  first  case  under  this  law  to  be  decided  by  the  United 
States  Supreme  Court.  The  court  made  a  distinction  between ' '  manu- 
facture" and  ''commerce,"  and  held  that  the  evidence  proved  merely 
a  combination  of  sugar  manufacturers,  and  tliis  did  not  constitute  a 
violation  of  the  law,  inasmuch  as  "manufacture"  was  not  "com- 
merce" and  the  law  was  directed  against  combinations  in  interstate 
or  foreign  commerce.  It  has  frequently  been  claimed  that  this  de- 
cision was  generally  understood  to  mean  that  the  Antitrust  Act 
did  not  apply  to  combinations  or  consolidations  of  manufacturing 
establishments. 

The  decision  has  also  been  much  criticized,  but  it  is  said  that  the 
pleadings  of  the  Government  were  bad,  did  not  specify  a  combina- 
tion engaged  in  mterstate  commerce,  and  that  the  record  of  the  case 
did  not  prove  that  fact.  At  any  rate,  the  failure  of  this  case  against 
one  of  the  most  notorious  combinations  of  the  day  threw  grave 
doubt  on  the  effectiveness  of  the  law,  and  tended  to  discourage 
efforts  to  enforce  it.  At  the  same  time  it  gave  encouragement  to 
further  combinations  of  the  same  character. 

Trans-Missouri  Freight  Association  case  (1897). — This  case 
was  a  proceeding  in  equity  against  a  combination  of  railroads  fonned 
for  the  purpose  of  maintaining  rates  alleged  by  defendants  to  be  just 
and  reasonable. 2  The  Supreme  Court  held  that  the  combination  was 
milawful,  and  that  it  was  immaterial  whether  the  rate  agreement  in 
question  was  reasonable  or  not. 

'Seep.  74.  2 See  p.  84. 


12 


EEPOET  OP    THE   COMMISSIONER   OF   COEPOEATIONS. 


Tliis  decision  was  understood  by  many  to  mean  that  the  reason- 
ableness of  an  agreement  would  not  be  considered,  if  it  in  any  way 
restricted  competition;  that  is,  that  even  contracts  wliich  only  inci- 
dentally affected  competition,  or  were  only  "in  partial  restraint  of 
trade"  (and  therefore  vaUd  under  the  common  law  interpretation  of 
"restraint  of  trade"),  were  contrary  to  the  Antitrust  Act.  The 
effect  of  this  decision  was  obviously  to  discoui'age  efforts  at  combi- 
nation by  such  methods. 

Addyston  Pipe  &  Steel  Co.  case  (1899). — In  this  case,^  which 
was  a  proceeding  in  equity,  a  combination  of  pipe  manufacturers 
established  for  the  purpose  of  dividing  the  markets  and  enhancing  the 
prices  of  cast-iron  pipe  was  declared  by  the  Supreme  Court  to  be 
contrary  to  the  law.  This  case,  Hke  the  raih'oad  case  just  con- 
sidered, tended  strongly  to  discourage  combinations  in  the  form  of  a 
pool. 

Section  7.  Economic  and  political  results. 

Rapid  growth  of  trusts  (1S98-1901). — The  last  two  decisions 
referred  to,  wherein  pools  were  declared  unlawful  and  the  question 
of  the  reasonableness  of  the  terms  of  the  agreement  were  held  to  be 
immaterial,  apparently  greatly  discouraged  efTorts  to  form  combina- 
tions by  means  of  pools,  while  the  failure  in  the  Ivnight  case  to  con- 
demn a  consolidation  of  manufacturing  companies  tended  to  encourage 
the  formation  of  large  consolidations  of  industrial  enterprises. 

At  any  rate,  there  develoj^ed  between  1898  and  1901  an  extraor- 
dinary number  of  large  consohdations,  and  this  period  is  often  referred 
to  as  that  of  the  "consoUdation  craze."  Among  the  great  consohda- 
tions formed  during  this  period  may  be  mentioned  the  following:- 

1898. 
American  Thread  Co.  American  Linseed  Co. 

International  Paper  Co.  American  Tin  Plate  Co. 

United  States  Envelope  Co.  National  Biscuit  Co. 

Federal  Steel  Co.  International  Silver  Co. 


1899. 


Amalgamated  Copper  Co. 

American  Smelting  &  Refining  Co. 

American  Hide  &  Leather  Co. 

American  Woolen  Co. 

American  Felt  Co. 

American  Agricultural  Chemical  Co. 

Royal  Baking  Powder  Co. 

American  Ice  Co. 

United  Shoe  Machinery  Co. 

United  Fruit  Co. 

American  Shipbuilding  Co. 

American  Car  &  Foundry  Co. 

National  Steel  Co. 

International  Steam  Pump  Co. 


American  Steel  &  Wire  Co. 

National  Tube  Co. 

American  Steel  Hoop  Co. 

American  Window  Glass  Co. 

American  Writing  Paper  Co. 

Distilling  Company  of  America. 

United  States  Cast  Iron  Pipe  &  Foundry 

Co. 
Bordens  Condensed  Milk  Co. 
National  Enameling  &  Stamping  Co. 
LTnion  Bag  &  Paper  Co. 
Standard  Oil  Co.  of  New  Jersey. 
American  Chicle  Co. 


1  See  pp.  70,  112,11.'?. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  13 

1900. 

American  Sheet  Steel  Co.  American  Bridge  Co. 

Crucible  Steel  Co.  of  America.  American  Snuff  Co. 

1901. 

United  States  Steel  Corporation.  International  Salt  Co. 

American  Can  Co.  Eastman  Kodak  Co. 

Consolidated  Tobacco  Co.  American  Locomotive  Co. 

All  the  foregoing  concerns  were  apparently  combinations  of  com- 
peting enterprises  which  embraced  a  considerable  part  of  the  total 
industry  of  the  United  States  in  then-  respective  branches  of  busi- 
ness. AH  of  these  combinations  were  apparently  formed  either  by 
combining  control  of  competing  concerns  through  the  agency  of  a 
holding  company,  or  by  the  merging  of  the  plants  and  business  of 
the  concerns  combined  under  the  direct  control  of  one  company. 

Industrlvl  Commission  (1898-1902). — This  extraordinary  era  of 
consolidation  attracted  much  public  attention.  A  commission,  kno-vsm 
as  the  Industrial  Commission,  was  created  by  Congress  in  1898  to 
investigate  various  industrial  questions,  but  particularly  the  growth 
of  large  corporations  and  trusts.  Although  the  commission  was 
assisted  by  some  expert  economists,  who  helped  to  make  the  exami- 
nation of  witnesses  more  effective  than  it  would  otherwise  have  been, 
the  method  of  conducting  the  examination  prevented  the  commis- 
sion from  obtaining  the  best  results.  Especially  there  was  a  lack  of 
sufficient  supportmg  documentary  evidence  in  statements  of  accoimt, 
m  statistics  of  prices,  and  of  production,  etc.,  which  would  have  en- 
abled the  commission  to  weigh  accurately  the  testimony  given.  Wliile 
the  Industrial  Commission,  therefore,  failed  to  ascertaui  many  im- 
portant facts  regarding  these  great  combinations,  luivortheless  it 
served  to  awaken  popular  attention  to  their  gieat  size  and  power  and 
to  some  of  their  excesses,  especially  in  relation  to  stock  watermg, 
promotion  profits,  and  unfair  competition.  The  report  of  the  com- 
mission recommended  as  the  chief  measm-e  of  reform  greater  pubhcity 
regarding  the  operations  of  corj^orations  and  particularly  the  estab- 
lishment of  some  organ  of  pubhcity  hi  the  Federal  Government. 

Establishment  of  Bureau  of  Corporations  (1903). — In  con- 
sequence partly  of  the  recommendations  of  the  Industrial  Commis- 
sion, partly  of  certain  recommendations  made  by  Attorney  General 
Knox,  and  in  response  to  a  general  demand  for  a  more  effective  over- 
sight of  corporations,  the  Bureau  of  Corporations  was  organized 
in  1903  under  the  Department  of  Commerce  and  Labor.  The  duties 
of  the  Commissioner  of  Corporations  were  described  substantially  as 
follows :  To  investigate  the  organization  and  conduct  of  corporations 
and  combinations,  etc.,  engaged  in  interstate  commerce  (except  com- 
mon carriers)  in  order  to  give  information  to  the  President  and  to 


14  REPORT  OF   THE   COMMISSIONER   OF   CORPORATIONS. 

enable  him  to  make  recommendations  to  Congress.  The  powers  con- 
ferred on  the  Commissioner  for  such  investigations  were  extensive  and 
included  the  power  to  issue  subjioenas  to  compel  the  attendance  of 
witnesses  and  the  production  of  books  and  papers.  The  reports  of 
the  Bureau  were  to  be  made  to  the  President,  and  published  accord- 
ing to  his  directions. 

The  method  of  work  contemplated  in  the  formation  of  the  Bureau 
of  Corporations  was  scientific  economic  research,  and  the  taking  of 
testimony  as  ordinarily  practiced  by  commissions  was,  conseqently^ 
of  secondary  importance. 

The  primary  objects  of  the  Bureau  of  Corporations,  therefore,  were 
first,  information  for  the  Government  for  purposes  of  legislation,  and 
second,  the  remedial  effects  of  pubhcity  through  the  pubHcation  of 
the  reports  of  its  investigations. 

State  antitrust  legislation. — It  should  be  noted  that  State 
antitrust  legislation,  which  antedated  Federal  legislation  on  this 
subject,  continued  throughout  the  period  thus  far  considered  and  also 
since  that  time.  The  majority  of  the  States  estabhshed  antitrust 
laws,  some  of  which  were  more  stringent  than  the  Federal  law.  An 
important  feature  of  the  legislation  in  several  States  was  the  pro- 
hibition of  certain  kinds  of  "unfair  comj^etition,"  i^articularly  local 
price  discrimination.     (See  Chap.  IV.) 

Section  8.  Northern  Securities  case  (1901-1904)  and  its  political  and 
economic  effects. 

Northern  Securities  case  (1904). — Tlie  Northern  Securities  Co. 
was  a  holding  company  formed  in  1901  by  dommant  stockliolders  in 
the  Northern  Pacific  and  Great  Northern  Railways  for  the  purpose 
of  puttmg  in  the  hands  of  a  single  company  the  votmg  power  of  the 
dominant  stockholders  in  the  said  raih'oads.  The  Government  sought 
to  procure  a  dissolution  of  the  Northern  Securities  Co.  by  proceedmgs 
in  equity  as  a  combination  in  restramt  of  interstate  commerce.^  While 
hi  the  final  opmion  of  the  Suj^reme  Court,  rendered  hi  1904,  several 
important  legal  questions  were  settled,  the  chief  significance  of  the 
decision  in  relation  to  economic  development  was  that  the  device  of  a 
holdmg  company  to  procure  a  combmation  of  competmg  interests  in 
restraint  of  trade  was  unlawful.  The  holding  company  was  enjoined 
from  votmg  the  stock  held  by  it,  and  the  railroad  companies  were 
enjomed  from  paying  any  dividends  to  the  holdmg  company  on  such 
stock,  etc. 

This  decision,  which  condemned  the  device  of  the  holdmg  company 
for  the  purpose  of  procuring  a  common  control  of  competmg  mterests, 
was  of  capital  importance  in  tlie  interpretation  of  the  Sherman  Anti- 
trust Act,  and  of  great  significance  with  respect  to  subsequent  eco- 
nomic development. 

"See  pp.  73,  103. 


trust  laws  and  unfair  competition.  15 

Decline  of  consolidations  and  development  of  ''gentle- 
men's agreements"  and  "cooperation." — Prior  to  the  decision  in 
the  Northern  Securities  case,  the  tendency  seems  to  have  been  toward 
the  formation  of  consohdations  eitlier  by  merger  or  through  the  de- 
vice of  the  holdmg  company.  Subsequent  .to  that  decision,  in  so 
far  as  monopoHstic  combinations  of  competing  interests  were  made, 
they  did  not  often  take  the  form  of  the  holding  company.  It  may  be 
noted  that  the  American  Tobacco  Co.,  which  prior  to  1904  was  largely 
a  holding  company,  was  reorganized  about  seven  months  after  the 
decision  in  the  ISorthern  Securities  case  in  the  form  of  a  merger  with 
respect  to  the  properties  of  the  principal  concerns  combined,  which 
appears  to  have  been  jirompted  in  part  by  the  decision  in  that  case.^ 
It  maybe  noted  also  that  the  International  Harvester  Co.,  wliich  was 
formed  subsequent  to  the  initiation  of  the  Government  suit  agamst 
the  Northern  Securities  Co.  but  before  the  final  decision,  was  a  merger 
of  the  manufacturing  properties  of  competing  interests.  The  decision 
in  the  Northern  Securities  case,  as  weU  as  the  increased  activity  of  the 
Government  in  the  mvestigation  and  prosecution  of  suits  agamst 
consohdations,  was  apparently  of  great  influence  in  preventmg  further 
efforts  to  restrict  competition  by  such  means.  It  was  not  until 
several  years  later,  however,  that  the  Supreme  Court  exj)ressly  de- 
clared that  a  merger  for  such  purposes  was  illegal. 

Legal  difficulties  had  at  an  earher  date,  as  noted  above,  discour- 
aged the  use  of  \\Titten  price  and  poofiiig  agreements  as  a  means 
of  combmation,  and  tended  to  promote  combination  through  con- 
solidation, but  the  decision  in  the  Northern  Secmdties  case,  as  just 
stated,  tended  to  discourage  efl^orts  at  combination  in  tliis  form  also. 
Thereafter,  apparently,  the  device  most  available  for  evading  the 
Antitrust  Law  was  the  looser  and  unwi'itten  form  of  agi-eement  gen- 
erally described  as  a  "gentlemen's  agreement."  Tliis  device  became 
known  somewhat  later  as  the  system  of  "cooperation,"  which  is  par- 
ticularly well  illustrated  in  certain  combinations  atone  time  practiced 
bysteel  manufacturers.  The  fundamental  ideaof  such  cooperation  was 
to  procure  substantial  harmony  m  policy  among  com])etitors  regardmg 
volume  of  output  and  prices,  without  specific  written  or  oral  agree- 
ments, but  rather  by  tacit  understandings  and  the  communication  of 
information  regarding  the  production  and  prices  of  the  various  co- 
operatmg  interests  in  order  to  insure  good  faith  in  the  performance 
of  the  tacit  understandmgs.  A  particular  variation  of  this  ]5olicy 
was  the  apparent  tacit  understanding  to  follow  the  price  quotations 
of  the  "leading  interest,"  as  ,  for  example,  the  American  Tin  Plate  Co., 
for  tin  plate,  and  the  Reading  Coal  &  Iron  Co.,  for  anthracite  coal. 

Increase  of  activity  in  the  prosecution  of  trusts. — The 
Northern    Securities   decision,    by   declaring    the   holding-company 

I  Report  of  the  Commissioner  of  Corporations  on  the  Tobacco  Industry,  Part  I,  p.  11. 


16  KEPOKT   OF    THE    COMMISSIONEK    OF    COEPORATIONS. 

device  for  forming  combinations  illegal,  gave  a  great  impetus  to  the 
prosecution  of  trusts,  wliich  at  that  time  were  frequently  organized 
in  the  form  of  holding  companies. 

This  activity  was  greatly  stimulated,  moreover,  by  the  work  of 
the  Bureau  of  Corporations,  which  in  a  series  of  reports  on  some 
of  the  most  conspicuous  trusts  in  the  country  showed  more  fully 
and  authoritatively  than  had  been  done  theretofore  their  real  eco- 
nomic basis  and  character.  The  Bureau's  reports  on  the  petroleum 
industry  and  tobacco  industry  were  of  special  importance,  these 
two  industries  being  dominated  by  the  Standard  Oil  Co.  and  the 
American  Tobacco  Co.,  respectively,  two  of  the  largest  and  most 
obnoxious  of  the  trusts.  In  this  connection  may  be  also  noted  the 
fact  that  the  Bureau's  report  on  the  Standard  Oil  Co.'s  railroad  rebates 
had  a  powerful  influence  in  promoting  the  passage  of  the  Hepburn 
Act  of  1906  for  the  further  regulation  of  railroads  engaged  in  inter- 
state commerce.  In  the  prosecution  of  these  trusts,  moreover,  the 
Department  of  Justice  obtained  and  made  extensive  use  of  infor- 
mation collected  by  the  Bureau  of  Corporations.  AVhile  a  variety 
of  suits  were  initiated  by  the  Government  the  determmation  of  the 
Standard  Oil  and  Tobacco  cases  were  of  paramount  importance  with 
regard  to  the  future  development  of  the  more  powerful  and  more 
concentrated  forms  of  combination. 

Section  9.  Standard  Oil  and  Tobacco  decisions  and  their  results. 

Standard  Oil  and  Tobacco  decisions  (1911). — While  the 
record  in  the  Standard  Oil  and  the  American  Tobacco  Co.  cases  as 
well  as  the  reports  of  the  Bureau  of  Corporations  showed  clearly 
the  monopolistic  character  of  these  great  trusts,  various  circum- 
stances made  it  seem  doubtful  at  hrst  whether  they  would  be  con- 
demned by  the  courts  or  not.  This  was  due  particularly  to  the 
decision  in  the  Knight  case,  the  authoiity  of  which  it  was  alleged 
had  never  been  directly  questioned  by  the  Supreme  Court. 

The  decisions  in  the  Standard  OiP  and  the  American  Tobacco  Co.^ 
cases,  rendered  in  1911,  were  both  victories  for  the  Government. 
The  unlawfulness  of  the  holding-company  device  to  accompUsh 
a  combination  in  restraint  of  trade,  as  decided  in  the  Northern  Securi- 
ties case,  was  affirmed,  and  in  the  Tobacco  case  the  actual  merger 
of  the  properties  of  competing  concerns  which  accomplished  the  same 
ends  was  likewise  declared  unlawful.  The  Knight  case  thereby  lost 
all  practical  significance  in  the  determination  of  the  lawfulness  of 
such  combinations.  While  in  the  earher  trust  cases  emphasis  was 
generally  placed  on  the  first  section  of  the  Antitrust  Act,  prohibiting 
combination  in  restraint  of  trade,  in  the  Oil  and  Tobacco  cases  and 
in  other  recent  cases  stress  has  also  been  laid  on  the  second  section, 
which  denounces  those  who  monopohze  or  attempt  to  monopolize 

1  See  pp.  86,  90,  and  104.  2  See  pp.  88  and  99. 


TEUST   LAWS  AND  UNFAIR  COMPETITION.  17 

interstate  commerce.  In  the  interpretation  of  this  section  the  court 
has  given  a  broad  meaning  to  the  term  "monopoUze,"  and  it  has 
attached  importance  to  the  existence  of  unfair  practices  as  evidencing 
an  attempt  to  monopohze. 

Character  and  effect  of  dissolutions. — The  court  directed 
that  the  Standard  Oil  Co.  should  be  reorganized  in  such  a  manner 
as  to  bring  it  into  harmony  mth  the  law,  but  did  not  prescribe  in 
detail  in  what  way  it  should  be  accompUshed.  The  decree  of  the  lower 
court,  which  was  approved  in  substance  by  the  Supreme  Court,  pro- 
hibited the  Standard  Oil  Co.  from  either  votmg  stock  wliich  it  held  in 
the  subsidiary  companies  or  receiving  dividends  thereon,  and  en- 
joined the  Standard  Oil  Co.  from  exercising  any  control  over  the 
operations  of  any  of  its  subsidiaries,  but  it  suggested  that  the  stocks 
of  the  subsidiary  companies  might  be  distributed  ratably  among  the 
holders  of  the  stock  of  the  Standard  Oil  Co.  of  New  Jersey.^     The 

1  The  most  essential  parts  of  the  decree  are  contained  in  sees.  5  and  6  as  follows: 

"Sec.  5.  That  the  stocks  of  the  various  corporations  which  are  named  in  section  2  and  described  in  sec- 
tion 4  of  this  decree,  held  by  the  Standard  Company,  were  acquired  and  are  held  by  it  by  virtue  of  the 
illegal  combination;  that  the  Standard  Company,  its  directors,  officers,  agents,  servants,  and  employees, 
are  enjoined  and  prohibited  from  voting  any  of  the  stock  in  any  of  Ihe  subsidiary  companies  named  in  sec- 
tion 2  of  this  decree  and  from  exerci-^ing  or  attempting  to  exercise  any  control,  direction,  supervision,  or 
nfluence  over  the  acts  of  these  subsidiary  companies  by  virtue  of  its  holding  of  their  stock.  And  these 
subsidiary  companies,  their  officers,  directors,  agents,  servants,  and  employees  are,  and  each  of  them  is, 
enjoined  and  prohibited  from  declaring  or  paying  any  dividends  to  the  Standard  Company  on  account  of 
any  of  the  stock  of  these  subsidiary  companies  held  by  the  Standard  Company,  and  from  permitting  the 
latter  company  to  vote  any  stock  in,  or  to  dii-ect  the  policy  of,  any  of  said  companies,  or  to  exercise  any 
control  whatsoever  over  the  corporate  acts  of  any  of  said  companies  by  virtue  of  such  stock,  or  by  virtue 
of  the  power  over  such  subsidiary  corporation  acquired  by  means  of  the  illegal  combination.  But  the  de- 
fendants are  not  prohibited  by  this  decree  from  distributing  ratably  to  the  shareholders  of  the  principal 
company  the  shares  to  which  they  are  equitably  entitled  in  the  stocks  of  the  defendant  corporations  that 
are  parties  to  the  combuiation. 

"  Sec.  6.  That  the  defendants  named  in  section  2  of  this  decree,  their  officers,  directors,  agents,  servants, 
and  employees,  are  enjoined  and  prohibited  from  continuing  or  carrying  into  further  effect  the  com- 
bination adjudged  illegal  hereby,  and  from  entering  into  or  performing  any  like  combination  or  con- 
spiracy, the  effect  of  which  is,  or  wUl  be,  to  restrain  commerce  in  petroleum  or  its  products  among  the 
slates,  or  in  the  territories,  or  with  foreign  nations,  or  to  prolong  the  unlawful  monopoly  of  such  commerce 
obtained  and  possessed  by  defendants  as  before  stated,  in  violation  of  the  act  of  July  2,  1S90,  either  (1)  by 
the  use  of  liquidating  certificates,  or  other  written  evidences  of  a  stock  interest  in  two  or  more  potentially 
competitive  parties  to  the  illegal  combination,  by  causing  the  conveyance  of  the  physical  property  and 
business  of  any  of  said  parties  to  a  potentially  competitive  party  to  this  combination,  by  causing  the  con- 
veyance of  the  property  and  business  of  two  or  more  of  the  potentially  competitive  parties  to  this  com- 
bination to  any  party  thereto,  by  placmg  the  control  of  any  of  said  corporations  in  a  trustee,  or  group  of 
trustees,  bj-  causing  its  stock  or  property  to  be  heltl  by  others  than  its  equitable  owners,  or  bj'  any  similar 
device,  or  (2)  by  making  any  express  or  implied  agreement  or  arrangement  together,  or  one  with  another, 
like  that  adjudged  illegal  hereby  relative  to  the  control  or  management  of  any  of  said  corporations,  or  the 
price  or  terms  of  purchase,  or  of  sale,  or  the  rates  of  transportation,  of  petroleum  or  its  products  in  interstate 
or  internal  ional  commerce,  or  relative  to  the  quantities  thereof  purchased,  sold,  transported,  or  manufac- 
tured by  any  of  said  corporations,  which  will  have  a  like  effect  in  restraint  of  commerce  among  the  states, 
in  the  territories,  and  with  foreign  nations  to  that  cf  the  combinations  the  operation  of  which  is  hereby 
enjoined."    (United  States  v.  Standard  Oil  Co.,  17:3  Fed.,  199-200.) 

These  provisions  of  tlie  decree  made  by  the  lower  court  were  approved  by  the  Supreme  Court,  with  cer- 
tain modifications,  of  which  the  following  are  the  only  ones  of  present  interest: 

"  But  the  contention  is  that,  in  .so  far  as  the  relief  by  way  of  injunction  which  was  awarded  by  section  6 
against  the  stockholders  of  the  subsidiary  corporations  or  the  subsidiary  corporations  themselves  after 
the  transfer  of  stock  by  the  New  Jersey  corporation  was  completed  in  conformity  to  the  decree,  the  relief 
awarded  was  too  broad:  a.  Because  it  was  not  sufficiently  specific  and  tended  to  cause  those  who  were 
within  the  embrace  of  the  order  to  cease  to  be  under  the  protection  of  the  law  of  the  land  and  required 
them  to  thereafter  conduct  their  business  under  the  jeopardy  of  punishments  for  contempt  for  violating  a 

30035°— 16 2 


18  REPORT  OF   THE   COMMISSIONER  OF  CORPORATIONS. 

Standard  Oil  Co.  was  dissolved  in  accordance  with  this  suggestion 
by  simply  dividing  the  stocks  held  by  the  holding  company  in  its 
subsidiaries  among  the  stockholders  of  the  said  holdmg  company. 
'As  a  comparatively  few  closely  associated  capitahsts  possessed 
a  majority  of  the  stock  of  the  holding  company  they  consequently 
became  the  controlUng  stockholders  in  each  of  the  several  separated 
companies.  The  general  opinion  is  that  tliis  dissolution  is  effec- 
tive neither  iu  theory  nor  in  fact.  There  is  much  ground  for  be- 
lieving that  it  did  not  result  in  independent  action  or  active  com- 
petition between  the  various  subsidiary  companies.  The  public 
advantage  of  the  dissolution  has  also  been  questioned,  on  the  ground 
that  prices  were  not  immediately  reduced,  but  on  the  contrary  were 
increased.  As  such  an  advance  in  prices  might  occur  under  condi- 
tions of  active  competition,  it  would  not  be  proper  to  assume  this  as 
proof  of  continued  violation  of  the  law  without  careful  investigation. 
Moreover,  there  has  been  a  marked  decrease  in  prices  since  then, 
corresponding  with  decreases  in  the  prices  of  crude  oil.  While  the 
position  of  the  independents  has  undoubtedly  been  improved,  tliis 
is  not  satisfactor}^  evidence  of  the  effectiveness  of  the  dissolution. 
That  the  dissolution  of  the  Standard  Oil  Co.  was  not  more  satis- 
factory in  form  and  results  appears  to  be  due,  however,  to  the  man- 
ned of  its  accomplishment  rather  than  to  any  inherent  difficulty  in 
reestablishing  competitive  conditions  among  the  component  parts 
of  the  combination. 

In  the  dissolution  of  the  American  Tobacco  Co.  the  Supreme  Court 
went  further  and  ordered  that  the  court  below  should  hear  the 
parties  "for  the  purpose  of  ascertaining  and  determining  upon  some 
plan  or  method  of  dissolving  the  combination  and  of  recreating,  out 
of  the  elements  now  composing  it,  a  new  condition  which  shall  be 

general  injunction.  New  Haven  R.  R.  v.  Interstate  Commerce  Commhswn,  200  U.  S.  404.  B&sides  it  is 
said  that  the  restraint  imposed  by  section  6 — even  puttuig  out  of  view  the  consideration  just  stated — was 
moreover  calculated  to  do  Injury  to  the  public  and  it  may  be  in  and  of  itself  to  produce  the  very  restraint 
on  the  due  course  of  trade  which  it  was  intended  to  prevent.  We  say  this  since  it  does  not  necessarily  fol- 
low because  an  illegal  restraint  of  trade  or  an  attempt  to  monojiolize  or  a  monopolization  resulted  from  the 
combination  and  the  transfer  of  the  stocks  of  the  subsidiary  corporations  to  the  New  Jersey  corporation 
that  a  like  restrauit  or  attempt  to  monoi>olize  or  monopolization  would  necessarily  arise  from  agreements 
between  one  or  more  of  the  subsidiary  corporations  after  the  transfer  of  the  stock  by  the  New  Jersey  cor- 
poration. For  illustration,  take  the  pipe  lines.  By  the  effect  of  the  transfer  of  the  stock  the  pipe  lines 
would  come  imdcr  the  control  of  various  corporations  instead  of  being  subjected  to  a  uniform  control.  If 
various  corporations  owning  the  lines  determined  in  the  public  interests  to  so  combine  as  to  make  a  con- 
tmuous  line,  sucli  agreement  or  combination  would  not  be  repugnant  to  the  act,  and  yet  it  might  be  re- 
strained by  the  decree.  As  another  example,  take  the  Union  Tank  Line  Comjiany,  one  of  the  subsidiary 
corporations,  the  owner  practically  of  all  the  tank  cars  in  use  by  the  combination.  If  no  possibility  existed 
of  agreements  for  the  distribution  of  these  cars  among  the  subsidiary  corporations,  the  most  serious  detri- 
ment to  the  public  interest  might  result.  Conceding  the  merit,  abstractly  considered,  of  these  contentions 
they  are  irrelevant.  We  so  think,  since  we  construe  the  sixth  paragraph  of  tlie  decree,  not  as  depriving 
the  stockholders  or  the  corporations,  after  the  dissolution  of  the  combination,  of  the  power  to  make  normal 
and  lawful  contracts  or  agreements,  but  as  restraining  them  from,  by  any  device  whatever,  recreating 
directly  or  indirectly  the  illegal  combination  which  the  decree  dissolved.  In  other  words  we  construe  the 
sixth  paragraph  of  the  decree,  not  as  depriving  the  stockholders  or  corporations  of  the  right  to  live  under 
the  law  of  the  land,  but  as  compelling  obedience  to  that  law.  *  *  *"  (Standard  Oil  Co.  v.  United 
States,  221  U.  S.,  80-81.) 


TRUST   LAWS   AND   UNFAIR  COMPETITION.  19 

honestly  in  harmony  with  and  not  repugnant  to  the  law."  The 
Ameiican  Tobacco  Co.  submitted  a  plan  of  dissolution  which  in  its 
main  features  was  adopted  by  the  court. 

The  plan  as  adopted  provided,  among  other  tlungs,  for  (1)  the 
abrogation  of  numerous  restrictive  covenants  by  which  various 
tobacco  companies  had  bound  themselves  not  to  engage  in  the  to- 
bacco business,  (2)  the  disintegration  of  certain  subsidiary  combina- 
tions in  particular  branches  of  the  business,  namely,  the  tin  foil, 
hcorice,  snuff,  stogie,  and  cigar  companies,  (3)  the  distribution  of  the 
stocks  of  numerous  subsidiary  companies  of  the  American  Tobacco 
Co.  among  the  shareholders  of  that  company,  and  (4)  the  transfer  of 
a  part  of  the  property  and  business  of  the  Ameiicaji  Tobacco  Co.  to 
two  new  companies  to  be  organized,  namely,  Liggett  &  INfyers  To- 
bacco Co.,  and  P.  Lorillard  Co.,  in  such  a  manner  that  each  of  these 
three  companies  should  have  a  large  part  of  each  branch  of  the 
tobacco  business  possessed  by  the  American  Tobacco  Co.,  the  stock- 
holders of  the  American  Tobacco  Co.  becoming,  pro  rata,  stock- 
holders in  each  of  these  three  companies.  In  this  manner  out  of  the 
companies  formerly  combined  there  were  released  or  constituted  14 
different  companies  ^  besides  a  number  of  other  former  subsidiary 
companies  whose  stocks  were  distributed  as  stated  above. 

The  court  ordered  that  the  defendants  should  be  enjoined  from 
carrjdng  out  the  combination  or  any  combination  of  a  hke  character 
to  that  adjudged  illegal,  especially  by  any  of  the  follo^\ing  acts:  (a) 
With  respect  to  the  14  companies  mentioned  above  and  \vithout 
Hmitation  of  time  (1)  by  conveying  the  property  or  business  of  any 
one  of  them  to  any  other,  (2)  by  placing  the  stocks  of  two  or  more  of 
them  in  a  voting  trust,  (3)  by  making  any  agreement  for  common 
management,  or  with  regard  to  the  price  of  tobacco  or  tobacco  prod- 
ucts or  with  regard  to  apportioniiig  the  trade  therein,  or  for  the 
employment  of  common  clerical  staff  or  offices,  (4)  by  doing  business 
secretly  under  any  other  name,  (5)  by  refusing  to  sell  goods  desired 
by  jobbers  in  certain  cases;  (b)  for  a  period  of  five  years  the  same 
14  companies  were  enjoined  (1)  from  having  common  officers,  di- 
rectors, or  agents  for  the  purchase  or  sale  of  goods,  (2)  from 
acquiring  the  stocks  or  property  of  any  of  the  said  companies,  or 
(3)  from  extending  financial  aid  to  them;  (c)  for  a  period  of  three 
years  the  29  individual  defendants  (the  chief  stocklioldors  of  the 
combination)  were  enjoined  from  increasing  theit  stock  holdings  in 
any  of  these  14  compajiics,  except  one  foreign  concern.  Most  of  the 
injunctions  appfied  to  the  14  companies,  but  those  against  agreements 
affecting  prices  and  apportionment  of  business  apparently  extended 
to  all  parties  to  the  combination  with  respect  to  any  of  its  elements. 

1  The  14  companies  were:  The  American  Tobacco  Co.,  Liggett  &  Myers  Tobacco  Co.,  P.  Lorillard  Co., 
American  Snufl  Co.,  George  W.  Helme  Co.,  AVeyman-Bruton  Co.,  R.  J.  Reynolds  Tobacco  Co.,  British- 
American  Tobacco  Co.  (Ltd.),  Porto  Kican-American  Tobacco  Co.,  MacAndrews  &  Forbes  Co.,  J.  S.  Young 
Co.,  The  Conley  Foil  Co.,  The  Johnston  Tin  Foil  &  Metal  Co.,  and  United  Cigar  Stores  Co. 


20  REPORT  OF   THE   COMMISSIONER   OF   CORPORATIONS. 

The  Government  requested  the  court  to  incorporate  numerous  other 
restrictive  provisions  in  the  decree  for  the  purpose  of  procuring  a 
more  effective  dissolution  and  of  insuring  that  competitive  condi- 
tions would  be  reestabhshed.  Some  of  these  were  adopted  by  the 
court,  but  many  of  them  were  denied.^ 

In  particular,  the  court  denied  the  request  of  the  Government  that 
the  manner  and  form  of  the  dissolution  might  be  tested  by  practice, 
and  if  not  satisfactory  that  the  Government  should  bo  allowed  to 
apply  for  further  relief  (within  a  period  of  five  years)  to  procure  a 
satisfactory  arrangement.  The  court  also  denied  the  request  of  the 
representatives  of  the  independents  that  "common  stock  holding" 
(i.  e.,  the  holding  of  the  stocks  of  all  the  companies  by  the  same 
group  of  stockholders)  should  be  prohibited.^ 

The  tobacco  company  dissolution  has  been  criticized  in  the  same 
way  as  the  oil  company  dissolution,  but  probably  with  less  force.^ 

It  has  generally  been  observed  that  both  in  frammg  the  plans  for 
the  dissolution  of  trusts  and  in  the  supervision  of  the  execution  of 
these  plans  it  would  be  highly  desirable  to  have  some  administrative 

1  Among  the  restrictions  which  the  Government  urged  should  be  incorporated  in  the  decree  which  were 
not  adopted  by  the  court  were  the  following:  (1)  That  no  company  established  under  the  decree  should 
have  more  than  40  per  cent  of  the  output  of  any  particular  kind  of  tobacco  product.  The  court  denied  this, 
saying  that  the  instances  in  which  the  proposed  allotments  of  business  exceeded  40  per  cent  were  few  and 
the  excess  over  40  per  cent  negligible.  (2)  That  giving  rebates  or  other  special  inducements  to  purchasers 
should  be  proliibited.  The  court  denied  this  on  the  ground  that  all  other  companies  were  free  to  employ 
such  means  under  the  law.  (3)  That  espionage  on  the  business  of  a  competitor,  bribery  of  employees  of 
such  competitor,  or  obtaining  information  from  United  States  revenue  officials,  should  be  prohibited. 
The  court  denied  this,  saying  that  when  illegitimate  methods  were  proved  they  cculd  be  dealt  with.  (4) 
That  every  independent  or  other  person  interested  should  have  the  right  to  apply  to  the  court  for  protec- 
tion if  the  injunction  were  violated.  The  court  denied  this,  on  the  ground  that  the  court  would  be  over- 
whelmed with  applications,  mainly  frivolous,  and  said  that  such  complaints  should  be  made  to  the  A  ttomey 
General.  (5)  That  the  stock  of  the  United  Cigar  Stores  Co.  should  be  sold  and  distributed  to  other  persons 
than  the  29  individual  defendants.  The  court  declared  that  it  had  not  the  power  to  penalize  parties  to  the 
suit  except  in  the  manner  provided  in  the  law,  and  denied  this  request.  (6)  Finally,  it  may  be  noted 
that  the  Attorney  General  requested  that  the  Government  should  have  the  right  to  reopen  the  case  at  any 
time  within  five  years,  with  a  view  to  obtaining  further  relief  in  case  the  plan  of  dissolution  adopted  did 
not  prove  satisfactory.  The  court  held  that  it  had  not  the  power  to  establish  such  a  modus  vivendi  and 
that  even  its  power  to  make  the  form  of  dissolution  adopted  would  have  been  questionable  if  not  expressly 
authorized  by  the  Supreme  Court. 

2  Besides  the  modifications  to  the  plan  recommended  by  the  Attorney  General,  numerous  other  changes, 
many  of  which  were  of  a  much  more  extensive  character,  were  proposed  by  the  representatives  of  other 
interests.  The  most  important  of  these  was  that  common  holding  of  stock  in  the  various  new  companies 
by  the  stockholders  of  the  American  Tobacco  Co.  should  be  prohibited,  on  the  ground  that  no  real  compe- 
tition between  the  new  companies  could  exist  unless  such  prohibition  were  made.  With  regard  to  this 
request  the  court  said  in  part: 

"With  this  argument  or  the  reply  to  it,  it  seems  to  me  this  court  is  not  concerned.  In  two  recent  cases 
(the  Northern  Securities  and  the  Standard  Oil)  the  Supreme  Court  found  a  combination  of  corporations 
to  have  offended  against  the  Anti-Trust  Act.  As  a  result  of  such  finding  there  was  a  disintegration  of  the 
combination.  In  each  case  the  disintegration  left  the  stock  of  the  separate  entities  into  which  the  group 
was  split  in  the  hands  of  the  same  body  of  individual  stockholders.  Since  there  was  no  disapproval  of 
this  method  of  disintegration  indicated  in  either  opinion,  it  would  seem  that  the  question  whether  or  not 
common  stockholding  is  'repugnant  to  the  law,'  that  is,  repugnant  to  the  Anti-Trust  Act,  has  been  settled 
for  this  court  by  controlling  authority. 

"  It  is  true  that  the  Supreme  Com-t  did  not  enter  into  a  discussion  of  this  question  of '  common  ownership,' 
but  its  existence  in  both  cases  was  so  plainly  manifest  that  it  is  difficult  to  understand  how  the  court  could 
have  approved  of  the  new  arrangement  unless  it  was  satisfied  that  such  arrangement  did  not  contain  the 
same  vice  as  the  old  one  which  they  held  must  be  terminated." 

2  See  Report  of  the  Commissioner  of  Corporations  on  the  Tobacco  Industry,  Part  III. 


TlttiST   LAWS  AND  UNFAIR  COMPETITION.  21 

oro;an  of  the  Government  which  could  advise  the  court  in  the  first 
instance  and  act  for  it  subsequently.^ 

Prosecution  of  the  Steel  Corporation,  Etc. — The  victory  of 
the  Government  against  the  oil  and  tobacco  trusts  was  followed  by 
similar  results  in  a  number  of  other  cases,  and  the  prosecution  of  the 
trusts  was  actively  continued.  Having  succeeded  against  the  oil 
trust,  which  was  generally  regarded  as  the  archetype  of  trusts  and  the 
worst  offender,  the  Government  then  turned  its  attention  to  certain 
other  combinations  claimed  by  some  to  be  ''good"  trusts  (on  the 
assumed  ground  that  they  did  not  try  to  exact  unduly  high  prices  or 
to  destroy  their  competitors),  notably  the  United  States  Steel 
Corporation  and  the  International  Harvester  Co. 

The  Government's  position  was  that  not  only  was  the  Steel  Corpo- 
ration itself  a  combination  contrary  to  the  Antitrust  Act,  but  also 
that  it  had  combined  with  the  chief  independent  producers  to  arti- 
ficially control  prices  under  the  so-called  ''cooperative"  system. 

Section  10.  The  Federal  Trade  Commission  and  supplementary  antitrust 
legislation,  1914. 

Public  agitation  to  modify  the  Sherman  Law. — The  Standard 
Oil  and  Tobacco  decisions  made  it  plain  that  the  great  trusts  were 
unlawful  and  that  they  could  be  dissolved.  Following  these  deci- 
sions the  whole  question  of  Government  pohcy  regarding  the  regu- 
lation of  combinations  and  monopoly  became  a  matter  of  public 
discussion. 

Concurrent  \\dth  this  development,  a  number  of  investigations  were 
conducted  by  congressional  committees  into  certain  monopohzed 
industries,  namely,  steel  and  sugar,  and  also  into  the  so-called 
"money  trust." 

State  reform  of  corporation  law. — That  defective  State  laws 
are  partly  responsible  for  the  growth  of  monopoHstic  organizations 
is  generally  recognized,  and  has  led  to  some  reforms  in  State  legis- 
lation. The  most  comprehensive  effort  in  reforming  State  legislation 
with  this  purpose  in  view  is  found  in  the  "Seven  Sisters"  laws  of  New 
Jersey,  which  were  passed  in  1913.  They  are  found  in  chapters 
13  to  19,  inclusive,  of  the  laws  of  the  New  Jersey  Legislatm-e  for  1913. 
Tliese  laws,  as  well  as  other  State  antitrust  laws,  are  described  in 
Chapter  IV. 

Federal  Trade  Commission. — The  President,  in  an  addi-ess  before 
a  joint  session  of  Congress  on  January  20,  1914,  recommended  the 
estabUshment  of  a  Federal  trade  commission,  and  said,  in  part: 

The  opinion  of  the  country  wouhl  insi  ant  ly  approve  of  such  a  commission.  It  would 
not  wish  to  see  it  empowered  to  make  terms  \\-ilh  monopoly  or  in  any  sort  to  assume 

1  See  Federal  Trade  Commission  act,  pp.  22, 129. 


22  REPOET   OF   THE   COMMISSIOlSrER  OF   COEPOEATIONS. 

control  of  business,  as  if  the  Government  made  itself  responsible.  It  demands  such  a 
commission  only  as  an  indispensable  instrument  of  information  and  publicity,  as  a 
clearing  house  for  the  facts  by  which  both  the  public  mind  and  the  managers  of  great 
business  undertakings  should  be  guided,  and  as  an  instrumentality  for  doing  justice 
to  business  where  the  processes  of  the  courts  or  the  natural  forces  of  correction  outside 
the  courts  are  inadequate  to  adjust  the  remedy  to  the  wrong  in  a  way  that  will  meet  all 
the  equities  and  circumstances  of  the  case. 

As  the  first  result  of  the  movement  for  additional  Federal  legislation, 
Congress  passed  a  law  establishing  a  Federal  Trade  Commission,  which 
was  approved  on  September  26,  1914.  The  provisions  of  this  law  are 
set  forth  in  more  detail  in  Chapter  III.     (See  p.  128.) 

It  is  sufficient  to  note  here  that  this  act  provides  for  a  commission 
which  shall  absorb  the  Bm-eau  of  Corporations  and  which  is  intrusted 
with  broad  powers  of  investigation  and  of  recommendation  with  re- 
spect to  the  enforcement  of  the  antitrust  acts  and  the  right  to  require 
annual  and  special  reports  from  corporations  subject  to  its  jurisdiction. 
In  particular  it  may  be  noted  that  the  commission  is  empowered  to 
act  as  a  master  in  chancery  in  the  preparation  of  decrees  made  in  the 
execution  of  the  antitrust  acts  in  such  cases  as  may  be  referred  to  it 
by  the  courts.  Further,  the  Federal  Trade  Commission  is  clothed 
with  important  quasi  judicial  powers  in  the  interpretation  of  a  pro- 
vision of  declaratory  law  embodied  in  tliis  act,  namely,  "That  unfair 
methods  of  competition  in  commerce  are  hereby  declared  unlawful." 
The  Federal  Trade  Commission  is  empowered  to  prevent  persons, 
corporations,  etc.,  from  using  such  unfair  methods  of  competition  in 
interstate  and  foreign  commerce.  It  v/as  stated  by  the  committees 
of  Congress  wliich  had  jurisdiction  of  the  Federal  Trade  Commission 
bill  that  this  provision  regarding  unfair  methods  of  competition  was 
incorporated  on  the  theory  that  the  prevention  of  such  unfair  com- 
petition was  one  of  the  most  important  means  of  preventing  the 
development  of  monopolies. 

This  act  also  expressly  provides  that  the  antitrust  acts  are  in  no 
way  modified  by  anything  contamed  in  it. 

Clayton  Antitrust  Act. — A  second  result  of  the  agitation  for 
additional  Federal  trust  legislation  was  the  enactment  of  the  Clayton 
Antitrust  Act  of  October  15,  1914,  which,  according  to  its  title,  was 
intended  to  supplement  the  existing  antitrust  acts.  A  more  detailed 
description  of  this  act  is  given  in  Chapter  III.     (See  p.  132.) 

It  is  sufficient  to  note  here  merely  the  chief  features  and  purposes 
of  this  law  from  the  point  of  view  of  the  development  of  trust  legis- 
lation, wliich  are  as  follows:  (1)  Certain  practices  in  so  far  as  they 
tend  substantially  to  lessen  competition,  etc.,  are  prohibited  in 
certain  cases,  namely,  (a)  price  discrimination,  Q))  tying  con- 
tracts, (c)  the  holding  by  one  company  of  the  stock  of  anotlier  com- 
pany, and  {(1)  common  directors  or  officers  in  different  companies. 
With  respect  to  these  questions,  quasi  judicial  powers  are  given  to  the 


TRLTST    LAWS   AND   UNFAIR   COMPETITION.  23 

Interstate  Commerce  Commission,  the  Federal  Reserve  Board,  and 
the  Federal  Trade  Commission,  according  to  their  respective  jm'is- 
dictions,  these  powers  being  substantially  the  same  as  those  of  the 
Federal  Trade  Commission  with  respect  to  unfair  methods  of  com- 
petition. (See  p.  130.)  (2)  The  declaration  is  made  that  labor  is 
not  a  commodity  nor  an  article  of  commerce,  and  further  that  the 
antitrust  acts  shall  not  be  construed  to  forbid  the  existence  of  certain 
kinds  of  labor  and  agricultural  organizations,  nor  to  forbid  their 
members  from  lawfully  carrying  out  their  legitimate  objects,  nor  shall 
such  organizations  be  construed  to  be  illegal  under  the  antitrust  laws. 
This  law  contains  various  other  important  provisions,  but  they  are 
of  less  interest  in  connection  with  the  development  of  the  Antitrust 
Law. 

The  provisions  of  the  Clayton  Act  first  referred  to  above  were  in- 
tended, apparently,  to  prevent  certain  practices  which  were  regarded 
as  lessening  competition  or  tending  to  monopoly,  but  which,  it  was 
feared,  would  not  always  in  themselves  be  sufficient  to  bring  the  person 
who  practiced  them  within  the  scope  of  the  Sherman  Antitrust  Act. 
While  some  effects  have  already  manifested  themselves  with  respect  to 
the  forms  of  business  organization,  this  legislation  is  of  too  recent  a 
date  to  make  it  possible  to  form  any  accurate  estimate  of  its  broader 
consequences. 


CHAPTER  II. 

COMMON-LAW  DECISIONS  BY  COURTS  IN  THE  TJNITED  STATES  IN 
REGARD  TO  AGREEMENTS  IN  RESTRAINT  OF  TRADE. 

Section  1.  Introduction. 

The  decision  of  the  United  States  Supreme  Court  in  the  Standard 
Oil  case  made  it  evident  that  the  words  "  restraint  of  trade  "  in  the 
Sherman  Act  should  be  construed  as  declaratory  of  the  common  law 
so  far  as  the  meaning  of  that  term  was  concerned.  (See  pp.  86-87.) 
This  view  had  been  taken  by  the  dissenting  members  of  the  Court 
in  the  Trans-Missouri  case.  (See  p.  85.)  Even  in  the  latter  case  the 
majority  of  the  court  had  expressly  declared  that  there  were  certain 
contracts  which  might  not  be  included  in  the  letter  or  spirit  of 
the  statute.  A  proper  understanding  of  this  term  as  used  in  the 
Sherman  Act,  therefore,  requires  a  knowledge  of  the  common-law 
decisions. 

This  knowledge  is  important  for  the  reason  that  the  rules  set  forth 

in  these  decisions  form  the  basis  of  jurisprudence  in  every  State 

where  no  antitrust  statutes  have  been  enacted;  where  such  statutes 

have  been  held  unconstitutional,  ineffective,  or  inapplicable;  where 

they  have  been  repealed;  and  where,  as  in  Massachusetts  (see  p.  204), 

the  statutes  are  expressly  declaratory  of  the  common  law.     (See 

Chaj).  IV.)     The  importance  of  the  common  law  decisions  becomes 

even  more  evident  when  it  is  perceived  to  what  extent  the  courts,  in 

deciding  cases  under  both  State  and  Federal  statutes,  have  cited 

such  decisions. 

No  method  of  presenting  the  common-law  decisions  is  satisfactory, 

however,  which  does  not  involve  a  careful  examination  of  a  consid- 
erable number  of  representative  cases.  It  is  obvious  that  the  prin- 
ciples upon  which  some  agreements  have  been  held  valid  and  others 
invalid  will  be  much  better  understood  if,  in  comiection  with  the 
decisions,  the  essential  facts  in  particular  cases  are  examined,  together 
with  the  reasoning  contained  in  the  opinion  of  the  court.  It  can 
not  be  expected,  however,  that  a  complete  agreement  will  be  found 
in  all  the  cases,  but  it  is  probable  that  there  is  as  much  consistency  in 
the  decisions  on  this  subject  as  in  those  relating  to  other  subjects. 

In  carrying  out  the  method  of  presentation  indicated,  it  has  been 
found  that  the  cases  cover  so  wide  a  variety  of  circumstances  that 
24 


TRUST   LAWS  AND  tTNPAIR  COMPETITION.  25 

it  is  difficult  to  classify  them  satisfactorily,  but  to  make  the  presenta- 
tion someAvhat  clearer  for  present  purposes,  the  following  principal 
groups  will  be  considered,  namely: 

(1)  Agreements  connected  with  the  sale  of  a  business. 

(2)  Agreements  among  competitors  to  restrict  competition. 

(3)  Agreements  among  competitors  to  consolidate  under  common 
ownership  or  control. 

In  these  three  groups  of  cases  it  will  be  observed  thati'  the  first 
group  includes  agreements  by  which  the  vendor  of  a  business  agrees 
not  to  reengage  in  the  business  as  a  competitor  of  the  purchaser.  In 
the  second  group  the  agreement  is  one  to  regulate  the  conditions  of 
competition  between  those  who  are  trade  rivals  and  who  continue  as 
such,  subject  to  the  restrictions  of  the  agreement.  The  third  group 
includes  agreements  whereby  the  ownership  or  control  of  competing 
businesses  is  combined  in  the  same  hands. 

The  present  report,  however,  is  more  intimately  concerned  in  the 
cases  of  the  second  and  third  groups,  namely,  those  which  are  more 
likely  to  be  of  a  monopolistic  character  or  to  have  a  monopolistic 
tendency.  Agreements  between  the  buyer  and  seller  of  a  business 
included  in  the  first  group  may  also  be  monopolistic  in  character  or 
tendency  when  accompanied  by  circumstances  from  which  it  appears 
that  the  contract  has  been  entered  into  as  a  device  to  lessen  competi- 
tion, enhance  prices,  or  secure  or  build  up  control  of  the  market,  as 
where  a  buyer  acquires  the  business  of  several  competing  vendors. 
It  is  clear  that  in  themselves  the  agreements  of  the  first  group  do 
not  necessarily  tend  to  give  the  buyer  control  of  the  market. 

This  class  of  cases  must  be  briefly  considered  here,  however,  in 
order  to  understand  the  present  meaning  of  the  term  "  restraint  of 
trade  "  in  the  light  of  its  deAclopment,  since  it  was  to  this  class  of 
cases  that  the  term  was  originally  applied  and  to  which  it  was  largely 
confined  in  the  early  decisions. 

The  use  of  unfair  competitive  methods  may  afford  substantial  evi- 
dence of  an  intention  unduh?-  to  restrain  trade  or  competition,  to 
secure  control  of  the  market,  or  to  create  a  monopoly.  It  appears, 
however,  in  the  common-law  cases,  that  when  such  methods  exist,  the 
control  of  the  general  market  is  not  necessarily  involved.  Such 
cases  arc  therefore  taken  up  elsewhere  in  this  report.  (See  Chap. 
VII.)  An  important  feature  of  cases  involving  unfair  methods  of 
competition  is  the  effect  of  the  practice  upon  individuals  engaged  in 
competition  with  the  party  complained  of.  In  this  class  of  cases 
considerations  of  the  greatest  public  concern  may  be  involved  (espe- 
cially in  the  result  of  the  continued  use  of  unfair  methods),  but  in 
particular  instances  the  effect  upon  the  general  public  is  usually 
more  limited  or  less  direct  than  in  the  cases  discussed  in  this  chapter. 


26  REPORT  OP   THE   COMMISSIONER  OF   CORPORATIONS. 

Under  the  common  law,  agreements  in  restraint  of  trade,  which  are 
regarded  as  against  public  policy,  are  held  to  be  void  and  unenforce- 
able. The  court  will  not  aid  any  party  whose  rights  are  derived 
from  such  an  agreement.  In  this  sense  these  agreements  are  un- 
lawful or  illegal.  By  statute  a  criminal  liability  has  been  imposed 
in  certain  cases,  especially  those  involving  an  element  of  conspiracy. 
(See  pp.  2,  3.)  In  former  times  attempts  to  control  the  market  in 
respect  to  victuals  and  other  necessaries  were  punished  as  criminal 
offenses,^  apparently  without  regard  to  whether  a  conspiracy  existed 
or  not. 

Section  2.  Agreements  connected  with  the  sale  of  a  business. 

Centuries  ago  English  courts  laid  down  the  rule  that  contracts 
in  restraint  of  trade  could  not  be  enforced.  The  courts  were  op- 
posed to  upholding  any  restraint,  however  limited.  Most  of  the 
cases  which  came  before  the  courts  in  that  period  involved  agree- 
ments whereby  the  vendor  of  a  business  agreed  not  to  reengage  in 
the  same  line  of  trade.  The  courts  took  the  view  that  no  one  should 
be  allowed  to  bind  himself  not  to  carry  on  the  trade  to  which  he 
was  accustomed  or  to  limit  his  right  to  carry  it  on  in  his  own  way. 
It  was  believed  that  such  a  rule  was  in  the  interest  of  trade. 

This  view  prevailed  until  early  in  the  eighteenth  century  when 
the  case  of  Mitchell  v.  Reynolds^  was  decided.  In  that  case,  after 
a  thorough  examination  of  the  earlier  decisions,  the  court  held  valid 
the  particular  agreement  that  was  involved  in  the  case  before  it. 
In  reaching  this  result  the  court  said  in  part : 

We  are  of  opinion,  that  a  special  consideration  being  set  forth  in  the  condition, 
which  shows  it  was  reasonable  for  the  parties  to  enter  into  it,  the  same  is 
good ;  and  that  the  true  distinction  of  this  case  is  not  between  promises  and 
bonds,  but  between  contracts  with  and  without  consideration ;  and  that  where- 
ever  a  sufficient  consideration  appears  to  make  it  a  proper  and  a  useful  con- 
tract, and  such  as  cannot  be  set  aside  without  injury  to  a  fair  contractor,  it 
ought  to  be  maintained;  but  with  this  constant  diversity,  viz.,  where  the  re- 
straint is  general,  not  to  exercise  a  trade  througliout  the  kingdom,  and  wli^re  it 
is  liihited  to  a  particular  place  ;  for  the  former  of  these  must  be  void,  being  of  no 
benefit  to  either  party,  and  only  oppressive,  as  shall  be  shown  by-and-by.    *    *    * 

In  all  restraints  of  trade,  where  nothing  more  appears,  the  law  presumes 
them  bad ;  but  if  the  circiunstances  are  set  forth,  that  presumption  is  excluded, 
and  tlie  Court  is  to  judge  of  those  circumstances  and  determine  accordingly ; 
and  if  upon  them  it  appears  to  be  a  just  and  honest  contract,  it  ought  to  be 
maintained. 

This  decision,  that  some  restraints  could  be  enforced,  established 
an  important  modification  to  the  earlier  rule.  The  decision  recog- 
nized the  rule  as  to  all  general  restraints,  because  it  seems  to  have 

1  64  L.  R.  A.,  6S0n.     Compare,  however,  Coke's  Institutes,  chap.  89  ;  Hawkins's  Pleas  of 
the  Crown,  chap.  80,  London  ed.,  1709;  and  Rex  v.  Waddington   (1801),  1  East,  143. 
=  1  P.  Wms.,  181    (1711). 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  27 

been  thought  that  there  could  be  no  question  that  all  such  restraints 
were  bad.  In  cases  where  the  restraint  was  limited  to  a  particular 
place,  however,  it  was  held  that  the  court  should  determine  whether 
it  was  just  and  honest,  having  regard  to  the  circumstances,  and,  if 
so,  it  should  be  enforced. 

This  decision  gave  rise  to  some  confusion  and  uncertainty  in  the 
use  of  the  term  "restraint  of  trade,"  which  has  persisted  until  the 
present  time.  By  some  the  term  has  been  used  to  include  all  re- 
straints where  any  limitation  in  fact  is  involved  without  regard  to 
whether  the  contract  was  just  and  honest  or  not,  while  by  others  it 
has  been  used  to  include  only  those  restraints  Avhich  are  unenforce- 
able. Failure  to  observe  this  distinction  has  caused  misapprehension 
in  respect  to  the  legal  significance  of  the  term 

This  confusion  has  been  increased  by  some  lack  of  uniformity  in 
the  decisions  themselves.  Some  courts  have  apparently  felt  con- 
strained to  follow  precedents  established  under  economic  conditions 
that  prevailed  in  earlier  years,  rather  than  to  regard  changes  in 
such  conditions  as  among  the  "  circumstances  "  referred  to  in  the  rule 
laid  down  in  INIitchell  v.  Reynolds,  as  to  what  should  be  taken  into 
consideration  in  determining  whether  the  contract  is  "  just  and 
honest."  On  the  other  hand,  some  courts,  especially  in  England, 
in  following  the  spirit  of  this  rule,  have  gone  farther  in  its  appli- 
cation and  even  held  some  general  restraints  enforceable,  as  in  the 
case  of  the  sale  of  trade  secrets  and  trade  of  a  special  character, 
which,  although  of  wide  extent,  is  confined  to  a  limited  number  of 
customers.^ 

The  dictum  in  Mitchell  r.  Reynolds,  that  a  general  restraint  not 
to  exercise  a  trade  throughout  the  kingdom  was  void,  has  been 
attributed  to  the  probability  that  at  the  time  that  case  was  decided 
it  seemed  inconceivable  that  an  agreement  to  refrain  from  establish- 
ing a  business  of  the  same  kind  anywhere  in  the  kingdom  should  be 
necessary  to  the  protection  of  the  good  will  of  any  business  then 
existing.^  In  following  this  dictum  it  came  to  be  held  in  England 
that  any  restraint  whose  limits  were  coterminous  with  the  kingdom 
should  be  regarded  as  void,  and  the  courts  continued  to  apply  the 
limits  thus  arbitrarily  fixed,  even  in  cases  where,  under  more  modem 
conditions,  the  circumstances  might  have  been  held  to  justify  a  more 
liberal  interpretation  of  the  rule.  The  dictum  has  been  followed  in 
a  number  of  American  cases  wdiich  hold  that  an  agreement  involving 
a  restraint  covering,  or  substantially  covering,  an  entire  State  is  void 
as  a  ffeneral  restraint.^    This  was  the  view  taken  bv  the  court  in  Law- 

o  ^  ^ 

1  Jolly,   ConfTfifts   in   Rostraint  of  Trado,   p.   19    ("d   cd.,   Lonrlon,   1914). 

2  See  Anchor  Electric  Co.  v.  Uawkes,  171  Mass.,  101    (1898)   at  p.  105. 

=>  Among  these  cases  may  be  mentioned  Lawrence  et  al.  v.  Kidder.  10  Bar1>our  (N.  T.), 
041  (1851)  ;  Taylor  v.  Blanehard,  13  Allen  (95  Mass.),  370  (1866)  ;  and  Western  Wood- 
enware  Association  r.  Starkey  et  al.,  84  Mich.,  76  (1890).  In  connection  with  the  latter 
case,  see  Deal  v.  Chase  et  al.,  Ml  Mich..  490  (1875)  on  p.  33  of  this  report. 


28  REPORT   OF   THE   COMMISSIONER   OP   CORPORATIOISTS. 

rence  v.  Kidder,  cited  in  the  note.  In  that  case  the  defendants  had 
covenanted  that  for  five  years  from  the  date  of  the  contract  they 
would  discontinue  the  manufacture  and  sale  of  palm-leaf  beds  or 
mattresses,  or  materials  out  of  which  such  beds  are  made,  in  all  the 
territory  of  the  State  of  New  York  west  of  the  city  of  Albany,  and 
that  they  would  not  sell  beds  or  materials  for  beds  to  agents  of  the 
plaintiffs  in  Columbus,  Ohio.  In  an  action  based  on  an  alleged  breach 
of  this  contract  it  was  held  that  the  contract  was  in  restraint  of 
trade  and  void,  the  restriction  embracing  too  large  a  territory.  In 
reaching  this  result  the  court  expressed  itself,  in  part,  as  follows: 

*  *  *  I  am  of  the  opinion,  independent  of  autliority,  that  a  contract  prohib- 
iting to  an  individual  the  pursuit  of  any  trade  or  employment  throughout  the 
State  of  New  Yorli,  should  be  regarded  as  a  contract  in  total  restraint  of  trade 
within  the  common  law. 

In  the  Massachusetts  and  ISIichigan  cases  cited  in  note  3  on  page 
27,  the  respective  courts  were  inclined  to  hold  that  a  restraint  extend- 
ing throughout  the  State  is  void,  apparently  on  the  ground  that  to 
uphold  the  restriction  would  result  in  driving  business  from  the 
State  and  throw  certain  of  its  citizens  out  of  employment,  or  cause 
their  removal  from  the  State.  In  the  Massachusetts  case  it  appeared 
that  the  plaintiff  had  been  engaged  in  the  manufacture  and  sale  of 
shoe  cutters  at  Marlboro,  Mass. ;  that  the  manufacture  could  only  be 
carried  on  by  persons  instructed  in  the  same ;  that  the  business  was 
then  confined  to  the  plaintiff  and  three  other  parties  in  other  parts 
of  the  State;  and  that  the  plaintiff  was  doing  a  large  and  profitable 
business.  It  further  appeared  that  the  plaintiff  received  the  defend- 
ant, who  was  wholly  ignorant  of  the  business,  into  partnership,  under 
an  agreement  providing  that  if  the  partnership  were  dissolved  the 
defendant  should  not  at  any  time  thereafter  carry  on  the  business  of 
manufacturing  or  selling  shoe  cutters  at  any  place  within  the  State 
of  Massachusetts.  The  defendant,  after  the  dissolution  of  the  part- 
nership, engaged  in  the  same  business  in  Boston  with  a  new  partner, 
and  traded  with  and  supplied  customers  of  the  plaintiff.  In  holding 
the  contract  to  be  contrary  to  public  policy  and  void,  the  court  said : 

*  *  *  A  monopoly  extending  throughout  the  State  may  be  as  really  in- 
jurious to  the  people  of  the  State  as  if  it  extended  throughout  the  whole 
country.  *  *  *  whatever  may  be  the  extent  of  the  State,  the  monopoly 
restricts  the  citizen  from  pursuing  his  business,  unless  he  transfers  his  residence 
and  his  allegiance  to  some  other  State  or  country.  Its  tendency  is  to  drive 
business  and  citizens  who  are  skilled  in  business  from  this  to  other  States. 
*  *  *  In  the  present  contract  the  court  can  see  nothing  beneficial  to  the 
public,  and  are  of  opinion  that  it  is  contrary  to  the  well-established  policy  of  the 
law,  and  void. 

In  the  Michigan  case  referred  to,  a  manufacturing  firm  in  Michi- 
gan sold  their  stock  and  material  to  an  Illinois  corporation  engaged 
in  a  similar  business,  and  agreed  not  to  engage  in  the  business  for 


TRUST    LAWS   AND   UNFAIR   COMPETITION.  29 

five  years  in  eight  specified  States,  including  those  in  which  the 
parties  resided,  nor  to  allow  the  premises  where  they  had  carried  on 
their  business  to  be  used  for  that  purpose,  without  the  consent  of  the 
corporation.  The  complainants  brought  suit  for  an  injunction  and 
an  accounting,  alleging  that  some  of  the  defendants  had  procured 
the  incorporation  of  a  new  compan}^,  to  which  the  premises  in  ques- 
tion were  indirectly  conveyed,  and  that  they  had  active  supervision 
of  said  corporation  and  were  engaged  in  competition  with  the  com- 
plainants in  the  eight  States  specified  in  the  agreement.  From  a 
decree  dismissing  the  bill  complainant  appealed.  In  holding  the 
contract  void  on  grounds  of  public  policy,  the  court  expressed  its 
opinion  as  follows: 

The  interests  of  the  parties  alone  are  not  the  sole  considerations  involved 
here.  It  is  the  duty  of  the  court  to  see  that  the  public  interests  are  not  in 
any  manner  jeopardized.  *  *  *  Here  a  large  manufacturing  business  had 
been  established,  and  presumably  it  gave  employment  to  quite  a  number  of 
people.  By  the  contract  these  people  are  thrown  out  of  employment  and  de- 
prived of  a  livelihood,  and  no  other  of  the  citizens  of  Michigan  are  called  in 
to  take  their  places.  The  business  is  no  longer  to  be  carried  on  here,  but  is 
removed  out  of  the  State.  *  *  *  I  do  not  think  it  needs  the  citation  of 
authorities  to  show  that  contracts  of  this  nature  have  frequently  been  con- 
demned by  the  courts  and  held  void  as  unreasonable  restraints  of  trade  and 
therefore  void  on  the  ground  of  public  policy. 

On  the  other  hand,  in  the  State  of  New  York,  restraints  cover- 
ing, or  substantially  covering,  the  entire  United  States,  have 
been  upheld  as  valid.  One  of  these  agreements  related  to  the 
manufacture  and  sale  of  matches^  and  another  to  thermome- 
ters." In  the  Diamond  Match  case  the  defendant,  who  was  en- 
gaged in  the  manufacture  of  matches  in  Xew  York  and  in 
their  sale  throughout  the  States  and  Territories,  sold  his  good 
will,  etc.,  to  the  Swift  &  Courtney  &  Beecher  Co.,  a  corporation  en- 
gaged in  the  manufacture  of  matches  in  Connecticut,  Delaware,  and 
Illinois,  and  in  selling  its  product  throughout  the  country.  Defend- 
ant covenanted  with  the  purchaser  and  assigns  that  he  would  not  en- 
gage in  the  manufacture  or  sale  of  matches  at  any  time  within  99 
years,  except  in  the  service  of  the  purchasing  company,  in  any  of  the 
States  or  Territories  except  Nevada  and  Montana,  and  he  executed 
a  bond  in  the  penalty  of  $15,000  as  liquidated  damages  in  case  of  a 
breach  of  his  covenant.  In  an  action  brought  by  the  Diamond  Match 
Co.,  assignee,  to  restrain  the  defendant  from  engaging  in  the  manu- 
facture or  sale  of  matches  in  violation  of  the  covenant  in  the  bill  of 
sale,  the  court  held  that  the  (]uestion  as  to  what  was  a  general  re- 
straint of  trade  did  not  depend  upon  State  lines;  that  they  were  not 
the  boundaries  of  trade  and  commerce:  that  a  restraint  was  not  neces- 

1  Diamond  Match  Co.  ?•.  Roebcr.  106  N.  Y.,  473  (lS87i. 
^^Watertown  Thermometer  Co.  v.  Pool  et  al.,  51  Hun,  157    (1889). 


30  REPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

sarily  general,  which  embraced  an  entire  State;  and  that  the  cove- 
nant, being  supported  by  a  lawful  consideration,  constituting  a 
partial  and  not  a  general  restraint,  and  being,  in  view  of  the  circum- 
stances, reasonable,  was  valid. 

It  has  sometimes  been  claimed  that  this  decision  marked  a  de- 
parture from  the  common-law^  rule  by  holding  that  even  c(mtracts 
in  total  restraint  of  trade  should  be  upheld  in  order  to  preserve  the 
greatest  possible  freedom  of  contract.     The  court,  however,  expressed 
the  opinion  that  the  public  interest  was  not  involved,  and  that  the 
restraint  was  not  total,  and  held  that  as  the  contract  did  not  confer 
any  special  or  exclusive  privilege  nor  create  a  monopoly  there  was 
little  danger  that  the  public  would  suffer  harm  from  a  lack  of  per- 
sons to  engage  in  a  profitable  industry.     It  w^as  expressly  pointed 
out  that  combinations  stand  on  a  different  footing.     The  report  of 
this  case  does  not  indicate  that  any  question  was  raised  by  the  parties 
or  the  court  as  to  the  validity  of  the  contract  on  the  ground  that  it 
was  a  part  of  the  plan  in  the  organization  of  the  Diamond  Match 
Co.,  which,  in  a  Michigan  case  subsequently  decided,  was  held  to  be 
an  unlawful  combination  formed  to  effect  a  monopol3^     (See  p.  0().) 
"     In  the  Watertown  thermometer  case  it  was  alleged  by  the  plain- 
tiff', and  admitted  by  demurrer,  that  the  defendant,  Julia  Pool,  in 
consideration  of  $5,000,  by  a  written  agreement,  under  seal,  had  sold 
to  two  persons  named  therein,  100  shares  of  the  stock  of  the  plaintiff 
corporation,  and  assigned  to  them  the  trade-mark  used  on  thermom- 
eters and  storm  glasses  manufactured  by  her;  that  she  had  author- 
ized the  transfer  of  such  trade-mark  to  the  plaintiff,  wdiich  had  its 
principal  place  of  business  at  Watertown;  and  that  she  had  also 
agreed  "not  to  engage  in  the  manufacture  of  any  thermometers  of 
any  kind  or  description,  nor  of  any  storm  glasses,  at  any  place  within 
the  United  States,  at  any  time  within  a  period  of  10  years  from  the 
date  "  thereof.     It  also  appeared  that  for  the  same  consideration  the 
defendant,  Herbert  Pool,  had   agreed  that  he  would  not  in   any 
manner  wdiatever  engage  in  the  manufacture  of  thermometers  or 
storm  glasses  within  said  period  of  10  years.     It  w^as  also  alleged 
that  all  the  rights  secured  by  said  agreement  had  been  transferred 
to  the  plaintiff,  and  that  for  its  full  and  proper  development  the 
j)laintiff's  business  required,  for  a  considerable  period  of  time,  the 
entire  territory  embraced  under  such  agreement.     It  was  further  al- 
leged that  the  defendants  had  violated  their  agreement  by  engaging 
in  the  same  business  at  Oswego  under  the  name  of  the  Oswego  Ther- 
mometer Worlds.     The  only  question  raised  w^as  as  to  the  validity  of 
the  contract.    The  defendants  claimed  that  it  was  in  general  restraint 
of  trade  and  therefore  void,  founding  this  claim  on  the  extent  of  ter- 
ritory covered  by  the  restrictions.     It  Avas  held  that  the  restraint, 
though  general,  was  at  the  same  time  coextensive  only  with  the 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  31 

interest  to  be  protected  and  with  the  benefit  meant  to  be  conferred  by 
the  agreement;  that  it  imposed  no  restriction  upon  the  defendants 
which  was  not  beneficial  to  the  plaintiff  or  which  was  unnecessary 
for  its  reasonable  protection,  and  that  it  was  induced  by  a  considera- 
tion which  made  it  reasonable  for  the  parties  to  enter  into  it. 

In  18T3  the  Supreme  Court  of  the  United  States,  in  Oregon  Steam 
Navigation  Co.  v.  Winsor  ^  upheld  a  stipulation,  coextensive  with  the 
traveled  waters  of  a  State,  and  covering  a  period  of  10  years,  under 
the  following  circumstances :  It  appeared  that  the  California  Steam 
Navigation  Co.  sold  a  steamer  in  1861  to  the  Oregon  Steam  Naviga- 
tion Co.,  subject  to  a  stipulation  that  the  latter  company  should 
not  permit  the  said  steamer  to  be  employed  upon  any  of  the  routes 
of  travel,  rivers,  bays,  or  waters  of  California  for  a  period  of  10 
years.  Three  years  later  the  Oi-egon  company  sold  the  same  steamer 
for  the  sum  of  $75,000  to  Winsor  and  others,  subject  to  a  covenant 
that  the  vessel  shoidd  not  be  emplo^'ed  upon  any  of  the  routes  of 
travel  or  waters  of  California,  or  the  Columbia  Kiver  and  its  trib- 
utaries, for  a  period  of  10  years  from  1867.  The  Oregon  company 
bi'ought  an  action  against  Winsor  and  others,  alleging  as  a  breach  of 
the  contract  that  the  steamer  had  been  engaged  fi'om  November  1, 
1868,  in  the  transportation  of  passengers  and  freight  from  San  Fran- 
cisco to  Vallejo,  being  a  route  on  the  waters  of  California  embraced 
in  the  stipulation.  The  supreme  court  of  Washington  Territory  dis- 
missed the  case.  On  a  writ  of  error  to  the  Supreme  Court  of  the 
United  States  it  was  held  that  the  contract  with  the  California  com- 
pany was  not  void  as  in  restraint  of  trade ;  that  the  portion  of  the  stip- 
ulation with  Winsor  excluding  the  steamer  from  California  waters 
was  necessary  in  order  that  the  Oregon  company  might  keep  its 
covenant  with  the  California  company;  that  although  the  stipulation 
with  Winsor  with  respect  to  California  waters  Avas  for  three  years 
beyond  the  period  during  Avhich  the  Oregon  company  was  bound 
to  protect  the  California  company,  the  contract  was  divisible^  and 
such  portion  of  the  stipulation  was  enforceable  for  seven  j'^ears.  The 
court  was  of  the  opinion  that — 

This  stipulation  (with  tlie  California  company)  was  necessary  to  jirotect  the 
former  company  from  interference  with  its  own  business.  It  had  no  tendency 
to  destroy  the  usefulness  of  the  steanuM*,  and  did  not  deprive  the  country  of  any 
industrial  agency.  The  transaction  merely  transferred  the  steamer  from  the 
employment  of  one  company  to  that  of  another  situated  and  doing  business  in 
another  State.  It  involved  no  transfer  of  residence  or  allegiance  on  the  part  of 
the  vendee  in  order  to  pursue  its  eniploymcMit,  nor  any  ('cassation  or  diminution 
of  its  business  whatever.    The  presumption  is  that  the  arrangement  was  mutu- 

187  TJ.  S.,  64   (1873). 

*Among  other  cases  In  which  an  agreement  in  restraint  of  trade  has  been  held  divisible 
are  Lange  v.  Werk,  2  Ohio  State,  520  (1853)  ;  Thomas  v.  Miles,  2  Ohio  State,  274  (1854)  ; 
and  Smiths  Appeal,  11. '5  Ta.  State,  579  (1886). 


32  KEPOKT   OF    THE   COMMISSIONER  OF   CORPOEATIONS. 

ally  beneficial  to  both  companies,  and  that  it  promoted  the  general  interests  of 
commerce  on  the  Pacific  coast. 

*  *  *  the  covenant  made  by  the  defendant  seems  to  stand  on  the  same 
ground  as  that  made  by  the  plaintiffs  with  the  California  company.  The  same 
observations  may  be  made  with  reference  to  it.  The  public  was  not  injured  by 
being  deprived  of  any  of  the  business  enterprise  of  the  country.  The  vendees 
did  not  incapacitate  themselves  from  carrying  on  business  just  as  they  had 
previously  done,  and  in  the  same  locality.  Their  business  was  rather  facilitated 
by  the  arrangement.  Finally,  the  stipulation,  it  will  be  presumed,  was  founded 
on  a  valuable  consideration  in  its  influence  upon  the  price  paid  for  the  steamer ; 
its  object  and  purpose  was  simply  to  protect  the  vendors,  and  if  we  except  the 
three  years  before  considered  in  its  relation  to  California,  its  restraining  effect 
extended  no  farther  than  was  necessary  for  their  protection. 

In  connection  with  the  above  case  it  will  be  noted  that  the  agree- 
ment related  only  to  the  use  of  a  particular  steamer.  It  will  also  be 
noted  that  the  restraint  imposed  was  upon  the  purchaser  and  not 
upon  the  vendor.^ 

The  later  cases  seem  to  indicate  a  disposition  on  the  part  of  the 
courts  to  apply  the  rule  as  to  restraint  of  trade  by  taking  into  con- 
sideration the  conditions  under  which  business  is  actually  carried  on 
at  the  particular  time  in  question,  and  e^'ince  a  tendency  (where  no 
injury  to  the  public  is  involved)  to  uphold  a  restraint  extending 
beyond  the  limits  of  a  State  wherever  necessary  and  fair  to  protect 
the  purchaser  in  respect  to  the  good  will  of  the  business  acquired  by 
him. 

A  restraint  Avithout  limit  of  place  or  time  is  void,^  as  are  also 
agreements  under  which  the  seller  agrees  not  to  reenter  the  same 
business  within  a  specified  time  but  without  any  provision  as  to 
place.^ 

Numerous  cases  have  been  decided  upholding  particular  restraints 
where  the  restraint  was  regarded  as  reasonable.  Two  Indiana  cases 
afford  examples  of  the  application  of  the  rule  to  early  cases  of  this 
kind.  Bowser  et  al.  v.  Bliss  et  al.,*  was  an  action  of  debt  on  a  note 
payable  to  Bliss  and  others  in  consideration  of  a  sale  by  the  latter 
of  their  right  of  making,  selling,  and  trading  fanning  mills  south  of 

iDunlop  ct  al.  v.  Gregory  et  al.  (10  N.  Y.,  241  (1851)  was  somewhat  similar  in  its 
facts,  but  tlie  restraint  imposed  was  more  limited  as  to  place,  but  unlimited  in  time.  The 
court  held  that  the  agreement  was  valid,  there  being  a  consideration,  and  it  appearing 
under  the  circumstances  that  the  contract  was  reasonable  and  useful,  the  restraint  im- 
posed not  being  larger  than  was  necessary  for  the  protection  of  the  covenantee. 

-Alger  V.  Thacher,  19  Pickering  (36  Mass.),  51  (1837).  This  was  an  action  of  debt 
brought  on  a  bond  which  recited  that  the  plaintiff  had  purchased  of  the  defendant  337 
shares  of  the  stock  of  the  South  Boston  Iron  Co.,  and  had  paid  to  him  a  large  sum  of 
money.  The  bond  recited  that  the  defendant  should  not  undertake,  at  any  time  thereafter, 
"  in  his  own  name  or  in  the  name  of  another,  to  conduct,  carry  on,  use,  or  employ  the  art, 
trade,  or  occupation  of  an  iron  founder  or  caster,  or  be  concerned,  interested,  employed, 
or  engaged,  directly  or  indirectly,  in  any  manner  whatsoever,  or  under  any  pretense  what- 
soever, in  the  business  of  founding  or  casting  of  iron."  On  demurrer  it  was  held  that  the 
bond  was  void,  being  in  restraint  of  trade  generally. 

2  In  this  connection  see  Wiley  v.  Baumgardner  et  al.,  97  Indiana,  66  (1884),  and  Bishop 
V.  Palmer  et  al.,  146  Mass.,  469  (1888). 

*7  Blackford,  344   (1845).     See  also  Beard  et  al.  v.  Dennis,  6  Indiana,  200   (1855). 


TEUST   LAWS   AND  UNFAIR  COMPETITION.  33 

the  Wabash  River,  within  30  miles  of  Marion,  within  which  bounds 
they  agreed  not  to  reenter  the  business.  The  defendants  alleged 
that,  as  the  contract  was  in  restraint  of  trade,  it  was  illegal.  The 
court  held,  however,  that  the  restriction  as  to  space  was  not  unreason- 
able, considering  the  nature  of  the  business  and  the  newness  of  the 
country,  and,  further,  the  fact  that  the  restraint  was  indefinite  in 
point  of  time  did  not  invalidate  the  contract. 

In  Duffy  et  al.  v.  Shockey  ^  the  plaintiffs  had  sold  the  good  will 
of  their  marble  shop  in  Covington  to  the  defendant,  binding  them- 
selves "not  to  start  a  marble  shop  at  any  point  nearer  Covington 
than  La  Fayette  or  Terre  Haute,  nor  for  the  same  distance  east  and 
west  of  the  Wabash  River  at  Covington,"  so  long  as  the  defendants 
should  carry  on  the  business  in  Covington.  In  an  action  to  recover 
the  purchase  price  the  defendant  alleged  that  one  of  the  plaintiffs 
established  a  shop  at  La  Fayette  and  sold  large  amounts  within  the 
territory  named,  and  that  the  other  took  contracts  within  said  terri- 
tory and  procured  the  work  to  be  done,  partly  in  the  shop  in  La  Fay- 
ette and  partly  in  a  shop  in  Covington,  in  which  it  was  alleged  he 
had  an  interest.  In  affirming  a  judgment  for  the  defendant  the 
court  held  that  the  contract  was  valid,  the  restriction  being  reason- 
able, and  that  the  sales  within  the  territory  named  constituted  a 
breach  of  the  agreement.  The  court  was  of  the  opinion  that  it  was 
important  in  such  a  case  to  inquire  whether  the  public  interest 
within  the  limits  specified  would  suffer  by  the  interdiction,  but 
declared  that  it  was  manifest  from  the  evidence  in  this  case  that 
it  would  not. 

Similar  results  were  reached  in  Beal  v.  Chase  et  al.^  and  in  ~\\liit- 

ney  et  al.  v.  Slayton.^    In  the  former  case  it  appeared  that  Chase, 

the  proprietor  of  a  prosperous  printing  business  in  Ann  Arbor  (in 

connection  with  Avhich  he  published  a  popular  receipt  book),  for  a 

large  and  adequate  consideration  sold  his  printing  establishment, 

the  receipt  book  and  copyrights,  the  good  will  of  the  business,  and 

the  right  to  use  his  name  in  connection  with  the  book  and  business, 

and  agreed  not  to  engage  directly  or  indirectly  in  the  business  of 

printing  and  publishing  in  the  State  of  Michigan  as  long  as  the 

purchaser  should  remain  in  such  business  in  Ann  Arbor.     Chase 

subsequently  became  the  president   of   a   new   corporation,   which 

became  a  formidable  rival  of  the  purchaser  of  the  old  business.    In 

a  suit  instituted  by  the  purchaser,  the  court  held  that  the  contract 

was  valid,  not  unreasonable,  and  based  on  a  full  consideration.    The 

court  stated  that — 

One  of  us  has  doubted  whether  it  [the  agreement]   could  properly  include 
the  whole  State;  but.  considering  the  rule  to  the  contrary  as  soniewliat  arti- 


111  Indiana,  70   (1858).         =31  Mich.,  490   (1S75).         MO  Maine,  224   (1885). 
30035°— 1(3 3 


34  KEPOET   OF   THE   COMMISSIONEE   OF   COEPOEATIONS. 

ficial,  he  concurs  in  maintaining  the  agreement.^  Althougli  some  questions 
might  arise  as  to  wliether  a  corporation  could  be  restrained  from  dealings 
prohibited  to  a  stoclcliolder,  merely  because  it  had  such  a  stockholder,  we  do 
not  discuss  that,  because  Chase's  connection  with  this  company  was  something 
more,  and  the  terms  of  the  decree  can  not  fairly  be  wrested  into  any  unreason- 
able meaning. 

In  "Wliitney  et  al.  v.  Slayton,  the  defendant,  having  sold  his  iron 
foundry  at  Calais  to  the  plaintiffs,  executed  a  bond  in  the  sum  of 
$5,000,  conditioned  that  he  would  not  engage  in  the  business  of  iron 
casting  Avithin  60  miles  of  Calais  for  a  term  of  10  years.  In  an 
action  of  debt  on  the  bond,  evidence  was  introduced  tending  to  show 
that  the  defendant,  after  executing  the  bond,  erected  a  foundry,  ma- 
chine shop,  and  other  buildings  in  Calais,  and  sold  the  same  to  an 
incorporated  company ;  that  he  held  stock  in  that  company ;  and  that 
he  was  employed  as  a  foreman  in  carrying  on  the  business.  A 
verdict  w^as  found  for  the  plaintiff,  and  the  defendant  filed  excep- 
tions, urging,  among  other  grounds,  that  the  bond  was  void,  its  con- 
ditions being  in  restraint  of  trade.  The  court,  taking  into  considera- 
tion the  fact  that  the  wants  of  the  community  might  ordinarily  be 
expected  to  be  supplied  by  one  such  establishment  at  that  place,  much 
of  the  country  within  60  miles  of  Calais  not  being  densely  inhabited, 
Avith  few  places  of  considerable  business  therein,  held  that  under  such 
circumstances  the  contract  was  valid;  that  if  the  defendant  was  a 
stockholder  in  the  corporation  he  was  engaged  in  iron  casting  within 
the  meaning  of  the  contract ;  and  that  his  being  in  the  service  of  the 
corporation  was  also  a  violation  of  the  agreement. 

In  Eobmson  v.  Suburban  Brick  Co.,-  the  facts  were  as  follows: 
Four  brick  manufacturers  owning  plants  located  at  neighboring 
points  in  Ohio  and  West  Virginia  agreed  to  convey  their  plants  to 
a  corporation  to  be  organized,  which  would  have  its  principal 
place  of  business  at  Wheeling,  W.  Va.  In  payment  for  the  plants 
so  conveyed,  the  manufacturers  were  to  receive  specified  amounts 
of  stock  in  the  new  company.  Each  party  agreed  not  to  engage 
in  the  brickmaking  business  or  in  any  lines  that  should  be  manu- 
factured thereafter  at  any  of  the  plants  to  be  operated  by  the  new 
corporation,  or  to  furnish  means,  aid,  or  advice  to  others  seeking 
to  do  so  in  such  a  way  as  to  come  in  competition  with  said  cor- 
poration witliin  50  miles  of  Wheeling  within  a  period  of  10  years 
from  the  date  of  the  agreement.  Robinson  subsequently  sold  his 
interest  in  the  new  corporation  (which  was  called  the  Suburban 
Brick  Co.)  and  became  a  stockholder  in  the  Standard  Brick  &  Stone 
Co.,  a  corporation  engaged  in  a  similar  business  within  10  miles  of 

1  In  this  connection  see  Western  Woodenware  Association  v.  Starkey  et  al.,  84  Mich., 
76   (1890),  on  p.  28. 

2  127  Fed.,  S04   (1904). 


TRUST    LAWS    AND   UNFAIR   COMPETITION.  35 

Wheeling.  The  Suburban  Brick  Co.  sought  to  compel  the  specific 
performance  of  the  above  agreement  and  to  enjoin  Robinson  from 
prosecuting  the  business  as  manager  or  adviser  of  the  Standard 
Brick  &  Stone  Co.,  or  any  others  seeking  to  engage  in  business  within 
said  territory.  The  answer  attempted  to  justify  the  breach  by  the 
defendant,  who  insisted  that  the  agreement  was  unlawful  and  invalid 
under  the  laws  of  the  State  of  Ohio,  under  the  trust  laws  of  the 
United  States,  at  common  law,  and  against  the  principles  of  equity. 
The  relief  prayed  for  was  granted  and  an  injunction  ordered,  to 
remain  in  force  until  the  date  fixed  by  the  agreement.  On  appeal 
the  court  affirmed  the  decree.  In  this  case  the  court  seems  to  have 
confined  itself  to  a  consideration  of  the  restrictive  agreement  that  had 
been  entered  into  by  the  defendant,  and,  except  as  may  have  been 
intimated  in  its  refusal  to  hold  the  transaction  void  under  the  Sher- 
man law  on  the  ground  that  that  law  did  not  relate  to  manufactories 
within  a  State,  the  court  does  not  seem  to  have  gone  into  the  question 
of  the  legality  of  the  plan  by  which  the  various  plants  were  to  be 
conveyed  to  a  single  owner.^     (See  sec.  4  of  this  chapter.) 

The  principle  on  which  the  validity  or  invalidity  of  restrictive 
agreements  entered  into  in  connection  with  the  sale  of  a  business- 

1  Where  the  parties  to  a  restrictive  agreement  have  been  competitors,  and  one  in  dispos- 
ing of  his  business  to  the  other  agrees  not  to  reenter  the  business  within  specified 
limits,  it  has  been  held  that  the  mere  allegation  of  the  vendor  of  an  illegal  purpose  on 
the  part  of  the  purchaser  to  form  a  monopoly  did  not  invalidate  the  agreement  which, 
in  the  opinion  of  the  court,  was  not  unreasonable  and  only  coextensive  with  the  business 
which  the  vendor  agreed  to  relinquish  and  the  purchaser  expected  to  acquire.  Thus,  in 
Chappel  V.  Brockway  (21  Wend.,  157),  a  New  York  case  decided  in  1839,  it  appeared 
that  the  Rochester  &  Buffalo  Packet  Boat  Co.  and  the  defendant  were  competitors  for 
business  on  the  Erie  Canal,  each  running  a  line  of  boats  between  Rochester  and  Buffalo. 
The  defendant,  for  the  consideration  of  $12,500,  sold  his  boats  and  other  property  con- 
nected with  them  to  this  company  and  entered  a  bond  in  the  penal  sum  of  $25,000  that 
he  would  not  at  any  time  thereafter  own.  run,  or  be  interested  in  any  line  of  packet 
boats  on  the  canal  from  Rochester  to  Buffalo.  In  an  action  on  this  bond  the  defendant 
pleaded  that  the  packet-boat  company,  by  reducing  fares,  had  compelled  him  to  sell  out 
to  them,  that  the  object  was  to  obtain  a  monopoly,  that  prices  had  been  subsequently 
raised  at  the  expense  of  the  public,  and  that  under  these  circumstances  he  became  the 
owner  of  a  new  line  of  boats  by  means  of  which  travelers  were  again  afforded  a  cheap, 
safe,  and  convenient  mode  of  transportation.  The  court  sustained  the  plaintiff's  conten- 
tion that  the  defendant  had  not  stated  sufficient  grounds  to  invalidate  the  bond.  In 
reaching  this  conclusion  the  court  expressed  its  opinion  as  follows : 

"  *  »  *  *  it  is  enough  that  the  contract  is  good  upon  its  face  and  the  plea  does 
not  clearly  prove  that  it  was  injurious  to  the  public." 

mother  cases  involving  various  aspects  of  the  doctrine  discussed  in  section  2  are 
Weller  et  al.  v.  Ilersee,  10  Ilun,  431  (N.  Y.,  1877)  ;  Hail's  Appeal,  60  Pa.  St.,  458  (1869)  ; 
Moore  &  Handley  Hardware  Co.  v.  Towers  Hardware  Co.,  87  Ala.,  206  (1888)  ;  Harrison 
et  al.  r.  Lockart,  25  Ind.,  112  (1865)  ;  JIcAllister  r.  Howell,  42  Ind.,  15  (1873)  ;  Gompers 
et  al.  t'.  Rochester,  52  Pa.  St.,  194  (1867)  ;  Presbury  v.  Fisher  &  Bennett,  18  Mo.,  50 
(1853)  ;  Tode  et  al.  v.  Gross,  127  N.  Y.,  480  (1891)  ;  Harkinson's  Appeal,  78  Pa.  St., 
196  (1875)  ;  Holbrook  v.  Waters,  9  Howard's  Prac.  (N.  Y.),  335  (1854)  ;  Doty  r.  Martin, 
32  Mich.,  462  (1873)  ;  Herreshoflf  v.  Boutineau,  17  R.  I.,  3  (1890)  ;  Morse  Twist  Drill  & 
Machine  Co.  v.  Morse,  103  Mass.,  73  (1809)  ;  Carroll  v.  Giles,  30  S.  C,  412  (1888)  ; 
Stines  r.  Dorman,  25  Ohio  State,  580  (1874)  ;  Hodge,  executor,  v.  Sloan,  107  N.  Y.,  244 
(1887)  ;  Clark  r.  Frank,  17  Mo.  App.,  602  (1885)  ;  Grasselli  v.  Lowden,  11  Ohio  State, 
349  (1860)  ;  California  Stoam  Navigation  Co.  v.  Wright,  6  Cal.,  258  (1856)  ;  and  Leslie 
V.  Lorillard  et  al.,  110  N.  Y.,  519  (1888). 


36  EEPOET   OF   THE   COMMISSIONER  OF   COEPOKATIONS. 

should  be  determined  was  expressed  by  the  court  in  Hubbard  v. 
Miller  ^  in  the  following  words : 

If,  considered  with  reference  to  the  situation,  business  and  objects  of  the 
parties,  and  in  tlie  liglit  of  all  the  surrounding  circumstances  with  reference 
to  wliich  the  contract  was  made,  the  restraint  contracted  for  appears  to  have 
been  for  a  just  and  honest  purpose,  for  the  protection  of  the  legitimate  inter- 
ests of  the  party  in  whose  favor  it  is  imposed,  reasonable  as  between  them 
and  not  specially  injurious  to  the  public,  the  restraint  will  be  held  valid.  A 
contract  of  this  kind  requires  no  greater  pecuniary  or  valuable  consideration 
to  support  it  than  any  other  contract ;  but  such  consideration,  however  valu- 
able, will  not  of  itself  support  it.  Whether  it  can  be  supported  or  not  depends 
upon  matters  outside  of  and  beyond  the  abstract  fact  of  the  contract  or  the 
pecuniary  consideration ;  it  will  depend  upon  the  situation  of  the  parties,  the 
nature  of  their  business,  the  interests  to  be  protected  by  the  restriction,  its 
effect  upon  the  public ;  in  short,  upon  all  the  surrounding  circumstances ;  and 
the  weight  or  effect  to  be  given  to  these  circumstances  is  not  to  be  affected  by 
any  presumption  for  or  against  the  validity  of  the  restriction;  if  reasonable 
and  just,  the  restriction  will  be  sustained ;  if  not,  it  will  be  held  void. 

Section  3.  Agreements  among  competitors  to  restrict  competition. 

The  common  purpose  or  effect  of  agreements  to  regulate  competi- 
tion among  concerns  independently  managed  is  to  enhance  profits  by 
limiting,  restricting,  eliminating,  or  otherwise  regulating  competition 
normally  prevailing  between  the  parties.  The  agreement  may  be  to 
fix  prices,  pool  profits,  divide  territor}^,  limit  output,  control  supply, 
or  in  some  way  to  regulate  competition  to  the  benefit  of  the  parties. 
Such  agreements  may  consist  merely  of  an  informal  understanding 
or  gentlemen's  agreement  under  which  performance  depends  entirely 
upon  the  good  faith  of  the  parties.  In  some  cases  the  agreement  may 
be  more  formal  and  may  be  set  forth  in  writing.  In  some  instances 
the  parties  may  put  themselves  under  bond  not  to  violate  the  agree- 
ment. Any  of  these  forms  of  agreement  may  be  carried  out  through 
some  form  of  organization  or  association  among  the  parties. 

Various  reasons  for  holding  these  agreements  and  those  discussed 
in  section  4,  to  be  void  on  grounds  of  public  policy  have  been  ad- 
vanced by  the  courts.  In  the  main  they  agree  that  the  primary 
objection  lies  in  the  fact  that  they  create  conditions  tending  to  con- 
centrate control  of  the  market  in  the  hands  of  certain  parties  to 
the  exclusion  of  others,  at  the  same  time  subjecting  the  public  to 
the  possibility  of  the  imposition  of  arbitrary  and  unreasonable  prices, 
and  to  the  disadvantages  of  possible  deterioration  in  the  quality  and 
quantity  of  the  supply  of  goods,  when  the  spur  of  competition  is 
removed. 

127  Mich.,  15    (1873). 


TEUST,  LAWS   AND   UNFAIR   COMPETITION.  87 

Wherever  any  agreement  between  competitors  ^  appears  to  involve 
an  nndne  restriction  of  competition  and  therefore  to  be  detrimental 
to  the  public  interest  the  courts  will  refuse  to  aid  in  its  enforce- 

^  Agreements  between  noncompeting  parties  imposing  restraints  of  trade. — Arrange- 
ments betwpen  nonrompetinfi  parties  as  well  as  those  between  eompetini?  parties 
to  "  corner  the  market  " ;  that  is,  to  facilitate  efforts  to  obtain  control  of  the  supply 
of  a  commodity  in  necessary  or  common  use,  in  order  to  hold  it  for  sale  at  arbi- 
trarily enhanced  prices,  are  also  held  to  be  void  under  the  common  law,  as  beintr  against 
public  policy.  By  controllins  the  supply  the  participants  are  in  a  position  arbi- 
trarily to  dictate  prices  regardless  of  ordinary  market  conditions,  thus  creating  substan- 
tially monopolistic  conditions.  In  important  respects  the  modem  corner  resembles  the 
practices  of  forestalling,  engrossing,  and  regrating,  which  were  regarded  as  unlawful 
even  before  the  time  of  Edward  VI,  in  whose  reign  a  statute  was  enacted  for  the  purpose 
of  defining  such  practices  and  fixing  the  punishment  of  offenders  (.5  and  6  Edward  VI, 
chap.  14).  The  earlier  statutes  on  the  subject  were  repealed  by  statute,  12  George  III, 
chap.  71  (1772)  ;  also  7  and  8  Vict.,  c.  24.  Authorities  differ  as  to  whether  the  offenses  of 
forestalling,  engrossing,  regrating,  etc.,  were  of  common  law  or  statutory  origin.  It 
seems  that  the  enhancement  of  prices  of  articles  of  such  necessary  and  common  use  as 
food  was  a  crime  at  common  law.  (Coke's  Inst.,  chap.  89.  See  citations  in  footnote, 
2  Purdy's  Beach  on  Private  Corporations,  pp.  141.5-1416.)  Even  in  the  absence  of 
statute,  courts  are  inclined  to  regard  those  who  participate  in  a  corner  as  conspirators 
against  the  public  welfare  and  will  refuse  to  lend  assistance  in  enforcing  any  part  of  the 
arrangement. 

For  decisions  in  cases  involving  attempts  to  corner  the  market,  see  Raymond  v.  Leavitt, 
46  Mich.,  447  (1881),  and  Samuels  et  al.  r.  Oliver  et  al.,  130  111.,  7.3  (1889). 

In  Pacific  Factor  Co.  v.  Adler  (00  Cal.,  110  (1890)  ),  it  appeared  that  in  1888  the  de- 
fendant had  entered  into  a  contract  with  the  plaintiff  corporation  whereby  he  agreed  to 
give  it  the  exclusive  sale  of  all  grain  bags  or  burlaps  (up  to  a  specified  number)  which 
would  be  under  his  control  prior  to  Jan.  1,  1889,  and  agreed  to  accept  the  average 
price  received  by  the  other  party  for  all  bags  sold  by  him  and  to  pay  a  commission  on  such 
sal.-^s.  The  defendant  further  agreed  to  pay  the  plaintiff  as  liquidated  damages  3  cents 
for  each  bag  or  burlap  which  he  refused  or  neglected  to  doliv<-'r  on  demand.  In  an  action 
upon  the  contract  to  recover  liquidated  damages  the  defendant  set  up  a  special  defense 
to  the  effect  that  the  plaintiff,  through  its  board  of  directors,  devised  a  scheme  to  control 
the  sale  and  supply  of  all  or  the  greater  portion  of  the  grain  bags  and  burlaps  within  the 
State  for  the  purpose  of  increasing  the  price  and  of  limiting  the  number  of  dealers  from 
whom  they  could  be  obtained,  and  compelling  the  farmers  to  purchase  said  lags  from  the 
plaintiff  at  a  price  in  excess  of  their  real  value  ;  that  the  annual  demand  amounted  to 
between  32,000,000  and  35,000.000  bags ;  that  the  plaintiff  calculated  that  the  quantity 
of  bags,  etc.,  within  the  State  and  which  were  to  arrive  prior  to  .Ian.  1,  1889,  would 
amount  to  42.000,000  bags  ;  that  in  pursuance  of  its  scheme  the  plaintiff  entered  into 
contracts  with  other  holders  and  owners  of  grain  bags  and  burlaps  in  all  respects  similar 
to  the  contract  made  with  the  defendant  ;  that  the  quantity  of  bags,  etc.,  covered  by  all 
the  plaintiff's  contracts  aggregated  approximately  80,000,000  ;  and  that  all  said  contracts. 
Including  the  contract  with  the  defendant,  were  contrary  to  public  policy  and  void.  The 
court  held  that,  standing  alone,  the  contract  must  be  considered  good,  no  illegal  object 
or  transgression  of  the  law  appearing  and  no  public  interest  l)eing  injuriously  affected, 
but  that  if  it  be  shown  that  such  contract  formed  part  of  a  scheme  to  remove  all  com- 
petition and  thereby  compel"  consumers  to  purchase  at  excessive  prices,  the  contract 
would  be  held  void  as  contrary  to  public  policy  and  would  not  be  enforced. 

The  decision  in  Pacific  Factor  Co.  v.  Adler  should  be  compared  with  that  in  Chappel  r. 
Broekway.  mentioned  in  the  footnote  on  p.  35,  and  with  Van  Marter  v.  Babcock  (23 
Barbour,  633  (1857)),  earlier  New  York  cases.  In  the  latter  case  the  court  was  of  the 
opinion  that  it  would  be  too  much  to  hold  a  contract  illegal  merely  upon  an  inference 
that  it  was  part  of  a  larger  scheme  to  control  the  market.  In  this  case  it  appeared  that 
a  written  contract  had  been  entered  into  between  the  plaintiff  and  the  defendants,  by 
which  the  former  agreed  to  sell  to  the  latter  all  the  mint  oil  which  should  be  produced 
upon  23  acres  of  peppermint  then  growing,  as  well  as  all  the  oil  of  peppermint  in  the 
production  of  which  the  plaintiff  should  be  in  any  way  interested,  for  two  years,  and  the 
defendant  agreed  to  purchase  the  same  at  a  specified  price  per  pound.  The  plaintiff  fur- 
ther agi-eed  to  discontinue  his  interest  in  the  production  of  p(M>permint  oil,  with  the  above 
exception,  for  a  period  of  two  years;  that  he  would  not  distill  for  any  other  person,  ex- 
cepting those  who  had  contracted  with  the  defendants,  nor  sell,  rent,  or  give  away  his 
distillery  or  the  use  of  it  for  two  years,  and  that  no  peppermint  should  be  grown  or  oil 
distilled  on  his  land  for  two  years,  excepting  for  the  production  of  the  oil  called  for  by 
the  contract.  It  was  further  provided  that  the  contract  should  be  void  in  case  the 
growers  did  not  generally  enter  into  an  agreement  with   the  defendants.      In   an  action 


38  EEPOET  OF   THE   COMMISSIONER   OF   CORPORATIONS. 

ment.  In  tins  connection,  no  broad  principle  of  general  application 
to  all  cases  can  be  laid  down.  The  common-law  doctrine  is  that  each 
case  must  be  considered  in  the  light  of  the  precise  circumstances  in- 
volved, but  that  whenever  the  facts  in  a  particular  case  make  it  clear 
that  the  agreement  between  two  or  more  competing  concerns  tends 
to  give  an  undue  control  over  the  market,  such  agreement  will  be 
held  unlawful  and  unenforceable. 

Control  of  Supply. — The  application  of  the  principle  stated  in 
the  preceding  paragraph  is  illustrated  in  Arnot  v.  The  Pittston  & 
Elmira  Coal  Co.^  In  that  case  it  appeared  that  the  plaintiff  was 
the  assignee  of  the  Butler  Colliery  Co.,  a  Pennsylvania  corpora- 
tion, engaged  in  mining  and  selling  coal  at  Pittston,  Pa.  The  de- 
fendant was  also  a  Pennsylvania  corporation,  engaged  in  the  same 
business,  having  a  coal  depot  at  Elmira,  N.  Y.  For  the  purpose  of 
controlling  the  shipment  and  supply,  maintaining  unnatural  prices, 
and  preventing  competition  in  the  sale  of  coal  at  Elmira  a  contract 
Avas  entered  into  whereby  the  defendant  agreed  that  it  would  take  all 
the  coal  which  the  Butler  company  should  desire  to  send  north  of  the 
State  line,  not  exceeding  2,000  tons  per  month,  at  the  regular  market 
price  established  by  the  Wyoming  Coal  Exchange  less  a  specified 
commission,  and  the  Butler  company  agreed  that  it  would  not  sell 
coal  to  any  party  other  than  the  defendant  to  come  north  of  the  State 
line  during  the  continuance  of  the  agreement.  The  product  of  the 
Butler  compan3^''s  mines  was  largely  in  excess  of  2,000  tons  per  month. 
The  defendant,  without  binding  itself  to  take  the  whole  output,  en- 
deavored by  this  agreement  to  keej)  all  of  the  coal  of  the  Butler 
company  out  of  the  market  except  the  limited  amount  agreed  upon, 
and  thus  to  enhance  the  price  of  that  commodity.  Coal  was  de- 
livered pursuant  to  the  above  contract  for  one  month,  but  the  Butler 
company  refused  to  make  further  deliveries,  and  made  sales  to  other 
parties  north  of  the  stipulated  line.  Action  was  begun  by  the  assignee 
of  the  Butler  Colliery  Co.  to  recover  the  price  of  coal  delivered. 
The  court  held  that  the  arrangement  to  effect  the  objects  purposed 
was  inimical  to  the  public  interest,  that  all  contracts  designed  to 

against  the  defendants  for  a  breach  of  this  contract  in  refusing  to  receive  and  pay  for 
oil,  the  court  held  that  the  agreement  was  not  illegal  and  void  as  being  in  restraint  of 
trade,  or  against  public  policy,  or  under  the  statute  against  conspiracies  to  restrain  trade 
and  commerce,  or  as  being  part  of  a  scheme  for  monopolizing  the  trade  in  peppermint 
oil.     In  stating  the  reasons  for  its  decision  the  court  said  : 

"There  is  no  foundation  for  the  position  now  taken,  that  the  contract  was  by  its  terms 
and  under  the  proof,  part  of  a  scheme  for  monopolizing  the  trade  in  peppermint  oil.  and 
was  illegal  and  void  under  the  statute  against  conspiracies  to  restrain  trade  and  com- 
merce. All  there  is  in  the  contract  to  afford  any  color  for  this  objection  is  a  provision 
at  the  close  of  it  declaring  the  contract  void  unless  the  growers  generally  enter  into  an 
agreement  with  the  defendants  ;  but  it  is  silent  as  to  what  agreement  is  intended  or  con- 
templated. It  would  be  too  much  to  hold  the  contract  illegal  upon  an  inference  merely 
that  the  contract  with  the  growers  was  to  be  of  an  illegal  tendency." 

168  N.  T.,  558    (1877). 


TRUST   LAWS   AND  UNFAIR   COMPETITION.  39 

effect  such  an  end  were  contrary  to  public  policy  and  illegal,  and  that 
the  plaintiff  could  not  recover  the  price  of  coal  so  delivered. 

An  attempt  to  corner  the  available  market  supply  of  a  particular 
commodity  was  involved  in  the  case  of  the  Santa  Clara  Valley  Mill  & 
Lumber  Co.  v.  Hayes  et  al.^  and  also  in  India  Bagging  Association  v. 
B.  Kock  &  Co.-     In  the  former  case  it  appeared  that  the  plaintiff  cor- 
poration and  defendants,  who  were  lumber  manufacturers,  had  en- 
tered into  a  contract  whereby  the  latter  agreed  to  make  and  deliver  to 
the  former  during  the  year  1881,  2,000,000  feet  of  lumber  at  $11  per 
thousand  feet.     Defendants  agreed  not  to  manufacture  lumber  to  be 
sold  during  said  period  in  four  specified  counties  except  under  the 
contract  and  to  pay  plaintiff  $20  per  thousand  feet  for  lumber  sold 
to  any  other  parties.     The  court  foimd  that  the  plaintiff  owned  three 
sawmills  near  Felton,  Cal.,   and  that  various  other  parties  were 
owners  of  similar  mills  in  the  vicinity;  that  for  the  purpose  of  limit- 
ing the  supply  of  lumber  and  increasing  the  price  thereof  a  plan  was 
devised  by  which  the  plaintiff  was  to  lease  all  the  mills  for  the  year 
1881,  where  such  leases  could  be  obtained ;  and  where  that  could  not 
be  done,  to  lease  by  contracts  similar  to  the  one  entered  into  with 
defendants;  that  during  1881  plaintiff  should  shut  down  two  of  its 
own  mills  and  as  many  of  the  leased  mills  as  might  seem  necessary 
in  order  to  limit  the  supply  of  lumber  in  the  four  counties  named; 
that  this  scheme  was  carried  out,  including  the  contract  with  defend- 
ants as  a  part  thereof;  that  the  onl}^  object  and  consideration  on  the 
part  of  the  plaintiff  in  entering  into  these  contracts  was  to  form  a 
combination  among  the  lumber  manufacturers  in  the  vicinity  for  the 
sole  purpose  of  increasing  the  price  of  lumber,  limiting  the  output, 
and  giving  the  plaintiff  the  control  of  all  lumber  manufactured  near 
Felton  for  the  year  1881  and  control  of  the  supply  for  that  year  in 
the  counties  mentioned;  that  the  direct  effect  of  this  was  that  there 
was  no  wholesale  market  for  lumber  at  Felton,  and  that  dealers  could 
not  purchase  in  any  considerable  quantity  during  1881.    In  an  action 
to  recover  damages  for  a  breach  of  the  contract  it  was  held  that  the 
contract  was  contrary  to  public  policy,  and  being  indivisible  was 
invalid  in  its  entirety.     The  court  expressed  its  opinion  in  part  as 
follows : 

With  the  results  naturally  flowing  from  the  laws  of  demand  and  supply,  the 
courts  have  nothing  to  do,  but  when  asveements  are  resorted  to  for  the  pur- 
pose of  taking  trade  out  of  the  realm  of  competition,  and  thereby  enhancing 
or  depressing  prices  of  connnodities,  the  courts  can  not  be  succ(>ssndly  invoked, 
and  their  execution  will  be  left  to  the  volition  of  the  parties  thereto. 

In  the  Louisiana  case  mentioned  above,  the  facts  were  as  follows: 
Eight  firms  had  formed  an  association  for  the  sale  of  India  bagging, 
binding  themselves  for  a  term  of  three  months  not  to  sell  any  bag- 

176  Cal.,  3S7  (1888).  =14  La.  Ann.,  168  (1859). 


40  EEPOET   OF    THE   COMMISSIONER    OF   CORPORATIONS. 

ging,  nor  to  offer  to  sell  any,  except  with  the  consent  of  the  majority, 
under  a  penalty  of  $10  for  every  bale  so  sold  or  offered.  The  bag- 
ging did  not  cease  to  be  the  property  of  the  individual  members. 
Suit  was  brought  by  the  manager  of  the  association  against  one  of 
the  members  to  recover  a  penalty  of  $7,400  for  having  sold  740  bales 
in  violation  of  the  agreement.  The  court  held  that  the  agreement 
was  palpably  and  unequivocally  a  combination  in  restraint  of  trade 
to  enhance  the  price  of  an  article  of  primary  necessity  to  cotton 
planters.  The  suit  was  dismissed,  the  court  citing  various  common 
and  civil  law  authorities  holding  that  such  combinations  are  con- 
trary to  public  order  and  unenforceable  in  a  court  of  justice. 

An  attempt  to  limit  production  by  agreement  was  involved  in 
Oliver  et  al.  v.  Gilmore,^  where  the  plaintiffs,  as  party  of  the  first 
part,  agreed  not  to  operate  their  plant  for  five  years  for  the  manu- 
facture of  strap  and  T  hinges.  In  consideration  thereof  eight  other 
firms  or  corporations  in  various  States,  as  parties  of  the  second 
part,  severally  agreed  to  pay  monthh^  to  the  party  of  the  first  part 
a  sum  equal  to  3^  per  cent  of  the  liet  sales  of  strap  and  T  hinges 
sold  by  the  several  parties  of  the  second  part.  It  was  provided 
that  the  sales  should  be  reported  and  remittances  made  to  the 
Wlieeling  Hinge  Co.;  that  upon  the  failure  of  any  of  the  parties 
to  make  such  report  or  remittance  notice  should  be  given  to  each 
of  the  said  parties,  and  if  within  30  days  the  terms  of  the  agreement 
were  not  complied  with  by  the  firm  in  default  or  by  the  Association 
of  Strap  and  T  Plinge  Manufacturers  the  agreement  should,  at  the 
option  of  the  first  party,  be  no  longer  in  force.  It  was  also  agreed 
that  if  any  one  of  the  parties  of  the  second  part  should  in  any  way 
increase  facilities  for  the  manufacture  of  such  hinges  the  agreement 
should  be  void.  The  plaintiffs  sued  to  recover  (1)  an  amount  al- 
leged to  be  due  under  this  agreement  and  (2)  damages  for  an 
alleged  breach  by  the  defendant  in  increasing  his  facilities  for  the 
manufacture  of  hinges.  The  court  held  that  in  view  of  the  fact  that 
by  this  contract  the  plaintiffs  stipulated  to  shut  down  their  works, 
at  least  so  far  as  strap  and  T  hinges  were  concerned,  for  the  period 
of  five  years,  for  no  consideration  except  a  pecuniary  one  and  with- 
out a  lawful  equivalent  with  reference  to  the  continuance  of  manu- 
facturing or  its  development  in  other  directions,  and  also  in  view 
of  the  stipulation  that  the  contract  should  be  void  if  the  other  par- 
ties increased  their  existing  facilities,  the  demurrer  should  be  sus- 
tained as  to  both  counts,  with  leave  to  amend.  In  reaching  the 
result  the  court  said: 

*  *  *  It  is  not  intended  by  this  to  say,  whether  or  not  in  an  emergency  of 
an  overstock,  manufacturers  or  miners  may  stipulate  for  handling  their  works  or 
mines  in  a  specific  manner,  or  for  shutting  them  down  in  whole  or  in  part,  each 


152  Fed.,  562  (1892). 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  41 

for  such  limited  time  as  would  ordinarily  enable  a  congested  market  to  re- 
lieve itself:  Ijut  a  contract  extendins  over  a  period  of  five  years,  intended,  like 
this  at  bar,  for  restricting  production,  and  absolutely  l)inding  manufacturers 
and  dealers,  while  still  retaining  their  plants  and  establishments,  to  operate 
them  in  a  particular  way,  or  to  shut  them  down  in  whole  or  in  part,  is  such  an 
incumbrance  on  the  freedom  of  individual  action,  necessary  to  the  public  good, 
as  lo  l)e  invalid.     *     *     * 

Division  or  territory. — Restraint  on  competition  by  an  agree- 
ment to  divide  territory  has  also  been  held  invalid  in  a  number  of 
cases,  among  which  may  be  mentioned  Chicago  Gas  Light  &  Coke 
Co.  v.  People's  Gas  Light  &  Coke  Co./  Gibbs  v.  Baltimore  Gas  Co.  of 
Baltimore,-  and  Charleston  Natural  Gas  Co.  v.  Kanawha  Natural 
Gas,  Light  &  Fuel  Co.  et  al.^ 

In  the  West  Virginia  case  it  appeared  that  the  Charleston  Natural 
Gas  Co.  had  been  supplying  the  city  of  Charleston  with  gas  by  a  pipe 
line  from  Boone  County.  The  supply  being  inadequate,  it  acquired  a 
gas  field  in  Roane  Count^^  intending  to  develop  gas  and  pipe  it  to 
its  city  lines.  The  Kanawha  Natural  Gas,  Light  &  Fuel  Co.,  which 
had  a  gas  field  in  Roane  and  Kanawha  Counties,  had  laid  a  pipe  line 
to  Charleston  and  was  about  to  lay  pipes  in  the  streets  of  that  city. 
Under  these  circumstances  the  two  companies  entered  into  an 
agreement  providing  that  the  Charleston  company  should  have  the 
exclusive  right  to  sell  natural  gas  in  a  certain  section  comprising  the 
main  part  of  the  city  of  Charleston  and  a  large  area  besides,  and  that 
the  Kanawha  company-  should  have  a  similar  right  in  a  large  adjoin- 
ing section.  Each  party  agreed  not  to  invade  the  other's  territoiT  nor 
permit  others  to  do  so  under  its  franchise.  The  Charleston  company 
agreed  not  to  drill  wells  or  acquire  territory  for  gas  purposes  within 
the  territory  occupied  by  the  Kanawha  company  and  to  take  all  its 
gas  from  the  latter.  Earnings  were  to  be  divided  in  certain  propor- 
tions, and  the  agreement  was  to  continue  20  years.  Subsequently 
the  Kanawha  company  agreed  to  transfer  its  assets,  leases,  and  wells 
to  the  United  States  Gas  Co.  The  Charleston  company  thereupon 
sought  to  enjoin  the  Kanawha  company  from  transferring  its  prop- 
erty, ])articularly  said  gas  property,  to  the  Ignited  States  company, 
to  enjoin  the  Kanawha  company  from  discontinuing  business,  and 
to  enforce  the  agreement.  The  court  held  that  the  contract  was  con- 
trary to  public  policy  and  void,  as  tending  to  stifle  competition  and 
create  a  monopoly.    The  court  pointed  out  that — 

The  trouble  is,  the  whole  spirit,  drift,  object,  effect  of  the  contract  promotes 
monopoly.  It  works  a  combine,  a  union  against  pul)lic  polic.v.  As  an  entirety 
it  does  so.  Its  warp  and  woof  ar(>  made  of  monojioly.  We  are  as  a  court  asked 
to  enforce  a  contract  with  tliese  hurtful  features  and  consequences  inwoven 
in  its  frame.    We  can  not  do  so  consistently  with  law. 

1121  111.,  .530    (1S87).         =130  U.  S.,  896   (1SS9).         =58  W.  Va.,  22    (1905). 


42  EEPOET   OP   THE   COMMISSIONER   OP   COEPOEATIONS. 

Pooling  arrangements. — Pooling  arrangements  among  competi- 
tors for  the  division  of  their  earnings  have  also  been  held  unlawful 
in  a  number  of  cases.  In  Anderson  v.  Jett  et  al.,^  the  owners  of  com- 
l^eting  steamboats  entered  into  an  agreement  providing  that  in  order 
to  prevent  the  rivalry  then  existing  and  the  consequent  reduction  of 
rates  below  a  fair  compensation  each  boat  should  thereafter  share,  in 
fixed  proportions,  in  the  net  profits  of  both;  that  each  boat  should 
bear  its  oAvn  operating  expenses;  that  if  the  owner  of  either  boat 
should  sell  it  with  a  view  of  going  out  of  the  trade  notice  should  be 
given  to  the  other  party;  and  that  the  owner  so  selling  should  not  re- 
enter the  trade  within  one  year.  One  of  the  parties  sold  his  boat 
with  a  view  to  going  out  of  the  trade,  giving  due  notice  of  the  fact, 
whereupon  the  other  owner  purchased  another  boat  to  take  its  place 
and  was  engaged  in  operating  both  when  the  owner  who  had  sold  his 
boat  reentered  the  business  within  the  period  stipulated  in  the  agree- 
ment. In  an  action  to  recover  damages  the  court,  in  holding  that  the 
agreement  was  against  public  policy  and  void,  said : 

The  combination  or  agreement,  whetlier  or  not  in  the  particular  instance  it 
lias  the  desired  effect,  is  void.  The  vice  is  in  the  combination  or  agreement.  The 
practical  evil  elTect  of  the  combination  only  demonstrates  its  character ;  but  if 
its  object  is  to  prevent  or  impede  free  and  fair  competition  in  trade,  and  may,  in 
fact,  have  that  tendency,  it  is  void  as  being  against  public  policy. 

The  same  principle  was  involved  in  other  cases  mentioned  else- 
where in  this  chapter,  in  Texas  &  Pacific  Railway  Co.  et  al.  v.  South- 
ern Pacific  Railway  Co.,^  and  Chicago,  ISIilwaukee  &  St.  Paul  Rail- 
way Co.  V.  Wabash,  St.  Louis  &  Pacific  Railway  Co.^ 

Price  fixing  by  associations  or  competitors. — When  a  number  of 
competing  concerns  desire  to  restrict  competition  among  themselves 
they  have  often  attempted  to  carry  out  their  plans  through  an  asso- 
ciation formed  for  the  purpose.  The  members  of  such  an  association 
enter  into  some  form  of  agreement  or  understanding  to  work  to- 
gether to  accomplish  the  desired  ends.  The  legality  of  these  efforts 
depends  upon  their  character.  The  courts  judge  them  primarily  by 
their  effect  upon  the  public. 

Stanton  v.  Allen*  was  a  case  of  this  sort.  The  proprietors  of  35 
separate  transportation  lines  on  the  Erie  and  Oswego  Canals  had 
formed  an  association,  the  professed  object  of  which  was  to  establish 
fair  and  uniform  rates  and  equalize  the  business  among  members. 
The  articles  provided  that  the  parties  should  not  be  partners;  that 
rates  should  be  determined  by  a  committee ;  that  earnings  should  be 
pooled  and  divided  in  specified  proportions;  that  none  of  the  mem- 

189  Ky.,  375    (1889). 

=  41   La.  Ann.,  970    (1889). 

''Ol   Fed.,  993    (C.  C.  A.,  1894). 

*5  Denlo,  434   (1S4S).     See  also  Hooker  v.  Vandewatcr,  4  Dcnio,  349. 


TRUST   LAWS   AND  UNFAIR   COMPETITION.  43 

bers  could  use  their  boats  except  in  accordance  with  the  agreement ; 
that  if  anyone  should  dispose  of  any  boat  so  that  it  might  be  used 
outside  of  the  association  it  might  be  seized  to  secure  a  compliance 
with  the  articles ;  and  that  a  like  seizure  might  be  made  of  the  boat 
of  any  party  neglecting  to  comply  with  the  articles,  or  who  should 
become  interested  in  any  boat  not  belonging  to  a  member  of  the  asso- 
ciation. In  order  to  exclude  others  from  a  share  of  the  business  each 
party  was  bound,  if  he  should  have  more  freight  than  he  could  carry, 
to  oifer  it  to  some  of  the  associates ;  and  if  they  could  not  take  it  he 
was  authorized  to  procure  its  transportation  without  limitation  as  to 
rates,  and,  after  deducting  expenses  and  an  additional  fixed  percent- 
age for  risk,  to  turn  in  the  balance  to  the  common  fund.  Approxi- 
mately 400  boats  were  controlled  through  this  agreement.  An  action 
was  brought  against  the  defendant,  a  member  of  the  association,  as 
the  maker  of  a  note  and  acceptor  of  a  bill  of  exchange,  payable,  in 
pursuance  of  the  agreement,  to  the  order  of  the  agent  of  the  associa- 
tion. The  court  held  that  the  association  had  a  tendency  to  diminish 
public  revenue  and  was  injurious  to  trade;  that  the  articles  contra- 
vened public  policy,  were  injurious  to  the  interests  of  the  State,  and 
were  therefore  void  at  common  law ;  and  that  no  action  could  be 
maintained  on  the  bill  and  note,  which  had  arisen  out  of  a  transaction 
contrary  to  law.  In  reaching  this  decision  the  court  expressed  its 
opinion  as  follows : 

As  these  canals  are  the  property  of  the  State,  constructed  at  great  expense,  as 
facilities  to  trade  and  commerce,  and  to  foster  and  enconrase  airriculture,  and 
are  at  the  same  time  a  munificent  source  of  revenue,  whatever  concerns  their 
employment  and  usefulness  deeply  involves  the  interests  of  the  whole  State. 

A  similar  result  was  reached  in  Sayre  v.  Louisville  Fnion  Benevo- 
lent Association.^  The  by-laws  of  the  Louisville  Union  Benevolent 
Association  excluded  from  membership  any  person  who  had  not  been 
a  captain,  owmer,  or  part  owner  of  a  steamboat  on  the  Mississippi  or 
Ohio  Rivers  or  tributaries,  and  declared  that  no  member  "  shall  go 
into  any  river  or  trade  and  work  for  less  than  the  wages,  nor  take, 
bargain  for,  or  cuvrj  any  freight  for  less  than  the  established  rate 
in  the  trade."  The  by-laws  also  provided  for  fines,  required  members 
to  pay  certain  monthly  dues,  and  tonnage  dues  for  each  trip  made, 
and  made  provision  for  the  relief  of  sick  members,  etc.  Saj're,  a 
member  of  the  association,  was  sued  by  it  to  recover  tonnage  and 
monthl}^  dues,  fines  for  not  pajnng  said  dues,  and  a  fine  of  $250  for 
carrying  freight  for  less  than  the  established  rate.  From  a  judgment 
for  the  plaintiff  the  defendant  appealed.  The  court  was  of  the  opin- 
ion that  the  agreement  that  no  one  should  carry  freight  for  less  than 
the  rate  fixed  by  the  association,  without  reference  to  the  question 


162  Ky.,  143  (ISGG). 


44  REPORT   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

whether  the  rate  was  reasonable  or  not,  ^vas  illegal  and  void.     The 
court  held  as  follows : 

We  find  nothing  In  the  charter  from  which  it  can  be  reasonably  inferred  that 
the  Legislatiire  meant  to  authorize  such  a  combination.  In  our  opinion,  tlie 
by-law  under  which  the  fine  of  $250  was  imposed  upon  Sayre  was  illegal  and 
void,  notwithstanding  his  assent  thereto;  but  the  association  is  entitled  to  a 
judgment  for  the  residue  of  the  money  claimed  in  the  petition. 

A  more  recent  case  is  that  of  More  et  al.  v.  Bennett  et  al.,  decided 
in  1892.^  In  that  case  the  plaintiffs  and  defendants  were  stenog- 
raphers and  members  of  the  Chicago  Law  Stenographers'  Association, 
the  constitution  and  by-laws  of  which,  among  other  things,  provided 
that  any  reputable  stenographer  engaged  in  law-reporting  in  Cook 
County  should  be  eligible  to  membership ;  that  the  association  might 
adoi)t  a  schedule  of  rates  to  be  charged  by  members;  that  members 
should  not  underbid  each  other,  but  might  cut  rates  against  out- 
siders; and  that  members  violating  the  rules  should  be  subject  to 
fine.  The  plaintiffs  entered  into  a  contract  with  the  county  to  report 
and  furnish  transcripts  of  the  proceedings  in  a  certain  trial,  agreeing 
to  do  said  work  at  as  low  a  rate  (it  was  claimed)  as  any  reputable 
stenographer  should  in  good  faith  bid  for  saia  work.  The  defendants 
endeavored  to  secure  the  work  at  less  than  the  rates  fixed  by  the 
association,  and  the  plaintiff,  having  been  required  by  the  county 
to  meet  said  bid,  brought  an  action  to  recover  damages  resultiug 
from  the  alleged  breach  of  the  rules  and  by-laws  of  the  association. 
It  was  held  that  as  one  of  the  objects  of  the  association,  if  not  its 
leading  object,  was  to  control  the  prices  to  be  charged  by  its  members 
for  stenographic  work  by  restraining  all  competition  between  them, 
it  was  contrary  to  public  policy,  and  the  courts  would  refuse  to  lend 
their  aid  to  the  enforcement  of  such  an  agreement. 

Another  important  case  which  should  be  mentioned  in  this  con- 
nection is  Emery  et  al.  v.  The  Ohio  Candle  Co.,'-  where  it  appeared 
that  in  1880  an  association  known  as  the  Candle  Manufacturers' 
Association,  composed  of  manufacturers  producing  95  per  cent  of 
the  Star  candles  made  in  substantially  all  the  territory  east  of  the 
western  boundary  of  Utah,  was  formed,  to  continue  for  six  years. 
Its  object  was  to  increase  the  price  and  reduce  the  production  of 
candles,  and  it  was  found  as  a  fact  to  have  had  that  effect.  Members 
were  required  to  pay  into  the  treasury  2^  cents  jier  pound  on  every 
pound  of  candles  disposed  of  on  their  own  account  within  the  terri- 
tory ;  none  was  bound  to  operate  his  factory,  and,  whether  he  did  or 
not,  he  received  his  proportion  of  the  profits  of  the  pool,  which  was 
based  upon  the  business  done  by  him  in  previous  years,  thus  making 
it  to  the  interest  of  each  member  to  operate  his  factory  when  prices 
were  high  and  to  remain  idle  when   prices  were  low.     The  Ohio 


140  111..  09    (1892).  247  Ohio  St:it<',  320   (1S90). 


TRUST   LAWS   AND  UNFAIR   COMPETITION.  45 

Candle  Co.  joined  the  association  in  1883  and  withdrew  in  1884,  and 
sued  the  members  of  the  Candle  Manufacturers'  Association  to  re- 
co\er  profits  claimed  to  be  due  under  the  contract,  which  were  with- 
held on  the  ground  that  it  had  violated  the  agreement  by  withdraw- 
ing before  the  expiration  of  the  life  of  the  association.  In  dismissing 
the  petition  the  court  held  that  the  objects  of  the  association  were 
contrary  to  public  policy;  that  no  recovery  could  be  had  without 
giving  effect  to  the  terms  of  the  agreement;  and  that  the  suit  could 
not  be  maintained. 

The  establishment  of  a  schedule  of  minimum  prices  seems  to  have 
been  the  object  of  an  agreement  which  was  passed  iii)on  by  the  court 
in  De  Witt  Wire-Cloth  Co.  v.  New  Jersey  Wire-Cloth  Co.^  In  that 
case  the  defendant  pleaded  in  extinguishment  of  an  admitted  cause 
of  action  that  an  equivalent  sum  was  due  from  the  plaintiff  by  virtue 
of  the  following  facts :  That  three  corporations  and  two  copartner- 
ships engaged  in  the  manufacture  and  sale  of  wire  cloth  entered  into 
an  agreement  whereby,  for  the  avowed  object  of  "  regulating  the 
price  "  of  the  commodity,  they  constituted  themselves  an  association, 
imposed  upon  themselves  stipulated  rates  of  charge,  engaged  that 
they  would  "  sell  no  cloth  at  less  than  the  prices  set  forth,"  and  to 
insure  obedience  to  this  undertaking  subjected  themselves  to  a  heavy 
penalty  for  its  violation ;  that  the  plaintiff  and  defendant  were  parties 
to  this  agreement  and  association;  that,  pursuant  to  a  provision  in 
the  agreement,  defendant  deposited  $2,000  with  a  trust  company,  to 
be  forfeited  to  the  other  members  in  case  the  defendant  should, 
among  other  things,  violate  its  obligation  not  to  sell  below  the  stipu- 
lated price;  that  the  association  had  declared  the  $2,000  forfeited; 
and  that  of  this  sum  the  plaintiff  had  received  and  wrongfully  re- 
tained $500,  which  the  defendant  claimed.  On  demurrer  by  the 
plaintiff,  it  was  held  that  the  inevitable  effect  of  the  agreement  was 
to  restrict  competition  and  to  arbitrarily  enhance  prices;  that  such 
a  contract,  being  repugnant  to  public  polic}'',  was  unlawful ;  and  that, 
as  the  counterclaim  demanded  the  repayment  of  money  received  un- 
der an  illegal  agreement,  the  court  would  not  interpose  for  its  resti- 
tution. 

An  agreement  entered  into  by  all  the  tobacco  warehousemen  in 
Cincinnati,  providing  for  the  regulation  of  competition,  for  the  fixing 
of  prices,  for  pooling  part  of  the  receipts  by  giving  monthly  certifi- 
cates of  indebtedness  to  pool  trustees,  and  for  establishing  a  guar- 
anty fund  from  a  part  of  the  money  so  collected,  was  involved  in 
Hoffman  et  al.,  trustees,  v.  15rooks  et  al.^  Each  party  was  liable  to 
forfeit  his  interest  in  the  fund  and  was  subject  to  fine  for  a  breach 
of  the  terms  of  the  agreement,  which  was  unlimited  in  duration,  and 

114  N.  Y.  Supp.,  277   (1891). 

=  Superior  Court  of  Cincinnati,  G  Ohio  Decisions  Reprint,  1:215  (1884), 


46  REPORT   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

from  which  the  parties  could  withdraw  only  by  unanimous  consent. 
Defendants  gave  certificates  of  indebtedness  for  some  months,  and 
then  refused  to  do  so  longer.  Plaintill's,  who  were  trustees  of  the 
pool,  sued  upon  the  certificates  of  indebtedness  given,  for  an  ac- 
counting and  for  the  amount  so  found  due  the  pool  under  said  agree- 
ment. In  sustaining  the  defendants'  demurrer  the  court  held  that 
although  some  of  the  stipulations  might  be  upheld,  others  w^ere  void 
as  against  public  policy,  and,  being  inseparable  in  this  action,  no 
recovery  could  be  allowed. 

Common  marketing  agency. — The  employment  of  a  common 
marketing  agency  is  one  of  the  plans  sometimes  adopted  by  com- 
peting concerns  to  restrict  competition,  affording  a  means  of  control 
over  prices  and  production.  Each  of  the  parties  participating  re- 
serves full  ownership,  management,  and  control  of  his  own  business, 
except  in  respect  to  the  particular  matters  for  which  the  common 
agency  is  employed. 

Agreements  of  this  kind  have  been  entered  into  in  a  number  of 
instances  by  companies  engaged  in  coal  mining.  Thus,  in  the  case 
of  the  Morris  Run  Coal  Co.  v.  Barclay  Coal  Co.,^  five  coal  corpora- 
tions of  Pennsylvania  entered  into  an  agreement  in  New  York  to 
divide  two  coal  regions  of  which  they  had  the  control  and  to  ap- 
point a  committee  to  take  charge  of  their  interests,  which  was  to 
decide  all  questions  and  appoint  a  general  agent  in  New  York, 
through  whom  the  coal  was  to  be  delivered.  Each  corporation  was  to 
deliver  its  proportion  at  its  own  cost  in  the  different  markets  at  such 
times  and  to  such  persons  as  the  committee  might  direct.  The  com- 
mittee w^as  to  adjust  prices,  rates  of  freight,  and  enter  into  agree- 
ments with  anthracite  companies.  The  five  companies  were  to  sell 
their  coal  themselves  only  to  the  extent  of  their  proportion  and  at 
prices  adjusted  by  the  committee,  the  agent  being  authorized  to  sus- 
pend shipments  beyond  such  proportion.  Prices  were  to  be  averaged 
and  payments  made  to  those  in  arrears  by  those  in  excess,  and  no 
party  was  to  sell  coal  otherwise  than  agreed  upon.  In  an  action  for 
debt  based  on  transactions  under  the  contract  it  was  held  that  the 
contract  was  void,  being  in  violation  of  a  New  York  statute  pro- 
hibiting conspiracies  to  commit  anj?^  act  injurious  to  trade  or  com- 
merce, and  also  void  under  the  common  law,  being  in  restraint  of 
trade  and  against  public  policy. 

A  similar  result  was  reached  in  two  cases  decided  in  West  Virginia 
where  agreements  of  this  kind  had  been  made  Ijy  competing  coal 
companies.  In  one  of  these  cases.  Slaughter  v.  Thacker  Coal  &  Coke 
Co.,^  it  appeared  that  the  Thacker  Coal  Co.  was  organized  in  1895 
for  the  sole  purpose  of  acting  as  sales  agent  of  three  out  of  four 
incorporated  coal  companies  which  were  operating  in  the  Thacker 

168  Pa.  State,  173   (1S71).  255  ^^_  y^.,  642    (1904). 


TEUST   LAWS   AND  UNFAIR   COMPETITION.  47 

coal  vein,  the  presidents  of  these  companies  being  the  principal 
stockholders  in  the  new  corporation.  The  fourth  coal  company  re- 
fused to  take  part  in  its  organization  or  to  contract  with  it.  The 
agent  corporation  entered  into  a  contract  with  the  Thacker  Coal  & 
Coke  Co.  whereby  it  agreed  to  sell  for  that  company,  for  a  period 
of  five  years,  not  less  than  20,000  tons  of  coal  each  year,  or,  in  default 
thereof,  to  pay  said  company  20  cents  per  ton  for  so  much  as  it 
should  fail  to  sell.  Ten  cents  per  ton  was  to  be  deducted  as  compen- 
sation. The  Thacker  Coal  &  Coke  Co.  covenanted  to  deliver  to  the 
agent  company  as  much  coal  as  it  could  sell,  not  exceeding -84,000 
tons  per  annum,  or,  in  default  thereof,  to  pay  10  cents  per  ton  for 
coal  not  delivered,  as  liquidated  damages.  Selling  prices  were  fixed 
in  the  agreement,  and  were  not  to  be  departed  from  without  the 
consent  of  all  the  producing  companies.  The  new  company  had 
authority  to  select  and  appoint  all  subagents  for  the  sale  of  said 
coal.  In  1896  the  Thacker  Coal  &  Coke  Co.  refused  to  deliver  any 
more  coal  under  the  contract.  Subsequently  a  resolution  was  passed 
dissolving  the  agent  corporation  and  a  receiver  appointed,  with 
directions  to  sue  the  Thacker  Coal  &  Coke  Co.  for  damages  on  ac- 
count of  the  breach  of  the  contract.  The  court  held  that  the  contract 
was  illegal  and  void,  as  against  public  policy,  its  tendency  being  to 
restrain  trade  and  competition. 

In  Pocahontas  Coke  Co.  v.  Powhatan  Coal  Co.,^  the  other  "West 
Virginia  case  referred  to,  20  separate  and  independent  coke  manufac- 
turing and  producing  corporations  operating  in  the  same  coal  field, 
had  entered  into  a  contract  (called  "contract  A"),  the  expressed  pur- 
pose being  "  to  improve  conditions  in  the  manufacture,  inspection, 
and  shipment  of  coke,  and  to  regulate  and  to  improve  the  quality  of 
coke  manufactured  in  the  district  mentioned."  The  parties  agreed  to 
organize  the  Pocahontas  Coke  Co.,  each  to  be  entitled  to  one  share  in 
said  company  for  every  coke  oven  owned  by  such  part5^  The  surplus 
earnings  were  to  be  divided  annually  among  the  stockholders  in  pro- 
portion to  the  amount  of  coke  furnished  by  them  to  the  company. 
The  parties  were  required  to  enter  into  an  agreement  with  the  new 
company  (called  "  contract  B  "),  which  provided  in  substance  for  the 
appointment  of  the  company  as  the  sole  sales  agent  of  the  producers. 
By  this  contract  the  compan}^  was  only  required  to  take  such  quantity 
of  coke  from  the  parties  as  raih'oad  facilities  should  be  furnished 
to  transport,  and  as  market  conditions  enabled  it  to  dispose  of 
at  or  above  cost  of  production.  It  was  further  provided  that  if  the 
company  should  be  unable  to  take  all  the  coke  produced  it  should  only 
be  required  to  take  from  each  party  such  proportion  of  the  whole 
amount  as  the  number  of  ovens  owned  b}"  such  party  bore  to  the  total 


160  W.  Va.,  50S    (1906). 


48  REPORT   OP   THE   COMMISSIONER  OF   CORPORATIONS. 

number  of  ovens  owned  by  all  the  parties.  The  company  was  to  receive 
a  commission  of  5  cents  per  ton  and  guaranteed  payment  at  the 
average  price  for  all  coke  handled  by  it.  The  agreement  was  to 
continue  in  force  three  years  and  to  be  renewed  for  like  periods 
unless  terminated  by  notice.  The  Pocahontas  Coke  Co.  sought  to 
enjoin  the  Powhatan  company  from  withdrawing  from  contract  B. 
The  injunction  was  awarded,  and  from  an  order  overruling  a  motion 
to  dissolve  the  same,  the  defendant  appealed.  The  court  held  that 
the  combination  established  by  contracts  A  and  B  was  in  unreason- 
able restraint  of  trade  and  against  public  policy;  that  when  all  the 
powers  of  the  contracts  were  exercised  the  direct  and  necessary  or 
natural  effect  was  to  restrain  competition  and  control  prices;  and 
that  such  effect  Avas  not  merely  incidental,  commensurate,  or  neces- 
sary to  the  protection  of  the  parties  in  the  enjoyment  of  the  legitimate 
fruits  of  a  lawful  undertaking.  It  was  held,  further,  that  contract  A, 
which  constituted  the  basis  of  the  suit,  was  void,  because  against 
public  policy.    In  reaching  this  result,  the  court  said : 

It  is  no  defense  to  the  illegality  of  a  contract  or  combination  which  is  in  un- 
reasonable restraint  of  trade  to  show  that  in  the  particular  case  a  complete 
monoiX)ly  has  not  been  formed,  or  that  no  control  of  prices  has  been  exercised,  or 
that  prices  have  been  lowered  and  not  raised.  *  *  •*  a  contract  which  is 
charged  to  be  in  restraint  of  trade  is  not  to  be  tested  by  what  has  been  done 
under  it,  but  by  what  may  be  done  under  it ;  not  by  its  performance,  but  by  its 
powers  of  performance  when  fully  exercised. 

Agreements  among  producers  to  employ  common  marketing  ar- 
rangements were  involved  in  Central  Ohio  Salt  Co.  v.  Guthrie  ^  and 
McBirney  &  Johnston  "VMiite  Lead  Co.  v.  Consolidated  IMiite  Lead 
Co.-  In  the  first  of  these  two  cases,  practically  all  the  salt  manu- 
facturers in  a  large  salt-producing  territory  had  formed  a  voluntary 
association  known  as  the  Central  Ohio  Salt  Co.  for  the  express  pur- 
pose of  regulating  the  prices  and  sustaining  the  quality  of  salt.  All 
salt  made  or  owned  by  the  members  became  the  property  of  the  com- 
pany as  soon  as  packed  into  barrels.  Members  were  bound  to  sell 
only  at  retail,  and  then  only  to  actual  consumers  at  the  place  of 
manufacture,  and  at  prices  fixed  from  time  to  time  by  the  directors. 
The  proceeds  of  sales  were  paid  to  members  in  proportion  to  the 
amount  of  salt  received  from  each.  Defendant  for  some  time  com- 
plied with  the  terms  of  the  agreement  but  subsequently  refused  to 
deliver  to  the  company  certain  salt  manufactured  by  him.  In  an 
action  by  the  association  to  obtain  possession  of  this  salt,  the  court, 
in  holding  that  such  agreement  was  in  restraint  of  trade  and  void 
as  against  public  policy,  said : 

The  clear  tendency  of  such  an  agreement  is  to  establish  a  monopoly,  and  to 
destroy  competition  in  trade,  and  for  that  reason,  on  grounds  of  public  policy, 

135  Ohio  St.,  666  (18S0).  "S  Ohio  Decisions  reprint,  762  (1883). 


TRUST    LAWS   AND   UNFAIR    COMPETITION.  49 

courts  will  not  aid  in  its  enforcement.  It  is  no  answer  to  say  tlaat  competition 
in  the  salt  trade  was  not  in  fact  destroyed  or  that  the  price  of  the  commodity 
was  not  unreasonably  advanced.  Courts  will  not  stop  to  inquire  as  to  the  degree 
of  injury  inflicted  upon  the  public ;  it  is  enougli  to  know  tliat  tlie  inevitable 
tendency  of  such  contracts  is  injurious  to  the  public.  *  *  *  ^vg  tliink  tliat 
the  provision  that  "  the  manner  and  time  of  receiving  and  distributing  salt  shall 
be  under  the  control  of  the  directory  "  confers  upon  the  company  aiuple  power 
to  embarrass  the  freedom  of  the  members  as  to  tlie  quantity  of  salt  which  they 
might  wisli  to  manufacture.  There  is  no  agreement  that  the  company  will 
receive  all  the  salt  manufactured  and  at  the  time  when  it  may  be  ready  for  sale. 
On  the  wliole  case,  we  are  clearly  of  the  opinion  that  tliis  agreement  is  void, 
as  against  public  policy. 

In  the  White  Lead  case,  decided  in  tlie  superior  court  of  Cin- 
cinnati in  1883,  it  was  shown  that  the  manufacturers  of  white  lead 
in  the  United  States  west  of  Buffalo  had  formed  a  corporation  in 
which  each  was  to  have  a  certain  amount  of  stock,  and  agreed  that 
each  member  should  be  entitled  to  manufacture  a  certain  amount  of 
white  lead  proportionate  to  the  amount  of  stock  held  b}'^  him,  and 
no  more;  that  they  should  sell  at  prices  fixed  by  the  corporation; 
that  members  failing  to  sell  as  much  as  they  were  entitled  to  should 
have  the  right  to  turn  the  surplus  over  to  the  corporation  for  the 
average  price  that  they  received  from  others,  and  that  members 
disposing  of  more  than  their  allotted  proportion  should  receive  from 
the  corporation  the  amount  turned  in  by  the  unsuccessful  dealers. 
The  plan  was  to  be  carried  out  by  means  of  contracts  with  members 
of  the  corporation  similar  to  the  one  upon  which  this  action  Avas 
brought,  which,  upon  its  face,  was  merely  a  provision  between  the 
plaintiff  and  the  defendant  as  to  the  price  to  be  obtained  for  lead 
turned  in.  In  an  action  to  recover  a  balance  alleged  to  be  due  on 
account,  the  court  found  that  the  scheme  was  entered  into  for  the 
purpose  of  controlling  and  restricting  the  manufacture  and  produc- 
tion of  white  lead  and  controlling  the  prices  so  that  they  should  not 
fall  below  a  certain  figure,  and  held  that  the  contract,  being  an  essen- 
tial part  of  an  unlawful  scheme,  could  not  be  enforced. 

In  Craft  et  al.  v.  McConoughy,^  five  competing  grain  dealers 
entered  into  an  agreement  "  for  the  purpose  of  systematically  pur- 
suing the  grain  trade  in  Rochelle  and  for  mutual  protection  against 
losses."  It  was  provided  in  substance  that  the  several  grain  houses 
should  be  put  into  the  business,  each  firm  receiving  a  specified  num- 
ber of  shares;  that  each  firm  should  conduct  its  own  business  as 
heretofore,  keep  its  own  accounts,  pay  its  own  expenses,  ship  its 
own  grain,  and  furnish  its  own  funds;  that  reports  of  all  grain 
handled  should  be  made  to  a  general  bookkeeper;  that  the  account 
of  each  individual  should  be  balanced  monthly,  showing  the  profit 
or  loss,  which  was  to  be  divided  pro  rata,  according  to  the  number 

179  111.,  346   (1875). 
30035°— 16 4 


50  EEPOKT   OF    THE   COMMISSIONER   OF   COEPORATIONS. 

of  shares  held  by  each;  and  that  prices  and  grades  should  be  fixed 
from  time  to  time.  The  combination  purchased  or  leased  all  the 
warehouses  in  the  city  and  every  lot  suitable  for  the  erection  of 
such  buildings.  The  price  to  be  paid  for  grain  and  the  rates  for 
storage  and  shipment  were  fixed  at  secret  meetings.  The  parties 
were  held  out  to  the  public  as  competitors.  Following  the  exe- 
cution of  the  agreement  one  of  the  parties  died,  and  his  son,  the 
complainant,  who  claimed  to  have  taken  his  place  under  the  con- 
tract by  mutual  consent,  brought  a  bill  in  equity  for  an  account- 
ing and  distribution  of  the  profits  of  the  alleged  partnership.  The 
court  held  that  the  contract  was  in  restraint  of  trade,  unreasonable, 
oppressive,  and  injurious  to  the  public,  and  that  a  court  of  equity 
would  not  lend  its  aid  in  the  division  of  the  profits  of  the  illegal 
transaction.     In  its  opinion  the  court  said : 

While  these  parties  were  in  business,  in  competition  Avith  each  other,  tliey 
had  tlie  undoubted  right  to  establisli  their  own  rates  for  grain  stored  and 
commissions  for  shipment  and  sale.  They  could  pay  as  high  or  low  a  price 
for  grain  as  they  saw  proper  and  as  they  could  make  contracts  with  the  pro- 
ducer. So  long  as  competition  was  free,  the  interest  of  the  public  was  safe. 
The  laws  of  trade  in  connection  with  the  rigor  of  competition  was  all  the 
guaranty  the  public  required;  but  the  secret  combinatioil  created  by  the 
contract  destroyed  all  competition  and  created  a  monopoly  against  which 
the  public  interest  had  no  protection. 

In  Fairbanks  v,  Leary,^  the  facts  wxre  as  follows:  Five  individuals 
had  entered  into  a  copartnership  agreement  wherein  each  agreed 
not  to  transact  on  his  individual  account,  within  20  miles  of  the 
place  in  which  such  partnership  was  to  operate,  the  kind  of  business 
for  the  transaction  of  which  it  was  created,  namely,  handling  prod- 
uce, live  stock,  wool,  coal,  lime,  salt,  hides,  etc.  Other  provisions 
related  to  the  conduct  of  the  business,  payment  of  expenses,  division 
of  profits,  etc.  It  was  alleged  that  the  parties  operated  independently 
and  in  the  same  manner  as  they  had  theretofore  done  and  as  though 
the  partnership  did  not  exist,  but  adjusted  their  business  trans- 
actions as  provided  in  the  agreement.  The  arrangement  was  dis- 
continued b}'^  mutual  consent.  Plaintiffs  subsequently  sought  an 
accounting  for  money  belonging  to  the  firm,  alleged  to  have  been 
received  by  defendant,  who  resisted  payment,  claiming  that  the 
agreement  was  void  as  it  operated  in  unreasonable  restraint  of 
trade;  that  by  prohibiting  the  transaction  of  business  by  the  part- 
ners individually  it  tended  to  create  a  monopoly  and  to  reduce  prices 
paid  for  {)roduce ;  that  it  was  a  conspiracy  to  maintain  a  false  ap- 
pearance of  competition,  while  in  reality  the  members  of  the  firm 
were  laboring  for  the  common  interest,  seeking  to  depress  the  mar- 
ket; that  the  agreement  was  therefore  void;  and  that  the  plaintiffs, 
as  parties  to  an  illegal  contract,  were  not  entitled  to  the  aid  of  a 

140  Wis.,  637  (1876). 


TRUST   LAWS  AND  UNFAIE   COMPETITION.  51 

court  of  equity.  The  court  held  that  the  clause  wherein  each  part- 
ner had  agreed  not  to  transact  the  same  kind  of  business  on  his 
individual  account  within  20  miles  was  unobjectionable;  but  if  the 
copartnership  was  in  fact  formed  (though  not  so  expressed  in  the 
articles)  to  prevent  competition  in  the  markets  in  which  the  firm 
was  to  operate,  that  the  deception  upon  the  public  involved  in  keep- 
ing the  existence  of  the  agreement  secret  and  the  maintenance  of  an 
appearance  of  competition,  tainted  the  agreement,  rendering  it  void. 
The  court  was  of  the  opinion,  however,  that  the  averment  that  the 
firms  operated  independently  and  in  the  same  manner  as  they  had 
theretofore  done,  etc.,  would  not  of  itself  show^  any  secrecy  as  to 
the  true  relations  of  the  parties  and  would  not  make  the  complaint 
bad  on  demurrer. 

The  common-law  principle  against  agreements  in  restraint  of  trade 
has  also  been  held  applicable  to  agreements  among  competing  buj^ers 
in  Chapin  v.  Brown  Bros.^  and  in  the  People  v.  Milk  Exchange.- 

In  Chapin  v.  Brown  Bros,  it  appeared  that  all  the  grocery  men 
at  Storm  Lake,  Iowa,  decided  that  the  handling  of  butter  was  bur- 
densome and  entered  into  an  agreement  with  D.  &  E.  Chapin,  the 
plaintiffs  (who  were  to  establish  a  store  in  Storm  Lake  to  sell 
butter),  not  to  buy  any  butter  nor  to  take  any  in  trade,  except  for 
the  use  of  their  families;  provided  the  grocery  men  should  not  be 
prevented  from  buying  butter  to  retail  from  any  regular  butter 
buyer  who  bought  for  cash  all  his  butter  in  Storm  Lake.  In  refus- 
ing to  enforce  the  agreement,  the  court  said  it  was  invalid,  lacking 
consideration,  and  that — 

It  plainly  tends  to  monopolize  the  butter  trade  at  Storm  Lake,  and  destroy 
competition  in  that  business.  It  is  not  necessary  that  the  enforcement  of  the 
aja-eement  would  actually  create  a  moijopoly  in  order  to  render  it  invalid,  and 
surely  where  all  the  dealers  in  a  commodity  in  a  certain  locality  agree  to  quit 
the  business,  and  the  plaintiffs  ai'e  installed  as  the  only  dealers  in  that  line, 
the  tendency  is,  for  a  time  at  least,  to  destroy  competition,  and  leave  the  plain- 
tiffs as  the  only  dealers  in  that  species  of  property  in  that  locality. 

In  People  v.  Milk  Exchange,  the  milk  exchange  when  organized, 
or  shortly  thereafter,  had  ninety-odd  stockholders,  a  large  majority 
of  whom  were  milk  dealers  in  the  city  of  New  York  or  creamery  or 
milk-commission  men  doing  business  in  that  vicinity.  A  by-law 
provided  that  the  board  of  directors  should  have  power  to  fix  the 
market  price  at  which  milk  should  be  purchased  by  the  stockholders. 
The  directors  accordingly  fixed  the  price  of  milk,  and  the  prices  so 
fixed  largely  controlled  the  market  in  and  about  New  York  and  the 
milk-producing  territorj^  contiguous  thereto.  An  action  was  brought 
by  the  attorney  general  to  dissolve  the  corporation  and  vacate  its 
charter.    The  court,  among  other  things,  held  that  the  facts  sup- 

183  Iowa,  15G  (1891).  2  145  N.  Y.,  207  (1S95). 


52  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

ported  a  verdict  or  finding  that  the  combination  being  inimical  to 
trade  and  commerce  was  unlawful.  In  reaching  this  decision  the 
court  said : 

It  may  be  claimed  that  Ibe  purpose  of  the  combination  was  to  reduce  the 
price  of  millv,  and  that  it  being  an  article  of  food  such  reduction  was  not 
against  public  policy.  But  the  price  was  fixed  for  the  benefit  of  the  dealers, 
and  not  the  consumers,  and  the  logical  effect  upon  the  trade  of  so  fixing  the 
price  by  the  combination  was  to  paralyze  the  production  and  limit  the  supply, 
and  thus  leave  the  dealers  in  a  position  to  control  the  market,  and  at  their 
option  to  enhance  the  price  to  be  paid  by  the  consumers.  This  brings  the  case 
within  the  condemnation  of  the  authorities  to  which  we  have  referred. 

In  National  Bank  of  the  Metropolis  v.  Sprague  et  al./  it  was 
decided  that  where  there  is  no  agreement  not  to  compete,  it  is  not 
unlawful  for  persons  to  join  to  make  a  purchase  for  their  common 
benefit.  In  that  case,  upon  a  petition  of  the  complainant,  a  judg- 
ment creditor  of  the  defendant,  Sprague,  to  set  aside  a  sale  of  val- 
uable real  estate  sold  by  a  master  under  a  decree  of  foreclosure,  it 
appeared  that  the  bidder  to  whom  the  property  was  struck  off  was 
acting  as  agent  of  the  complainant  and  was  unable  to  comply  with 
the  terms  of  the  sale.  The  master  thereupon  required  a  deposit  of 
$5,000  before  bids  would  be  received  and  again  offered  the  property, 
which  was  finally  sold  to  an  agent  of  a  large  number  of  creditors. 
It  did  not  appear  that  any  one  of  these  creditors  who  agreed  to 
purchase  for  their  common  benefit  w'ould  have  been  willing  or  able 
to  purchase  on  his  own  account.  One  of  the  grounds  on  which  the 
complainant  urged  that  the  sale  be  set  aside  was  that  the  combination 
of  creditors  to  purchase  it  together  was  against  the  policy  of  the 
law  as  preventing  competition.  The  court  held  that  it  was  not  un- 
lawful for  persons  to  join  to  make  a  purchase  for  their  common 
benefit  Avithout  an  agreement  not  to  compete.  In  reaching  this 
decision  the  court  expressed  its  opinion  as  follows: 

There  is  no  doubt  that  it  is  illegal  for  two  purchasers,  or  intended  purchasers 
at  an  auction  sale,  to  combine  not  to  bid  against  each  other,  and  to  divide  in 
any  way  the  profits  of  purchases  made  under  such  a«  agreement.  But  all  the 
authorities  and  decisions  in  this  matter  which  have  been  brought  to  my  notice 
are  confined  to  cases  in  which  there  is  an  agreement  l)etween  the  parties  not  to 
bid  or  enter  into  competition  to  bid  against  each  othq;-,  and  where  this  agree- 
ment is  the  foundation  of  the  combination  to  purchase  for  their  common  benefit. 
And  the  principle  upon  which  the  rule  is  based  would  apply  only  to  such  cases, 
and  not  to  cases  where  parties  joined  to  make  a  purchase  for  their  common 
benefit  without  an  agreement  not  to  compete,  although  the  elfect  of  such  joint 
purchase  might  be  to  prevent  competition.  *  *  *  ^^nd  it  seems  *  *  * 
that  creditors  in  a  case  like  this  should  be  permitted  to  unite,  because  it  is  cal- 
culated to  enhance  the  price,  and  not  to  injure  the  sale. 

Agreements  regulating  competition  among  those  bidding  for  fur- 
nishing the  public  with  goods,  supplies,  or  services,  or  for  the  services 

120  N.  J.  Equity,  159   (1869). 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  53 

of  the  inmates  of  public  institutions  have  also  been  passed  upon  by 
the  courts.^ 

Valid  restrictive  agreements. — In  certain  cases  restrictive  agree- 
ments between  competing  parties  have  been  upheld.  Thus,  in  Long 
et  al.  r.  Towl,-  it  appeared  that  the  plaintiffs  were  in  possession  of 
a  tract  of  land  from  which  miners  were  engaged  in  taking  lead  ore 
under  an  agreement  to  sell  such  ore  to  plaintiffs.  In  violation  of 
this  agreement  some  of  the  miners  sold  some  of  the  ore  to  the 
defendant.  In  settlement  of  litigation  arising  from  this  trans- 
action defendant  agreed  that  for  ore  taken  from  plaintiffs'  land 
he  would  not  thereafter  pay  a  greater  price  than  plaintiffs  were 
paying  for  such  ore,  and  that  for  ore  taken  from  other  lands  he 
would  not  pay  a  greater  price  than  the  plaintiffs  were  paying  for 
ore  taken  from  their  own.  He  agreed  to  sell  exclusively  to  the  plain- 
tiffs all  ore  thereafter  purchased  by  him  at  a  price  of  $4  per  1,000 
pounds  more  than  plaintiffs  were  paying  at  the  time  to  the  miners 
on  their  own  land.  In  a  suit  to  recover  liquidated  damages  for  a 
breach  of  this  agreement  it  was  urged  that  the  contract  was  in  re- 
straint of  trade  and  void.  The  court  was  of  the  opinion,  however, 
that  such  a  contract,  which  did  not  prohibit  the  defendant  from 
carrying  on  his  business  at  any  place  he  might  choose,  but  only  lim- 
ited the  manner  of  carrying  it  on  by  fixing  the  price  at  which  he 
might  buy  and  sell  and  the  persons  to  whom  he  might  sell,  was  not  a 
restraint  of  trade.' 

In  Dolph  V.  Troy  Laundry  Machinery  Co.,^  it  appeared  that  the 
two  principal  manufacturers  of  washing  machines  in  the  United 
States,  in  order  to  avoid  competition  and  to  secure  better  prices  and 
larger  profits,  had  agreed  to  divide  profits.  The  agreement,  which 
was  to  continue  for  five  years,  provided  that  the  plaintiff  was  to  de- 
liver to  the  defendant  a  certain  number  of  machines  annually.  The 
plaintiff  had  the  option  to  manufacture  all  machines  sold  by  both. 
The  court  held  this  agreement  was  valid  and  not  against  public 
policy.  The  opinion  contained  certain  statements  from  which  it 
seems  that  the  court  took  a  view  as  to  the  legality  of  such  agree- 
ments differing  in  some  respects  from  the  view  taken  in  other  cases 
by  other  courts.    In  this  case  the  court  was  of  the  opinion  that — 

Assuming  that,  in  entering  into  the  contract,  tlie  parties  contemplated  that 
the  defendant  should  cease  manufacturing  machines,  and  buy  all  its  machines 
from  the  plaintiff,  and  that  the  only  purpose  in  view  was  to  promote  the  iuter- 

1  Woodruff  V.  Rerry,  40  Ark.,  251  (1882)  ;  Atcheson  v.  Mallon,  48  N.  Y.,  147  (1870)  ; 
Marsh  r.  Russell,  6G  N.  Y.,  288  (1870)  ;  (Jibbs  v.  Smith,  115  Mass.,  TyWl   (1874). 

-  42  Mo.,  :,{'>   (18681. 

•'' Caso  (l('oi(l(Hl  on  tho  jrl'ound  that  tho  disniissnl  of  tlie  oriiiiual  liti;;ation  formed  no 
considoration  for  the  promise  that  sum  stipulatt'd  was  not  li(|ui(Iated  damages,  but  a 
penalty  merely. 

*28  Fed.,  .55S    (1886). 


54  EEPORT  OF   THE   COMMISSIONER  OF   COEPOEATIONS. 

ests  of  the  parties,  antl  enable  them  to  obtain  from  customers  higher  prices  for 
the  machines,  it  is  not  obvious  how  sucli  a  contract  contravenes  any  principle 
of  public  policy.  Washing-machines,  although  articles  of  convenience,^  are  n()t 
articles  of  necessity.  The  scheme  of  the  parties  did  not  contemplate  suppress- 
ing the  manufacture  or  sale  of  machines  by  others.  *  *  *  It  is  quite  legiti- 
mate for  any  trader  to  obtain  the  highest  price  he  can  for  any  commodity  in 
which  he  deals.  It  is  equally  legitimate  for  two  rival  manufacturers  or  traders 
to  agree  xipon  a  scale  of  selling  prices  for  their  goods,  and  a  division  of  their 
I»rofits.  It  is  not  obnoxious  to  good  morals,  or  to  the  rights  of  the  public,  that 
two  rival  traders  agree  to  consolidate  their  concerns,  and  that  one  shall  discon- 
tinue business,  and  liecome  a  partner  with  the  other,  for  a  special  term.  It 
may  happen,  as  a  result  of  such  an  arrangement,  that  the  public  have  to  pay 
more  for  the  commodities  in  which  the  parties  deal,  but  the  public  are  not 
obliged  to  buy  of  them.  Certainly,  tlie  public  have  no  riglit  to  complain,  so  long 
as  the  transaction  falls  short  of  a  conspiracy  between  tlie  parties  to  control 
prices  by  creating  a  monopoly.     *     *     * 

The  decision  in  Central  Shade  Eoller  Co.  v.  Cnshman^  also  seems 
somewhat  at  variance  with  most  of  the  decisions  in  cases  of  this  kind, 
although  it  should  be  noted  that  the  agreement  related  to  a  patented 
device  and  also  that  the  court  expressly  pointed  out  that  the  article 
affected  by  the  agreement  was  not  an  article  of  prime  or  public  neces- 
sity. In  this  case  it  appeared  that  three  manufacturers  of  a  certain 
kind  of  curtain  fixture,  under  different  letters  patent  owned  by  them 
severally,  in  order  to  avoid  competition,  had  organized  the  Central 
Shade  Eoller  Co.,  a  corporation  in  which  they  were  the  only  stock- 
holders, and  an  agreement  was  entered  into  between  the  corporation 
and  the  manufacturers,  providing  that  the  corporation  was  to  take 
the  output  of  each  manufacturer;  that  the  corporation  was  to  employ 
no  salesmen,  but  the  manufacturers  were  to  act  as  its  selling  agents 
and  receive  a  commission  upon  their  sales ;  that  the  prices  for  rollers 
of  the  same  grade,  made  by  the  different  parties  should  be  the  same 
according  to  a  schedule  contained  in  the  contract,  and  that  when  any 
party  should  establish  an  agency  in  any  city  or  town  for  the  sale  of 
a  roller  made  exclusively  for  that  purpose,  no  other  party  should 
take  orders  for  the  same  roller  in  the  same  place.  During  the  term 
agreed  upon  the  manufacturers  were  not  to  sell  or  dispose  of  any 
of  their  letters  patent  except  upon  such  terms  that  a  transferee  should 
be  bound  by  this  agreement,  nor  were  they  to  dispose  of  their  stock 
in  the  corporation  without  the  written  consent  of  a  majority  of 
the  stockholders.  The  purpose  of  the  agreement,  as  stated  by  the 
complainant,  was  to  prevent  competition  in  the  sale  of  shade  rollers, 
to  secure  larger  profits  by  preventing  an  unprofitable  reduction  of 
prices  for  the  same,  and  so  to  merge  the  business  of  each  of  said  par- 
ties that  each  should  obtain  an  equitable  share  of  the  profits  of  each 

1143  Mass.,  353  (1887). 


TRUST   LAWS   AND  UNFAIR  COMPETITION.  55 

of  the  others  and  that  there  should  be  a  substantial  identity  of  inter- 
ests in  said  business.  The  corporation  filed  a  bill  alleging  a  breach 
of  the  agreement  on  the  part  of  the  defendant,  prayed  for  an  account- 
ing and  for  an  injunction  to  restrain  the  defendant  from  selling  in 
violation  of  the  terms  of  the  agreement.  The  case  was  heard  on  bill 
and  demurrer,  and  the  bill  was  dismissed.  On  appeal  by  the  plaintiff 
the  court  held  that  the  agreement  was  not  invalid  as  in  restraint  of 
trade  or  against  public  policy,  being  apparently  beneficial  to  the 
parties  to  the  combination  and  not  necessarily  injurious  to  the  public, 
as  the  agreement  did  not  relate  to  an  article  of  prime  necessity,  to  a 
staple  of  commerce,  or  to  merchandise  to  be  bought  and  sold  on 
the  market.^ 

A  restrictive  agreement  among  quarrymen  was  upheld  by  the 
court  in  Skrainka  v.  Scharringhausen,-  under  the  following  circum- 
stances: It  appeared  that  some  24  owners  and  operators  of  stone 
quarries  in  St.  Louis,  for  the  purpose  of  securing  "  a  fair,  propor- 
tionate sale  of  the  produce  of  all  quarries  at  uniform  prices  and 
living  rates,"  had  agreed  that  for  a  period  of  six  months  they 
would  not  sell  any  stone  except  as  set  forth  in  the  agreement.  They 
agreed,  further,  to  appoint  an  exclusive  agent,  who  was  to  appor- 
tion the  output  among  the  various  quarries  and  sell  at  stipulated 
prices.  A  penalty  was  fixed  for  the  violation  of  the  agreement. 
Plaintiff  was  appointed  trustee  to  sue  for  the  damages,  and  brought 
this  action  for  violation  of  the  agreement.  Defendant  contended 
that  the  agreement  was  against  public  policy,  in  restraint  of  trade, 
and  unreasonable.  The  court  in  holding  the  agreement  valid,  as 
being  not  necessarily  in  restraint  of  trade,  said : 

The  agreement  is  amongst  the  qnarrymen  of  one  district  of  one  city,  and 
it  does  not  appear  that  it  embraces  all  of  them.     There  is  no  evidence  that  it 

^  In  this  connection,  the  court.  In  United  States  r.  Addyston  Pipe  &  Steel  Co.  (85  Fed., 
271),  in  reforrinir  to  the  Shade  roller  case,  said  : 

"  Two  other  cases  deserve  mention  here.  They  are  Roller  Co.  v.  Cushman,  143  Mass., 
353,  9  N.  E.,  629,  and  Gloucester  Isinglass  &  Glue  Co.  r.  Russia  Cement  Co.,  154  Mass., 
92,  27  N.  E.,  1005.  In  these  cases  it  was  held  that  contracts  in  restraint  of  trade  are 
not  invalid  if  they  affect  trade  in  articles  which,  though  useful  and  convenient,  are  not 
articles  of  prime  or  public  necessity,  and  therefore  contracts  between  dealers  made  to 
secure  complete  control  of  the  manufacture  and  sale  of  such  articles  were  supported. 
In  the  first  case  the  article  involved  was  a  fastening  of  a  certain  shade  roller,  and  in 
the  other  was  glue  made  from  fish  skins.  We  think  the  cases  hereafter  cited  show  that 
the  common  law  rule  against  restraint  of  trade  extends  to  all  articles  of  merchandise, 
and  that  the  introduction  of  such  a  distinction  only  furnishes  another  opportunity  for 
courts  to  give  effect  to  the  varying  economical  opinions  of  its  individual  members.  It 
might  be  difiicult  to  say  why  it  was  any  more  important  to  prevent  restraints  in  beer, 
mineral  water,  leather  cloth,  and  wire  cloth  than  of  trade  in  shades  and  glue.  However 
this  may  be,  the  cases  do  not  touch  the  case  at  bar,  because  the  same  court  in  Telegraph 
Co.  V.  Crane,  100  Mass.  50,  .".5  N.  E.,  98,  held  that  fire-alarm  telegraph  instruments  were 
articles  of  suflicient  public  necessity  to  render  unreasoiiahlo  r(>straints  of  trade  in  them 
void,  and  certainly  such  articles  are  not  more  necessary  for  public  use  than  water,  gas, 
and  sewer  pipe." 

2  8  Mo.   App.,  523    (1880). 


56  REPORT  OF   THE   COMMISSIONER   OF   CORPORATIONS. 

works  any  public  mischief,  and  the  contract  is  not  of  such  a  nature  that  it  is 
apparent  from  its  terms  that  it  tends  to  deprive  men  of  employment,  unduly 
raise  prices,  cause  a  monopoly,  or  put  an  end  to  competition.  It  is  limited 
both  as  to  time  and  place,  and  we  know  of  no  case  in  recent  times  in  which 
a  contract  such  as  the  one  before  us  has  been  declared  illegal. 

In  the  People  ex  rel.  Pinckney  v.  New  York  Board  of  Fire  Under- 
writers ^  and  Matthews  et  al.  v.  Associated  Press  of  the  State  of 
New  York,-  the  courts  held  that  it  was  within  the  power  of  the 
respective  associations  to  adopt  and  enforce  a  by-law  imp©«ing  a 
certain  restraint  upon  its  members,  providing  the  restraint  was  rea- 
sonable and  appropriate  under  the  circumstances.  In  -the  first  of 
these  cases,  however,  it  should  be  noted  that  the  defendant  board 
had  been  incorporated  by  an  act  of  the  legislature,  one  of  its  de- 
clared purposes  being  to  "  establish  and  maintain  uniformity  "  among 
its  members  in  "  policies  or  contracts  of  insurance,"  and  power  had 
been  conferred  "  to  make  all  needful  by-laws  not  contrary  to  the 
provisions  of  the  act  or  to  the  constitution  and  la*\^s  of  this  State 
or  of  the  United  States."  The  court  held  that  a  by-law  binding 
members  to  uniformity  in  rates  of  insurance  came  within  the  powers 
conferred;  that  as  the  legislature  conferred  the  power  to  pass  the 
by-law,  it  was  not  in  conflict  but  in  harmony  with  pul^lic  policy, 
nor  was  it  open  to  the  objection  that  it  was  in  restraint  of  trade; 
that,  as  the  by-law  under  which  respondents  acted  was  reasonable 
and  within  their  corporate  powers,  the  relator  was  liable  to  expul- 
sion. 

In  Matthews  et  al.  v.  Associated  Press,  the  other  case  referred  to, 
it  appeared  that  the  plaintiffs,  who  were  also  members  of  the  United 
Press  Association,  had  procured  an  injunction  against  the  Associated 
Press,  etc.,  restraining  it  from  suspending  them  from  any  of  the 
rights  or  privileges  in  the  Associated  Press  and  from  withholding 
from  the  plaintiffs  (who  were  publishers  of  newspapers  at  Buffalo) 
the  regular  news  and  reports  furnished  by  the  association  to  its 
members,  on  account  of  any  alleged  violation  by  the  plaintiffs  of  a 
by-law  of  the  association  which  provided  in  part  that  "  no  memV^er 
of  this  association  shall  receive  or  publish  the  regular  news  dis- 
patches of  any  other  news  association  covering  a  like  territory  and 
organized  for  a  like  purpose  with  this  association."  The  court  held 
that  this  by-law  was  valid  and  enforceable;  that  it  did  not  im- 
properly tend  to  restrain  trade  (assuming  the  business  of  collecting 
and  distributing  news  would  come  within  the  definition  of  a  trade)  ; 
and  that  it  was  a  natural  and  reasonable  restraint  upon  the  members 
of  the  association  appropriately  regulating  their  conduct  as  mem- 

154    Howard's   Prac.    (N.    Y.),   240    (1875). 
2  136  N.  Y.,  333   (1893). 


TRUST   LAWS   AND   UNFAIR  COMPETITION.  57 

bers  thereof  with  respect  to  the  business  which  the  association  was 
organized  to  transact.^ 

Section  4.  Agreements  among-  competing  interests  to  consohdate  under 
common  ownership  or  control. 

Even  before  it  had  become  phi  in  that  under  ordinary  circum- 
stances the  courts  would  not  uphold  a  direct  agreement  among  com- 
petitors where  it  appeared  that  the  object  or  effect  was  to  limit 
competition,  competing  concerns  sought  other  methods  to  accomplish 
substantially  the  same  result  by  the  more  formal  plan  of  combining 
under  common  control  or  ownership.  Regarding  this  as  a  means  of 
securing  control  of  the  market,  the  courts  in  general  have  taken 
no  more  favorable  a  view  of  this  plan  than  of  the  direct  agreements 
to  limit  competition  discussed  in  the  preceding  section.  The  same 
evil  is  present,  namely,  the  attempt  to  restrain  trade  and  to  control 
the  market  primarily  for  the  benefit  of  the  combining  interests.  In 
a  number  of  cases  involving  attempts  of  this  kind,  the  courts  have 
refused  to  recognize  the  validity  of  agreements  entered  into  for  the 
acquisition  of  the  shares  of  one  corporation  by  another ;  agreements 
for  the  the  surrender  of  the  control  of  competing  concerns  to  a  single 

iThe  decision  in  tliis  case  should  be  compared  witli  that  in  Inter-Ocean  Publishing  Co. 
V.  Associated  Press,  decided  by  the  Supreme  Court  of  Illinois  in  1900  (56  X.  E.  Rep., 
822),  where  an  opposite  result  was  reached.  By  a  long  line  of  common-law  decisions, 
railroads,  other  common  carriers,  and  certain  other  businesses  and  callings  which  of  neces- 
sity are  carried  on  under  conditions  more  or  less  monopolistic  in  character  have  been 
held  to  be  subject  to  certain  obligations  not  imposed  on  those  who  follow  other  occupa- 
tions or  trades.  It  is  not  within  the  scope  of  the  present  report  to  discuss  the  character 
of  these  obligations  in  detail.  Besides  the  cases  involving  such  obligations  with  respect 
to  railroads,  the  following  may  be  cited  :  Munn  r.  Illinois,  04  U.  S.,  113  (187G)  ;  West 
Virginia  Transportation  Co.  v.  Ohio  Kiver  Pipe  Line  Co.  et  al.,  22  W.  Va.,  600  (1883)  ; 
People  ex  rel.  Postal  Telegraph-Cable  Co.  v.  Hudson  River  Telephone  Co.,  19  Abbott's 
New  Cases  (N.  Y.),  466  (1887)  ;  New  York  and  Chicago  Grain  and  Stock  Exchange  v. 
Board  of  Trade  of  City  of  Chicago  et  al.,  127  111.,  153  (1886)  ;  State  v.  Portland  Natural 
Gas  &  Oil  Co.,  153  Ind.,  483    (1899). 

Grants  of  a  monopolistic  character  by  public  authority  also  present  a  class  of  cases 
which  should  be  mentioned  here.  When  the  object  to  be  attained  seems  clearly  to  be 
in  the  public  interest,  legislative  grants  authorizing  the  exercise  of  special  privileges  by 
certain  designated  persons,  to  the  exclusion  of  others,  have  been  upheld  by  the  courts  in 
a  number  of  cases.  Such  grants,  however,  are  suliject  to  strict  interpretation  by  the 
courts,  and  any  ambiguity  is  construed  in  favor  of  the  public  and  against  the  grantee. 
The  power  of  municipal  corporations  to  grant  special  and  exclusive  privileges  depends 
upon  the  power  conferred  upon  the  municipal  corporation  and  the  powers  incident 
thereto. 

Among  cases  of  the  class  mentioned  in  the  preceding  paragraph  may  be  cited  :  Enfield 
Toll  Bridge  Co.  r.  Hartford  &  New  Haven  R.  II.  Co.,  17  Conn.,  40  (1845)  ;  Broadway  & 
Locust  Point  Ferry  Co.  v.  Hankey,  31  Md.,  346   (1869)  ;  Slaughterhouse  cases,  83  U.  S., 

36  (1872)  ;  Gaines  et  al.  v.  Coates,  51  Miss.,  3.35  (1875)  ;  Burlington  &  Hudson  County 
Ferry  Co.  v.  Davis,  78  Iowa,  133  (1878)  ;  State  v.  Milwaukee  Gas  Light  Co.,  29  Wis., 
4.54  (1872)  ;  McRae  r.  Wilmington  &  Raleigh  R.  R.  Co.,  47  N.  C,  186  (1855)  ;  Norwich 
Gas  Light  Co.  r.  Norwich  City  Gas  Co.,  25  Conn.,  19   (1856)  ;  Caldwell  r.  City  of  Alton, 

37  111.,  416  (1864  1  ;  City  of  Chicago  v.  RumpfC  et  al.,  45  111.,  90  (1867)  ;  City  of  Bloom- 
ington  1'.  Wahl,  46  111.,  489  (1868)  ;  Tugman  v.  City  of  Chicago,  78  111.,  405  (1875)  ;  Gale 
r.  Village  of  Kalamazoo,  23  Mich.,  344   (1871)  ;  and  Logan  &  Sous  r.  Pyne,  43  Iowa,  542 

,  (1876). 


58  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

common  trustee  or  board  of  trustees;^  or  for  the  merger  of  various 
competing"  properties  by  transfer  to  another  corporation  formed  for 
the  purpose  of  taking  them  over  and  operating  them  in  the  interest 
of  all. 

Acquisition  by  corporation  of  shares  in  another  corporation. — 
A  corporation  has  sometimes  attempted  to  eliminate  or  control  the 
competition  of  some  other  corporation  or  corporations  by  acquiring 
shares  of  the  latter's  capital  stock.^  In  a  number  of  cases  of  this  sort 
that  have  been  passed  upon  by  the  courts  it  has  not  been  necessary 
to  invoke  the  principle  against  agreements  in  restraint  of  trade. 
In  such  cases  the  courts  have  deemed  it  sufficient  to  hold  such 
acquisitions  unlaAvful  as  a  violation  of  a  principle  of  the  law  of 
corporations  which  forbids  a  corporation  from  exercising  any 
power  or  authority  not  expressly  conferred  upon  it  or  necessarily 
incidental  thereto.  Under  this  principle  of  corporation  law,  it  is 
held  that  in  the  absence  of  express  legislative  authority  every  cor- 
poration is  prohibited  from  acquiring  or  holding  stock  in  another 
corporation  or  from  surrendering  control  of  its  own  affairs  to  others. 
Such  an  act  is  considered  ultra  vires  as  foreign  to  the  purpose  for 
which  the  corporation  was  created  and,  therefore,  as  opposed  to 
public  policy.  In  holding  such  acquisitions  unlawful,  however,  the 
courts  have  often  pointed  out  that  the  agreement  involved  also  a 
violation  of  the  rule  against  agreements  in  restraint  of  trade. 

In  Franklin  Bank  of  Cincinnati  v.  Commercial  Bank  of  Cincin- 
nati ^  it  was  held  that  one  corporation  can  not  become  the  owner 
of  any  portion  of  the  capital  stock  of  another  unless  authority  is 
clearly  conferred  by  statute.  In  this  case  the  plaintiff  and  the 
defendant  were  banking  corporations,  an  action  having  been  bi'ought 
upon  the  refusal  of  the  defendant  to  transfer  to  the  plaintiff  cer- 
tain shares  of  stock  of  the  defendant  company,  owned  by  its  presi- 
dent, which  had  been  pledged  with  the  plaintiff  by  the  owner  to 

1  In  connection  with  the  class  of  contracts  discussed  in  this  section,  mention  should 
also  be  made  of  restrictions  in  agreements  whereVjy  the  various  stockholders  in  a  single 
corporation  transfer  their  shares  to  trustees  under  a  so-called  voting-trust  agreement. 
While  such  agreements  may  be  valid  as  a  principle  of  corporation  law,  they  may  be  ren- 
dered void  by  the  character  of  restrictions  imposed  therein  upon  the  right  of  the  stock- 
holders to  dispose  of  their  interests  and  the  privileges  incident  thereto.  See  Moses  v. 
Scott,   84   Ala.,   008    (1887). 

"For  the  same  purpose,  one  corporation  lias  sometimes  leased  the  property  of  another. 
Thus,  in  Thomas  v.  Railroad  Co.  (101  U.  S.,  71),  decided  in  1879,  the  United  States 
Supreme  Court  rested  its  decision  upon  the  ground  that  the  lease  by  a  railroad  com- 
pany, without  charter  authority,  of  its  road,  buildings,  and  rolling  stock  for  a  term  of 
20  years  was  nn  ultra  vires  act,  against  public  policy,  and  void.  In  this  connection  the 
court  said  : 

"  *  *  *  where  a  corporation,  like  a  railroad  company,  has  granted  to  it  by  charter 
a  franchise  intended  in  large  measure  to  be  exercised  for  the  public  good,  the  due 
performance  of  those  functions  being  the  consideration  of  the  public  grant,  any  contract 
which  disables  the  corpoi-ation  from  performing  those  functions,  which  undertakes,  with- 
out consent  of  the  State,  to  transfer  to  others  the  rights  and  powers  conferred  by  the 
charter,  and  to  relieve  the  grantees  of  the  burden  which  it  imposes,  is  a  violation  of  the 
contract  with  the  State,  and  is  void  as  against  public  policy.     *      *     *  " 

•■'30  Ohio  St.,  350   (1881). 


TRUST   LAWS   AND   UNFAIR  COMPETITION.  59 

secure  a  loan  on  his  individual  account.  The  court  held  that  the 
right  to  deal  in  shares  of  stock  in  other  corporations  was  not  only 
not  found  among  the  enumerated  powers  conferred  upon  banks  by 
law  but  that  such  power  was  denied  and  its  exercise  expressly  pro- 
hibited, hence  the  refusal  of  the  defendant  to  permit  the  transfer 
violated  no  right  of  the  plaintiff  and  created  no  liability  on  the  part 
of  the  defendant. 

Both  the  ultra  vires  principle  and  that  against  contracts  in  re- 
straint of  trade  were  held  to  be  involved  in  Central  Railroad  Co. 
et  al  V.  Collins  et  al.^  In  that  case  the  complainant  charged  in  sub- 
stance that  the  Central  Railroad  &  Banking  Co.  (chartered  to  build 
and  maintain  a  road  from  Savannah  to  Macon)  and  the  Southwest- 
ern Railroad  Co.  (chartered  to  build  a  road  from  Savannah  to  Bain- 
bridge)  were  about  to  purchase  from  the  city  of  Savannah  certain 
stock,  including  12,383  shares  of  the  Atlantic  &  Gulf  Railroad  Co. 
The  complainants  alleged,  among  other  things,  that  such  purpose 
was  in  violation  of  the  charters  of  the  defendant  companies;  that  it 
was  not  necessary  to  the  purpose  of  their  organization  or  for  the 
legitimate  execution  of  that  purpose;  that  one  of  the  purposes  was 
to  free  the  Southwestern  Railroad  from  the  competition  of  the  At- 
lantic &  Gulf  Railroad ;  that  the  purchase  was  illegal  because  of  the 
intention  with  which  it  was  made;  that  it  was  contrary  to  public 
policy,  being  injurious  to  the  interests  of  the  stockholders  and  the 
people.  An  injunction  was  granted  and  the  defendants  appealed. 
The  defendants  substantially  admitted  the  charges,  but  sought  to 
dissolve  the  injunction,  contending  as  one  ground  of  defense  that 
the  railroads  had  a  right  under  their  charters  to  make  such  a  pur- 
chase. The  court  held,  however,  that  a  corporation  has  no  powers 
except  those  expresslj^  granted  by  its  charter  and  those  necessary  to 
the  declared  objects  of  the  grant;  that  the  charter  should  be  strictly 
construed;  and  that  the  capital  stock,  credit,  and  property  of  every 
kind  must  be  used  solely  for  the  purposes  and  objects  of  the  charter. 
It  was  held,  further,  that  a  corporation  could  not  engage  in  an}^  new 
and  distinct  enterprise  involving  new  risks  to  its  stockholders  not 
fairly  within  the  terms  of  the  original  grant ;  that  the  purchases  of 
stock  in  another  railroad  with  intent  to  hold  it,  and,  as  in  this  case, 
with  intent  to  use  the  power  thus  acquired  to  secure  an  interest  in 
the  management  of  the  road,  came  within  these  principles;  that 
neither  the  Southwestern  nor  the  Central  Railroad  Co.  was  author- 
ized by  charter  to  purchase  the  stock  in  question;  and  that  a  court 
of  equity,  at  the  instance  of  vStockholders,  would  restrain  such  an 
act.    In  its  opinion  the  court  said  in  part: 

*     *     *     The  admitted  facts  of  this  answer  show  that  the  very  object  of  the 
contemplated  purchase,  the  sole  motive  which  prompts  it,  is  to  prevent  the 

MO  Ga.,  r,8'2   (18G0). 


60  REPORT   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

ruinous  competition  which  the  Gulf  road  has  already  entered  into  for  the 
freights  of  the  Flint  and  Chattahoochee  regions.  Even  a  petty  tradesman  can 
not  legally  bind  another  not  to  carry  on  a  particular  business  over  any  large 
extent  of  territory ;  and  here  is  a  contract,  the  object  of  which  is  unblushingly 
avowed  to  be  to  so  get  control  of  the  Atlantic  &  Gulf  Road,  as  that  its  present 
mode  of  carrying  freights  at  low  rates,  shall  cease,  and  the  very  object  of  the 
legislature  in  granting  the  charter,  and  becoming  itself  a  large  stockholder, 
be  thwarted/ 

Trust  agreements. — As  already  mentioned  (see  p.  7),  trust 
agreements  were  first  used  as  a  means  of  restricting  or  regulating 
competition  about  1880.  Under  this  plan,  holders  of  the  shares  of 
the  various  participating  corporations  transferred  their  holdings  to 
trustees,  usually  receiving  in  exchange  certificates  issued  by  the 
trustees.  Under  the  trust  agreement  the  trustees  were  empowered  to 
control  each  corporation  which  became  a  party  to  the  agreement. 

One  of  the  first  cases  to  be  decided  involving  an  arrangement  in 
the  nature  of  a  trust  was  Mallory  v.  Hanaur  Oil  Works.^  While  the 
court  in  this  case  referred  to  the  agreement  as  tending  to  create 
a  monopoly  through  a  combination  of  corporations,  the  agreement 
was  held  unlawful  because  ultra  vires.  In  this  case  four  corpora- 
tions engaged  in  manufacturing  cottonseed  oil  agreed  to  select  a 
committee  composed  of  representatives  from  each  corporation  and 
to  turn  over  to  them  the  properties  and  machinery  of  each  mill, 
to  be  managed  and  operated  by  the  committee  for  the  common  bene- 
fit, the  profits  and  losses  to  be  shared  in  proportions  agreed  upon. 
In  accordance  with  the  agreement  the  several  mills  were  turned  over 
and  operated  by  these  managers  under  the  name  of  the  "Independent 
Cotton  Seed  x\ssociation,"  and  a  fifth  corporation  was  subsequently 
admitted  by  consent.  The  directors  of  the  Planaur  Oil  Works,  one 
of  the  contracting  parties,  passed  a  resolution  declaring  this  contract 
void,  as  being  ultra  vires,  and  their  president  was  directed  to  take 
possession  of  their  mill.  The  Hanaur  company  sued  out  a  writ  of 
unlawful  detainer,  and  from  a  judgment  in  its  favor  the  defendant 
appealed.  The  court  held  that  the  agreement  was  a  contract  of 
partnership ;  that  such  a  partnership  contract  was  not  within  the 
express  or  im]3lied  powers  of  corporations  organized  under  the  incor- 
poration act,  but  was  ultra  \dres  and  void,  and  that  the  plaintiff  was 
entitled  to  recover  possession  of  its  property.  In  this  case  the  court 
remarked  that — 

We  have  not  deemed  it  necessary  to  consider  the  question  of  the  legality  of 
such  a  combination  of  corporations  as  one  tending  to  create  a  monopoly,  fgr 

1  See  also  Hazelhurst  et  al.  v.  Savannah,  Griffin  &  North  Alahama  Railroad  Co.  et  al., 
43  Ga.,  13  (1873)  ;  Milburn  et  al.  v.  New  York,  Lake  Erie  &  Western  Railroad  Co.  et  al., 
64  Howard's  Prac.  (N.  Y.),  20  (1882)  ;  Elkins  v.  Camden  &  Atlantic  Railroad  Co.,  36 
N.  .T.  Eq.,  .5  (1882)  ;  and  People  ex  rel.  Peabody  v.  Chicago  Gas  Trust  Co.,  130  111.,  268 
(1889). 

2  86  Tenn.,  598   (1888). 


TRUST   LAWS   AND  UNFAIR   COMPETITION.  61 

the  ground  upon  which  we  place  the  case  needs  no  additional  prop.  The  ques- 
tion of  the  validity  of  such  an  arrangement  is  a  very  grave  one,  but  need  not 
now  be  considered. 

In  the  leading  case  of  People  v.  North  Eiver  Sugar  Refining  Co.^ 
the  lower  court  was  of  the  opinion  that  the  agreement  which  was 
involved  violated  both  the  ultra  vires  principle  and  that  against 
monopolies.  The  State  Court  of  Appeals,  however,  expressly  de- 
cided the  case  on  the  ultra  vires  feature,  referring  to  the  monopo- 
listic feature  as  shown  below.  The  defendant  company  had  been 
incorporated  in  New  York  in  1865  as  a  manufacturing  corporation 
to  refine  and  sell  sugar,  sirups,  and  molasses.  In  1887  it  became 
a  party  to  the  formation  of  an  unincorporated  company,  known  as 
the  Sugar  Refineries  Co.,  in  the  nature  of  a  partnership  or  associa- 
tion, with  the  object  of  bringing  together  various  competing  interests 
engaged  in  the  manufacture,  refining,  and  sale  of  sugar.  The  ex- 
pressed purpose  of  the  plan  was  to  promote  economy  of  admin- 
istration and  reduce  the  cost  of  refining;  to  give  each  refinery 
the  benefit  of  all  appliances  and  processes  known  or  used  by  the 
others;  to  furnish  protection  against  unlawful  combinations  of 
labor;  and  to  oppose  inducements  to  lower  the  standard  of  refined 
sugar.  Each  corporation  becoming  a  party  to  the  agreement  was 
to  maintain  its  separate  organization  and  conduct  its  own  business 
under  control  of  the  association  through  a  board.  The  stock  of 
each  corporation  was  to  be  transferred  to  this  board,  and  in  its  place 
shares  were  to  be  issued  by  the  association  and  distributed  to  the 
stockholders  in  proportion  to  their  previous  holdings.  Profits  of 
the  corporations  were  to  be  paid  to  the  board,  which  was  authorized 
to  declare  dividends  therefrom.  The  board  was  authorized  to  trans- 
fer corporate  stock  to  such  persons  as  it  might  desire  to  qualify  as 
directors  or  other  officers  of  the  corporations,  w^hich  stock  was  to  be 
held  by  them  subject  to  the  provisions  of  this  agreement.  All  but 
six  companies  engaged  in  the  business  in  the  United  States  became 
parties  to  the  agreement.  The  defendant  became  a  party  by  the 
signature  of  its  secretary,  whose  authority  was  subsequently  revoked, 
but  finally  the  stock  was  transferred  to  the  board  of  the  Sugar 
Refineries  Co.  and  certificates  of  the  latter  were  divided  among  the 
stockholders  of  the  defendant  company.  The  State  brought  an 
action  to  vacate  the  charter. 

The  court  held  that  the  defendant  by  making  itself  a  party  to 
the  association  had  renounced  and  abandoned  its  own  duties  for 
the  transaction  and  management  of  its  own  business  and  placed  its 
interests  and  affairs  under  the  direction  and  control  of  a  board 
which  legally  should  have  no  power  over  it,  and  rendered  itself 

1  54   Ilun.  3.j4    (1SS9). 


62  REPORT  OF   THE   COMMISSIONER   OF   COEPOEATIONS. 

liable  to  the  judgment  which  has  been  recovered ;  that  the  defendant 
had  placed  itself  in  complete  subordination  to  another  and  different 
organization,  to  be  used  for  an  unlawful  purpose,  detrimental  and 
injurious  to  the  public;  that  it  had  become  a  party  to  a  combination 
designed,  in  part  at  least,  to  create  a  monopoly  and  exact  from  the 
public  prices  which  could  not  otherwise  be  obtained;  that  this  was 
a  subversion  of  the  object  for  which  the  company  was  created,  and 
authorized  the  action  to  vacate  its  charter. 

The  court  of  appeals^  in  affirming  this  judgment  expressly  rested 
its  decision  upon  the  ground  that  the  corporation  had  violated  its 
charter  and  failed  in  the  performance  of  its  corporate  duties.  In 
this  connection  the  court  said : 

*  *  *  Having  reached  that  result,  it  becomes  needless  to  advance  into 
the  wider  discussion  over  monopolies  and  competition  and  restraint  of  trade 
and  the  problems  of  political  economy.     *     *     * 

The  decision  in  the  North  Eiver  Sugar  case  was  followed  by  an- 
other decision  of  great  importance,  namely,  that  in  the  case  of  the 
State  of  Ohio  v.  Standard  Oil  Co.-  In  the  latter  case  it  appeared 
that  most  of  the  owners  of  shares  in  the  defendant  company  and  of 
a  number  of  other  oil  companies  had  transferred  their  stock  to 
trustees  in  exchange  for  trust  certificates,  common  control  of  each 
of  the  various  companies  participating  in  the  agreement  being 
effected  by  the  trustees'  action  in  electing  themselves  directors  of 
each  of  the  companies.  The  court  held  that  an  unlawful  combina- 
tion had  been  effected  and  ordered  a  forfeiture  of  the  charter  of  the 
defendant  corporation.    In  reaching  this  decision  the  court  said: 

Under  the  agreement  all  but  seven  of  the  shares  of  the  capital  stock  of  the 
company  have  been  transferred  by  the  real  owners  to  tlie  trustees  of  the  trust, 
who  hold  them  in  trust  for  such  owners;  and  being  enjoined  by  the  terms  of 
the  agreement  to  endeavor  to  have  "  the  affairs "  of  the  several  companies 
managed  in  a  manner  most  conducive  to  the  interest  of  the  holders  of  the  trust 
certificates  issued  by  the  trust,  have  the  right,  in  virtue  of  their  apparent  legal 
ownership  and  by  the  terms  of  the  agreement,  to  select  such  directors  of  the 
company  as  they  may  see  fit,  nay  more,  may  in  fact  select  themselves.  The 
law  requires  that  a  corporation  should  be  controlled  and  managed  by  its 
directors  in  the  interest  of  its  own  stockholders,  and  conformable  to  the  pur- 
pose for  which  it  was  created  by  the  laws  of  the  State.  By  this  agreement, 
indirectly  it  is  true,  but  none  the  less  effectually,  the  defendant  is  controlled 
and  managed  by  the  Standard  Oil  trust,  an  association  with  its  principal  place 
of  business  in  New  York  City,  and  organized  for  a  purpose  contrary  to  the 
policy  of  our  laws.  Its  object  was  to  establish  a  virtual  monopoly  of  the 
business  of  producing  petroleum,  and  of  manufacturing,  refining  and  dealing 
in  it  and  all  its  pi-oducts,  throughout  the  entire  country,  and  by  which  it  might 
not  merely  control  the  production,  but  the  price  at  its  pleasure.  All  such 
associations  are  contrary  to  the  policy  of  our  State  and  void. 


ill-'l  N.  Y.,  582  (1890).  MO  Ohio  St.,  137   (1892). 


TRUST   LAWS   AND   UNFAIR  COMPETITION,  "  63 

Eef erring  to  the  control  of  prices  the  court  said : 

Much  has  been  said  in  favor  of  the  objects  of  the  Standard  Oil  Trust,  and 
what  it  has  accomplished.  It  may  be  true  that  it  has  improved  the  quality 
and  cheapened  the  costs  of  petroleum  and  its  products  to  the  consumer.  But 
such  is  not  one  of  the  usual  or  general  results  of  a  monopoly ;  and  it  is  the 
policy  of  the  law  to  regard,  not  what  may,  but  what  usually,  happens.  Ex- 
perience shows  that  it  is  not  wise  to  trust  human  cupidity  where  it  has  the 
opportunity  to  aggrandize  itself  at  the  expense  of  others.  The  claim  of  having 
cheapened  the  price  to  the  consumer  is  the  usual  pretext  on  which  monopolies 
of  this  kind  are  defended,  and  is  well  answered  in  Richardson  v.  Buhl,  77 
Mich.,  632.  After  commenting  on  the  tendency  of  the  combination  known  as  the 
"  Diamond  Match  Company,"  to  prevent  competition  and  to  control  prices, 
Champlin,  J.,  said :  "  It  is  no  answer  to  say  that  this  monopoly  has  in  fact  re- 
duced the  price  of  friction  matches.  That  policy  may  have  been  necessary  to 
crush  competition.  The  fact  exists  that  it  rests  in  the  discretion  of  this  com- 
pany at  any  time  to  raise  the  price  to  an  exorbitant  degree."  Monopolies  have 
always  been  regarded  as  contrary  to  the  spirit  and  policy  of  the  common  law. 
The  objections  are  stated  in  the  "  Case  on  Monopolies,"  Darcy  v.  Allein,  Coke's 
Reports,  Fart  XI  S4b.  *  *  *  ^  society  in  which  a  few  men  are  the  em- 
ployers and  the  great  body  are  merely  employees  or  servants,  is  not  the  most 
desirable  in  a  Republic ;  and  it  should  be  as  much  the  policy  of  the  laws  to  mul- 
tiply the  numbers  engaged  in  independent  pursuits  or  in  the  profits  of  produc- 
tion, as  to  cheapen  the  price  to  the  consumer.  Such  policy  would  tend  to  an 
equality  of  fortunes  among  its  citizens,  thought  to  be  so  desirable  in  a  Republic, 
and  lessen  the  amount  of  pauperism  and  crime.  *  *  *  gy  ^j^g  invariable 
laws  of  human  nature,  competition  will  l)e  excluded  and  prices  controlled  in  the 
interest  of  those  connected  with  the  combination  or  trust. 

In  the  meantime  two  other  cases  had  been  decided,  one  in  Xe- 
braska  and  one  in  Xew  York,  in  which  the  courts  found  it  neces- 
sary to  pass  upon  a  trust  agreement  by  which  the  control  of  various 
companies  was  combined.  In  the  Nebraska  case,  State  v.  Nebraska 
Distilling  Co.,^  it  appeared  that  the  Distillers'  &  Cattle  Feeders' 
Trust,  an  unincorporated  association,  had  been  formed  in  1887  by 
owners  of  nine  distilleries  for  the  purpose  of  restricting  output, 
regulating  i)rices,  and  preventing  competition.  These  objects  Avere 
to  be  accomplished  by  securing  control  of  as  many  distilleries  as 
possible,  the  method  being  stated  as  follows : 

An  arrangement  or  agreement  is  made  by  which  the  company  is  to  transfer 
its  capital  stock  to  the  trustees  of  the  Distillers'  and  Cattle  Feeders'  Trust,  for 
which  said  trustees  are  to  issue  certificates  of  the  trust.  The  real  estate  upon 
which  the  distillery  is  situated  is  deeded  to  some  one  member  of  the  company  as 
trustee  for  the  stockholders,  and  the  trustee  then  leases  said  real  estate  to  the 
company  for  the  term  of  25  years.  The  capital  stock  of  the  company  is  can- 
celed and  new  stock  issued  to  said  nine  trustees  of  the  trust,  for  which  the 
trustees  give  the  agreed  amount  of  certificates  of  the  trust.  The  board  of  di- 
rectors of  tbo  coinpMiiy  rosigii  and  a  new  board  is  elected,  a  majority  of  which 
are  taken  from  the  niuf  trustees  of  the  trust.  *  *  *  "piie  trustees  of  the 
trust  have  almost  unlimited  power  and  control  over  all  distilleries  that  enter  it. 
They  can  limit  their  production  or  suspend  their  operation  altogether.     *     *     * 

»29  NVbr.,  700  (1890). 


64  EEPOET  OF   THE   COMMISSIONER   OF   COEPOKATIONS. 

The  trustees  confine  the  production  of  the  distilleries  under  their  control  to  the 
large  houses  situated  in  favorable  localities,  which  can  be  run  at  less  expense 
than  small  houses  located  in  unfavorable  places.  *  *  *  The  *  *  * 
trustees  can,  and  do,  at  will  restrict  and  limit  the  production  and  supply  of 
alcohol,  spirits,  ;ind  other  liquors,  and  thereby  enhance  their  value. 

The  distillery  of  the  defendant  Avas  brought  into  the  trust  in  the 
manner  described,  and  later,  by  order  of  the  trustees,  it  was  closed 
and  ceased  to  do  business.  Finally,  the  directors  were  authorized  to 
sell  all  the  property,  cancel  and  surrender  all  stock,  dissolve  the 
corporation,  and  notify  the  secretary  of  state  of  Nebraska  to  that 
effect.  Quo  warranto  proceedings  were  instituted  to  obtain  a  for- 
feiture of  the  franchise.  The  court  held  that  the  corporation  was 
without  power  to  dispose  of  all  its  property,  franchises,  and  powers 
necessary  to  carry  on  its  business;  that  the  object  of  the  trust  was 
illegal,  as  destroying  competition  and  creating  a  monopoly ;  that  the 
original  conveyance  by  the  defendant  of  its  property  with  such  pur- 
pose in  view  was  void;  and  that  as  there  had  been  an  abuse  of  the 
corporate  franchise  it  would  be  annulled. 

In  the  New  York  case  mentioned,  Pittsburg  Carbon  Co.  (Ltd.)  v. 
MclNIillin,  receiver,^  the  court  held  that  competing  corporations,  for 
the  purpose  of  furthering  a  combination  in  restraint  of  trade,  can  not 
lawfully  transfer  control  of  their  affairs  to  a  single  individual  trustee. 
In  this  case  it  appeared  that  in  1887  the  plaintiff,  together  Avith 
eight  other  companies  manufacturing  electric-light  carbons,  entered 
into  an  agreement  by  which  the  business  of  the  nine  companies  should 
be  exclusively  managed  and  directed  by  one  Hawks  as  trustee.  He 
was  to  designate  the  kind  of  goods  to  be  manufactured,  fix  the  prices 
at  which  and  the  jjersons  to  whom  they  should  be  sold,  and,  after 
paying  expenses,  divide  the  profits  as  provided  by  the  agreement. 
The  plaintiff  assigned  to  the  trustee  all  existing  contracts,  and  he 
assumed  their  performance.  Carbons  manufactured  in  plaintiff's 
factory  were  billed  in  the  name  of  the  trustee  and  delivered  to  the 
Brush  Electric  Co.  imder  an  outstanding  contract  with  plaintiff. 
The  plaintiff  withdrew  from  the  combination,  and  an  action  was 
brought  in  Ohio  by  other  members  to  wind  up  its  affairs,  the  de- 
fendant being  appointed  receiver.  Plaintiff  claimed  that  the  Brush 
Electric  Co.  should  pay  it  for  the  carbons  delivered,  and  not  pay  to 
the  trustee.  Payment  not  being  made,  this  action  was  brought.  The 
defendant,  McMillin,  receiver  of  the  combination,  also  brought  an 
action  against  the  Brush  Electric  Co.  The  amount  claimed  was  paid 
into  court  and  the  receiver  was  substituted  for  the  Brush  company  as 
defendant.  The  court  held  that  the  agreement  between  the  plaintiff 
and  the  trustee  was  illegal,  for  the  reason  that  it  was  entered  into  in 
furtherance  of  a  combination  in  restraint  of  trade;  that  to  sustain 

1119  N.  Y..  46   (1890), 


TRUST  LAWS  AISTD  UNFAIR   COMPETITIOISr.  65 

the  action  Tvoiild  permit  the  plaintiff  to  escape  from  tlie  operation 
of  the  rule  which  denies  affirmative  relief  to  a  party  to  an  illegal 
contract;  and  that  as  between  the  plaintiff  and  the  receiver  the 
latter  was  entitled  to  the  fund. 

Another  important  case  where  a  trust  agreement  was  involved  is 
Bishop  V.  American  Preservers'  Co./  in  which  the  facts  were  as 
follows:  The  American  Preservers'  Co.  was  a  voluntary  association 
of  the  stockholders  of  seven  corporations  in  different  States  engaged 
in  preserving  fruit.  The  agreement  among  them  provided  for  the 
creation  of  a  board  of  nine  trustees,  to  whom  the  parties  were  to 
ti-ansfer  their  shares  in  exchange  for  trust  certificates.  The  trustees 
were  to  hold  such  shares  and  receive  the  dividends  for  distribution 
as  dividends  upon  W\^  certificates.  The  trustees  were  authorized  to 
purchase  the  stock  of  other  corporations  by  the  issue  of  trust  certifi- 
cates and  to  organize  other  corporations  to  carry  on  the  business  of 
the  trust  and  to  hold  the  stock  of  such  corporations.  The  trust  was 
to  remain  in  force  25  years,  unless  sooner  terminated  with  the  consent 
of  a  certain  number  in  excess  of  a  majority  of  the  certificate  holders, 
and  the  trustees  could  not  sell  or  surrender  any  stock  held  by  them 
without  the  consent  of  a  majority  in  number  and  value  of  the  holders 
of  the  certificates.  The  trustees  incorporated  the  American  Pre- 
servers' Co.,  which  brought  an  action  against  Bishop  to  obtain  pos- 
session of  certain  stock  in  trade,  machinery,  etc.,  which  he  had  agreed 
to  transfer  to  said  corporation,  and  for  which  he  had  giA^en  a  bill 
of  sale,  and  received  trust  certificates.  Bishop  tendered  the  certifi- 
cates back,  retained  the  property,  and  defended  on  the  ground  that 
the  corporation  was  an  instrument  of  an  unhnvful  trust  and  without 
standing  in  court.  The  court  held  that  the  illegal  purpose  of  the 
trust  agreement  was  apparent  on  its  face,  and  it  was  void  as  being 
injurious  to  the  public  interest;  that  the  bill  of  sale  rested  under 
the  ban  of  the  law,  and  that  the  court  would  not  aid  in  the  recovery 
of  the  property,  but  would  leave  the  parties  where  they  were  when 
the  suit  was  begun. 

Corporate  combinations. — The  attitude  of  the  courts  in  declin- 
ing to  uphold  direct  agreements  limiting  competition  among  com- 
peting concerns,  as  well  as  trust  agreements  having  the  same  object, 
led  to  the  formation  of  corporate  combinations  in  the  hope  that  the 
courts  would  look  upon  them  with  more  tolerance.  Some  grounds 
for  this  hope  may  have  been  contained,  to  some  extent  at  least,  in  a 
dictum  of  the  court  in  People  v.  North  Kiver  Sugar  Refining  Co., 
where  it  was  said  (121  N.  Y.,  at  p.  624)  : 

It  is  said,  liowever,  that  a  consolidation  of  manufacturing  corporations  is 
permitted  liy  the  law.  and  that  the  trust  or  combination  or  partnership,  however 

1  157   111.,  284    (1895). 
30035°— 10 5 


66  EEPOET   OF    THE    COMMISSIONER    OF    COKPOKATIONS. 

it  may  be  described,  amounts  only  to  a  practical  consolidation  which  public 
policy  does  not  forbid  because  the  statute  permits  it.  (Laws  of  1867,  chap.  960; 
Laws  of  1884,  chap.  367.)  The  refineries  did  not  avail  themselves  of  that 
statute.  They  chose  to  disregard  it,  and  to  reach  its  practical  results  without 
subjection  to  the  prudential  restraints  with  which  the  State  accompanied  its 
permission.  If  there  had  been  a  consolidation  under  the  statute,  one  single 
corporation  would  have  taken  the  place  of  the  others  dissolved.  They  would 
have  disappeared  utterly,  and  not,  as  under  the  trust,  remained  in  apparent 
existence  to  threaten  and  menace  other  organizations  and  occupy  the  ground 
which  otherwise  would  be  left  free.  Under  the  .statute  the  resultant  combina- 
tion would  itself  be  a  corporation  deriving  its  existence  from  the  State,  owing 
duties  and  obligations  to  the  State,  and  subject  to  the  control  and  supervision 
of  the  State,  and  not,  as  here,  an  unincorporated  board,  a  colossal  and  gigantic 
partnership,  having  no  corporate  functions  and  owing  no  corporate  alleghince. 
Under  the  statute  the  consolidated  company  taking  the  place  of  the  separate 
corporations  could  have  as  capital  stock  only  an  amount  equal  to  the  fair 
aggregate  value  of  the  rights  and  franchises  of  the  companies  absorbed ;  and 
not  as  here  a  capital  stock  double  that  value  at  the  outset  and  capable  of  an 
elastic  and  irresponsible  increase.  The  difference  is  very  great  and  serves 
further  to  indicate  the  inherent  illegality  of  the  trust  combination. 

At  the  time  that  the  above  opinion  was  rendered,  however,  it  had 
already  been  decided  on  common-law  principles  in  Michigan,  in 
the  case  of  Richardson  v.  Biihl,^  that  a  corporate  combination 
formed  for  monopolistic  purposes  was  illegal.  In  that  case  it 
appeared  that  the  Diamond  Match  Co.,  a  Connecticut  corporation, 
had  been  organized  for  the  purpose  of  monopolizing  and  controlling 
the  making  of  friction  matches  and  establishing  the  price  thereof 
by  uniting  in  one  corporation  all  match-manufacturing  interests  in 
the  United  States.  To  accomplish  this  object  it  became  necessary  to 
acquire  many  plants  and  to, require  the  owners  not  to  reenter  the 
business  for  10  years  or  more.  The  Richardson  Match  Co.,  a  Michi- 
gan corporation  located  at  Detroit,  was  one  of  the  companies  sold  to 
the  Diamond  Match  Co.  The  complainant  owned  or  controlled  all 
of  the  stock  of  the  Richardson  INIatch  Co.  In  the  transaction  by 
Avhich  this  stock  was  exchanged  for  that  of  the  Diamond  Match  Co. 
the  defendant  made  certain  advances  of  money  to  the  complainant 
and  became  surety  for  the  latter  and  the  Richardson  Match  Co.  on 
various  obligations.  This  advance  was  secured  by  the  assignment  of 
some  1,800  shares  of  the  Richardson  Match  Co.,  with  the  right  to 
A'ote  same  and  to  retain  dividends,  the  stock  to  be  returned  when  the 
obligations  were  satisfied.  The  defendants  also  became  officers  of 
the  company.  The  loan  by  defendants  to  complainant  was  used  to 
pay  for  preferred  stock  of  the  Diamond  Match  Co.,  the  greater  part 
of  which  was  indorsed  to  Buhl  to  secure  payment  of  the  loan.  Con- 
tracts were  entered  into  with  respect  to  the  manner  in  which  the 
dividends  from  the  stock  held  as  coHateral  should  be  divided  and 

177  Mich.,  632   (1889). 


TEUST  LAWS  AND  UNFAIR  COMPETITION.  67 

applied,  and  providing  for  a  sale  in  case  of  default.  A  bill  was 
brought  to  enjoin  the  sale  of  the  security,  and  from  a  decree  direct- 
ing a  retransfer  of  the  stock  to  the  complainant  and  finding  a  large 
sum  due  from  the  defendants,  the  latter  appealed.  No  question  as  to 
the  validity  of  the  contract  or  combination  on  the  ground  of  public 
policy,  or  otherwise,  was  raised  by  the  parties,  but  the  court,  of  its 
own  motion,  held  that  the  objects  sought  to  be  attained  in  the  forma- 
tion and  organization  of  the  Diamond  Match  Co.  were  unlawful, 
as  creating  a  monopoly  in  a  necessity,  and  that  the  contract  in  ques- 
tion, being  made  to  further  its  objects  and  purposes,  was  void  as 
against  public  policy. 

A  few  years  later  substantially  the  same  result  was  reached  by  the 
court  in  Distilling  &  Cattle  Feeding  Co.  v.  People.^  In  that  case  a 
writ  in  the  nature  of  quo  warranto  was  filed,  alleging  that  for  the 
purpose  of  controlling  and  establishing  a  monopoly  in  the  manufac- 
ture and  sale  of  distilling  products  various  corporations  had  formed 
a  trust  and  placed  their  stock  in  the  hands  of  nine  trustees ;  that  the 
combination  had  absorbed  81  distilleries;  that  subsequently  the  Dis- 
tilling &  Cattle  Feeding  Co.  was  incorporated  in  Illinois,  the  nine 
trustees  constituting  the  directors;  that  the  property  of  the  con- 
stituent corporations  was  conveyed  to  the  new  corporation,  which 
eventually  controlled  and  substantially  monopolized  the  business  of 
manufacturing  high  wines,  spirits,  and  distillery  products  in  the 
United  States,  and  that  it  has  been  enabled  to  and  did  dictate  prices 
to  all  consumers  at  pleasure.  Defendant  was  ousted  from  its  fran- 
chise and  appealed.  It  was  urged  that  the  change  in  the  form  of 
organization  from  an  unincorporated  association  to  a  corporation  and 
the  change  in  the  mode  of  holding  distillery  properties  by  surrender- 
ing the  stock  of  the  constituent  corporations  and  having  the  proper- 
ties themselves  conveyed  to  the  defendant  purged  the  comlnnation 
of  an}^  illegality.  In  aflirming  the  judgment  of  the  court  below,  it 
was  held  that  the  Distillers  &  Cattle  Feeders'  Trust,  Avhich  preceded 
the  incorporation  of  the  defendant,  was  an  organization  which  con^ 
travened  well-established  principles  of  public  policy  and  was  there- 
fore illegal ;  that  as  the  corporation  merely  succeeded  the  trust,  its 
operations  being  carried  on  in  the  same  way  and  by  the  same  agencies 
as  before,  and  as  the  control  exercised  over  the  distillery  business 
and  the  virtual  monopoly  formerly  held  by  the  trust  were  in  no  de- 
gree changed  or  released,  it  was  as  essentially  opposed  to  public 
policy  as  when  the  trust  was  in  existence.  Corporate  organization 
could  not  purge  the  trust  scheme  of  its  illegality.  The  charter  author- 
izing the  defendant  to  engage  in  a  general  distillery  business  in 
Illinois  and  elsewhere  and  to  own  property  necessary  for  that  pur- 

1  lu6  111.,  448   (1895). 


68  EEPORT   OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

pose  gave  no  power  to  enter  upon  a  scheme  of  getting  control  of  sub- 
stantially all  the  distillery  business  of  the  country  for  the  purpose 
of  controlling  production  and  prices,  crushing  competition,  and  es- 
tablishing a  virtual  monopoly  in  that  business. 

The  decision  in  the  preceding  case  was  followed  in  Harding  v. 
American  Glucose  Co.^  In  the  latter  case  the  complainant  was  a 
stockholder  of  that  company,  which  was  a  New  Jersey  corporation 
doing  business  at  I*eoria,  111.  It  was  charged,  among  other  things, 
that  the  officers  and  directors  of  the  corporation  were  about  to  make 
a  sale  of  the  plant  at  Peoria  to  a  new  corporation  (the  Glucose 
Sugar  Eefining  Co.)  and  to  abandon  the  business  theretofore  con- 
ducted; that  five  other  corporations  engaged  in  the  same  business 
were  about  to  sell  their  plants  to  the  new  corporation ;  that  all  these 
sales  constituted  one  transaction;  and  that  the  arrangement  con- 
stituted a  giant  pool,  trust,  or  combine,  formed  for  the  purpose  of 
controlling  the  prices  of  glucose  and  grape  sugar,  of  suppressing  com- 
petition, and  of  creating  a  monopoly.  The  alleged  method  emploj^ed 
was  to  merge  the  plants  by  issuing  stock  in  the  new  corporation,  and 
where  this  method  failed  to  buy  such  organizations  and  plants  for 
cash.  It  was  in  evidence  that  there  were  only  seven  corporations  en- 
gaged in  the  manufacture  of  glucose,  and  that  one  of  them  had  re- 
fused to  enter  the  combination;  that  glucose  could  not  be  success- 
fully manufactured  except  in  what  is  known  as  the  corn  belt  of  the 
United  States;  that  the  corn  belt  constituted  an  ellipse  of  about  950 
miles  in  length  and  al)out  700  miles  in  width,  with  Peoria  as  the 
geographical  center,  and  all  within  1,000  miles  of  Chicago;  that  the 
contract  between  the  American  Glucose  Co.  and  the  new  corporation 
provided  that  the  former  would  not  for  25  years  within  a  radius  of 
1,500  miles  of  Chicago  engage  in  the  business  of  buying,  manufac- 
turing, or  selling  glucose,  grape  sugar,  or  any  of  the  products  of  any 
glucose  factory ;  and  that  somewhat  similar  contracts  had  been  made 
Avith  the  other  corporations.  The  agreement  was  carried  into  effect 
while  the  litigation  was  pending,  and  it  was  proved  that  as  soon  as 
the  new  organization  undertook  the  operation  of  the  plants  con- 
veyed to  it,  the  prices  of  glucose  and  its  products  were  advanced. 
The  bill  was  dismissed  and  the  complainant  appealed.  In  reversing 
the  decree  the  court  held,  among  other  things,  that  any  combination 
of  competing  corporations  for  the  purpose  of  controlling  prices,  or 
limiting  production,  or  suppressing  competition,  was  contrary  to 
public  policy;  that  the  public  policy  of  Illinois  had  always  been 
against  trusts  and  combinations  organized  for  the  purpose  of  sup- 
pressing competition  and  creating  monopoly;  that  such  policy  was 
manifested  by  the  decisions  of  its  courts  and  the  antitrust  acts  of 
1891  and  1893;  that  imder  the  circumstances  the  agreement  not  to 

1182  111.,  551    (1899). 


TRUST  LAWS  AND  UlSTFAIR  COMPETITION".  69 

mannfnctiire  and  sell  glucose  within  1,500  miles  of  Chicago  amounted 
to  a  total  restraint  of  trade,  was  void,  and  the  transaction,  of  which 
it  was  a  part,  illegal.  The  decree  dismissing  the  bill  was  reversed  and 
the  cause  was  remanded  with  instructions  to  enter  a  decree  settins: 
aside  the  deed  to  the  Glucose  Sugar  Eefining  Co.  and  all  contracts, 
assignments,  and  other  instruments  accompan^'ing  its  delivery,  so  far 
as  the  American  Glucose  Co.  and  its  directors,  officers,  and  stock- 
holders were  concerned.  The  following  is  quoted  from  the  opinion 
of  the  court : 

The  material  consideration  in  tlie  case  of  such  combinations  is,  as  a  general 
thin.^r,  not  tliat  prices  are  raised,  but  that  it  rests  in  the  power  and  discretion 
of  the  trust  or  corporation  takinjz;  all  the  plants  of  the  several  corporations  to 
raise  prices  at  any  time,  if  it  sees  fit  to  do  so.  It  does  not  relieve  the  trust  of 
its  objectionable  features,  that  it  may  reduce  the  price  of  the  articles  which  it 
manufactures,  because  such  reduction  may  be  brought  about  for  the  express 
purpose  of  crushing  out  some  comjietitor  or  competitors.  *  *  *  The  transfer 
of  its  property,  niade  by  the  American  Glucose  Co.,  was  a  transfer  to  a  corpo- 
ration, created  for  the  express  purpose  of  taking  its  property  and  the  property 
of  other  corporations,  so  as  to  use  them  in  the  suppression  of  competition,  an1 
in  the  creation  of  a  monopoly  in  the  manufacture  of  glucose,  and  grape  sugar, 
and  their  products  and  by-products.  The  whole  scheme,  as  devised  and  con- 
summated, was  a  fraud  not  only  on  the  public  but  upon  the  dissenting  stockholder 
filing  this  bill.  *  *  *  This  contract  [not  to  manufacture,  etc.]  indicates 
clearly  that  the  object  of  the  whole  sch.eme  was  to  suppress  c<in)petition  in  the 
mauufacture  of  the  products  referred  to  and  to  create  a  monopoly  therein. 


CHAPTER  ITI. 

THE   FEDERAI    ANTITRUST   lAWS   AND   THEIR  INTER- 
PRETATION. 

Section  1.  Introductory. 

This  chapter  presents,  in  its  first  part,  the  text  of  the  Sherman 
Antitrust  Act. 

The  second  part  of  the  chapter  seeks  to  show  the  scope  of  the  apph- 
cation  of  this  act  as  determmed  by  judicial  decisions,  especially  with 
respect  to  certam  kinds  of  combinations  which  fall  within  its  prohi- 
bitions. The  constitutionaHty  of  the  Sherman  Antitrust  Act  has  been 
afhrmed  by  the  Supreme  Court,  the  meaning  of  the  terms  used  therein 
defined,  and  the  scope  of  its  application  has  been  largely  defined 
in  the  numerous  cases  that  have  been  decided.  The  several  sections 
indicate  in  a  broad  way  what  the  judicial  interpretation  has  been  in 
these  matters.  In  regard  to  the  application  of  the  act,  no  effort  has  been 
made  at  a  minute  analysis,  the  classification  adopted  being  intended 
to  show  the  ground  broadly  as  to  (1)  kinds  of  persons  or  business 
affected  (e.  g.,  manufacturers,  merchants,  farmers,  laborers,  raikoads^ 
etc.),  and  (2)  the  chief  devices  for  forming  business  combmations 
which  have  been  held  to  be  within  the  meaning  of  the  law  (e.  g.,  price 
agreements,  holding  companies,  mergers,  etc.).  This  grouping,  there- 
fore, is  not,  nor  is  it  intended  to  be,  an  exhaustive  analysis  of  the  decis- 
ions, but  rather  one  of  a  practical  character  from  the  point  of  view  of 
the  layman  as  distinguished  from  that  of  the  lawyer.  The  extent  to 
which  the  various  remedies  afforded  by  the  Sherman  Antitrust  Act 
have  been  applied  is  also  described. 

The  third  part  of  the  chapter  contains  statements  concerning  other 
important  Federal  legislation  affecting  trusts  and  combinations  in 
restraint  of  trade,  namely,  certain  parts  of  the  Wilson  Tariff  Act  of 
1894,  of  the  Panama  Canal  Act  of  August  24,  1912,  of  the  Federal 
Trade  Commission  Act  of  September  26,  1914,  and  of  the  Clayton 
Antitrust  Act  of  October  15,  1914. 

THE  SHERMAN  ANTITRUST  ACT. 

Section  2.  Text  of  law. 

The  first  and  second  sections  of  the  Sherman  Antitrust  Act  con- 
tain the  two  principal  proliibitions,  namely,  agamst  every  contract, 
combination,  or  conspiracy,  in  restramt  of  interstate  or  foreign  com- 
merce, and  agamst  monopohzingor  attemptmg  to  monopolize  the  same: 

Sec.  1.  Every  contract,  combination  in  the  form  of  trust  or  otherwise,  or  con- 
spiracy, in  restraint  of  trade  or  commerce  among  the  several  States,  or  with  foreign 

70 


TRUST   LAWS  AND   UNFAIR   COMPETITION".  71 

nations,  is  hereby  declared  to  be  illegal.  Every  person  who  shall  make  any  such 
contract  or  engage  in  any  such  combination  or  conspiracy,  shall  be  deemed  guilty  of 
a  misdemeanor,  and,  on  conviction  thereof,  shall  be  punished  by  fine  not  exceeding 
five  thousand  dollars,  or  by  imprisonment  not  exceeding  one  year,  or  by  both  said 
punishments,  in  the  discretion  of  the  court. 

Sec.  2.  Every  person  who  shall  monopolize,  or  attempt  to  monopolize,  or  combine 
or  conspire  with  any  other  person  or  persons,  to  monopolize  any  part  of  the  trade  or 
commerce  among  the  several  States,  or  with  foreign  nations,  shall  be  deemed  guilty 
of  a  misdemeanor,  and,  on  conviction  thereof,  shall  be  punished  by  a  fine  not  exceed- 
ing five  thousand  dollars,  or  by  imprisonment  not  exceeding  one  year,  or  by  both 
said  punishments,  in  the  discretion  of  the  court. 

The  third  section  appUes  the  prohiljitions  of  the  first  section  to 
commerce  witliin  the  Territories  or  the  District  of  Columlna  or  to 
commerce  between  such  jiu-isdictions  or  between  them  and  the 
States  and  foreign  nations: 

Sec.  3.  Every  contract,  combination  in  form  of  trust  or  othei-wise,  or  conspiracy, 
in  restraint  of  trade  or  commerce  in  any  Territory  of  the  United  States  or  of  the  District 
of  Columbia,  or  in  restraint  of  trade  or  commerce  between  any  such  Territory  and 
another,  or  between  any  such  Territory  or  Territories  and  any  State  or  States  or  the 
District  of  Columbia,  or  with  foreign  nations,  or  between  the  District  of  Columbia  and 
any  State  or  States  or  foreign  nations,  is  here])y  declared  illegal.  Every  person  who 
shall  make  any  such  contract  or  engage  in  any  such  combination  or  conspiracy,  shall 
be  deemed  guilty  of  a  misdemeanor,  and,  on  conviction  thereof,  shall  be  punished 
by  fine  not  exceeding  five  thousand  dollars,  or  by  imprisonment  not  exceeding  one 
year,  or  by  both  said  punishments,  in  the  discretion  of  the  court. 

Sections  4  and  5  give  the  circuit  courts  jurisdiction  to  enforce  the 
law  and  provide  that  proceedings  in  equity  may  be  brought  by  the 
United  States  Government  to  prevent  and  restrain  violations  thereof. 
Tlie  courts  may  make  other  persons  parties  to  the  proceedings: 

Sec.  4.  The  several  circuit  courts  of  the  United  States  arc  hereby  invested  with 
jurisdiction  to  prevent  and  restraiii  violations  of  this  act;  and  it  shall  be  the  duty  of 
the  several  district  attorneys  of  the  United  States,  in  theii-  respective  districts,  under 
the  direction  of  the  Attorney-General,  to  institute  proceedings  in  equity  to  prevent 
and  restrain  such  violations.  Such  proceedings  may  be  by  way  of  petition  setting 
forth  the  case  and  praying  that  such  violation  shall  be  enjoined  or  otherwise  prohil)ited. 
"When  the  parties  complained  of  shall  have  been  duly  notified  of  such  petition  the 
court  shall  proceed,  as  soon  as  may  be,  to  the  hearing  and  determination  of  the  case; 
and  pending  such  petition  and  before  final  decree,  the  court  may  at  any  time  make 
such  temporary  restraining  order  or  prohibition  as  shall  be  deemed  just  in  the  premises. 

Sec.  5.  WTienever  it  shall  appear  to  the  court  before  which  any  proceeding  under 
section  four  of  this  act  may  be  pending,  that  the  ends  of  justice  require  that  other 
parties  should  be  brought  before  the  court,  the  court  may  cause  them  to  be  summoned, 
whether  they  reside  in  the  district  in  which  the  court  is  held  or  not ;  and  subpoenas  to 
that  end  may  be  served  in  any  district  by  the  marshal  thereof. 

Section  6  authorizes  the  seizure  and  condemnation  of  property  in 
the  course  of  transportation  in  interstate  commerce  or  to  a  foreign 
country  belonging  to  combinations,  etc.,  prohibited  in  the  first  section : 

Sec.  6.  Any  property  owned  under  any  contract  or  bj'  any  combinatioUj  or  pursuant 
to  any  conspiracy  (and  being  the  subject  thereof)  mentioned  in  section  one  of  this 


72  REPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

art,  and  being  in  the  course  of  transportation  from  one  State  to  another,  or  to  a  foreign 
comitry,  shall  he  forfeited  to  the  United  States,  and  may  be  seized  and  condemned  by 
like  proceedings  as  those  provided  by  law  for  the  forfeiture,  seizure,  and  condemnation 
of  property  imported  into  the  United  States  contrary  to  law. 

Section  7  gives  to  any  person  injured  by  reason  of  violation  of  this 
law  a  right  to  sue  for  treble  damages,  costs,  etc.: 

Sec.  7.  Any  person  who  shall  be  injured  in  his  business  or  property  by  any  other 
person  or  corporation  by  reason  of  anything  forbidden  or  declared  to  be  unlawful  by 
this  act,  may  sue  therefor  in  any  circuit  court  of  the  United  States  in  the  district  in 
which  the  defendant  resides  or  is  found,  without  respect  to  the  amount  in  controversy, 
and  shall  recover  threefold  the  damages  by  him  sustained,  and  the  costs  of  suit,  includ- 
ing a  reasonable  attorney's  fee. 

Section  8  defuies  the  word  "person"  to  include  corporations: 

Sec.  8.  That  the  word  "person,"  or  "persons,"  wherever  used  in  this  act  shall  be 
deemed  to  include  corporations  and  associations  existing  under  or  authorized  by  the 
laws  of  either  the  United  States,  the  laws  of  any  of  the  Territories,  the  laws  of  any 
State,  or  the  laws  of  any  foreign  country. 

JUDICIAL  INTERPRETATION. 
Section  3.  Topics  considered. 

The  following  sections  (3  to  24)  are  intended  to  show  the  judicial 
interpretations  of  the  Sherman  Antitrust  Act  in  regard  to  the  following 
subjects:  Constitutionahty;  interstate  commerce;  foreign  commerce; 
restraint  of  trade ;  monopoHze  and  attempt  to  monopolize;  trading  and 
manufacturing  combinations;  labor  combinations;  railroad  combina- 
tions ;  farmers'  combinations ;  mergers ;  holding  companies ;  agreements 
to  fix  prices;  agreements  to  hmit  output;  agreements  to  apportion  out- 
put; agreements  to  divide  temtory;  agreements  to  divide  earnings 
or  profits;  corners;  patent  combinations;  agreements  to  fix  resale 
prices,  and  the  question  of  the  certainty  of  the  law.  There  is  also 
a  short  section  to  show  the  extent  to  which  the  various  remedies 
afforded  by  this  law  have  been  apphed. 

In  each  of  these  sections  a  particular  topic  is  considered,  including 
a  general  statement,  a  brief  summary  of  the  leading  case  or  cases, 
and  sometimes  a  few  citations  of  other  important  cases  bearing  on 
the  same  subject.^ 

Section  4.  Constitutionality. 

The  constitutionality  of  the  Sherman  Antitrust  Act  was  decided  at 
a  comparatively  early  date  in  favor  of  the  power  of  Congress  to  pro- 
hibit combinations  in  restraint  of  trade  in  interstate  commerce  under 
the  clause  of  the  Constitution  which  grants  to  Congi-ess  the  power 
to  regulate  commerce  among  the  States  and  with  foreign  nations. 

'  Cases  subsequent  to  Mar.  15,  1915,  are  not  covered  by  this  report. 


TEUST   LAWS  AND  UNFAIR  COMPETTTIOlSr.  73 

United  States  v.  Joint  Traffic  Association  (171  U.  S.,  505), 
Supreme  Court,  1S98. — Thirty-one  railroud  companies  engaged  in 
interstate  transportation  between  Cliicago  and  the  Atlantic  seaboard 
made  an  agreement  wdth  respect  to  rates  of  transportation  on  their 
lines,  and  a  suit  in  equity  was  instituted  by  the  Government  to 
declare  the  agreement  null  and  void  and  to  enjoin  its  performance. 
One  defense  set  up  was  that  the  law  as  interpreted  by  the  Supreme 
Court  in  the  Trans-Missouri  Freight  case,  namely,  as  prohibiting 
contracts  in  reasonable  restraint  of  trade,  was  unconstitutional  as 
depriving  the  defendants  of  their  liberty  and  property  without  duo 
process  of  law  and  as  depriving  them  of  the  equal  protection  of  the 
laws.  The  com-t  held  that  Congress  in  regulating  the  interstate 
commerce  of  railroad  corporations  has  the  power  to  prohibit  all 
contracts  or  combinations  which  restram  trade  by  shutting  out  com- 
petition. 

The  court  said  in  part  (pp.  572-573): 

Notwithstanding  the  general  liberty  of  contract  which  is  possessed  by  the  citizen 
under  the  Constitution,  we  find  that  there  are  many  kinds  of  contracts  which,  while 
not  in  themselves  immoral  or  mala  in  sc,  may  yet  be  prohibited  by  the  legislation  of 
the  States  or,  in  certain  cases,  by  Congress.  The  question  comes  back  whether  the 
statiite  under  review  is  a  legitimate  exercise  of  the  power  of  Congress  over  interstate 
commerce  and  a  valid  regulation  thereof.  The  question  is,  for  us,  one  of  power  only, 
and  not  of  policy.  We  think  the  power  exists  iu  Congress,  and  that  the  statute  is 
therefore  valid. 

Northern  Securities  Co.  v.  United  States  (193  U.  S.,  197), 
Supreme  Court,  1904. — The  Northern  Securities  Co.  was  organized 
as  a  holding  corporation.  At  the  time  of  the  commencement  of  the 
suit  it  held  more  than  nine-tenths  of  the  stock  of  the  Northern  Pacific 
Railroad  Co.  and  more  than  thi*ee-fourths  of  the  stock  of  the  Great 
Northern  Railroad  Co.,  corporations  having  competing  and  substan- 
tially parallel  lines  from  Buluth  and  St.  Paul  to  the  Pacific  coast. 
The  shareholders  of  the  two  railroad  companies  in  Heu  of  their  stock 
were  to  receive,  upon  an  agreed  basis,  shares  in  the  Securities  com- 
pany. The  Securities  company  voted  the  stock  held,  and  collected 
the  dividends  thereon,  and  in  turn  declared  dividends  on  its  stock. 
The  management  of  the  two  roads  was  thus  placed  under  the  same 
control,  and  competition  was  eliminated.  A  suit  in  equity  was  brought 
by  the  Government  to  declare  the  combination  or  conspirac}^  unlawful, 
to  enjoin  the  Northern  Securities  Co.  from  acquiring,  holding,  or  voting 
said  shares,  and  to  enjoin  the  stockholders  of  the  two  railroad  com- 
jDanies  from  carrying  on  the  scheme  to  put  the  two  railroad  companies 
under  the  control  of  the  Securities  company.  The  suit  was  defended 
on  the  ground  that  the  power  of  Congress  to  regulate  interstate  com- 
merce does  not  give  it  the  right  to  regulate  or  to  control  the  owner- 
ship of  shares  of  stock  of  corporations  engaged  therein. 


74  EEPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

The  court  held  this  combination  was  contrary  to  the  Sherman 
Act,  and  that  the  prohibition  of  such  a  scheme  was  within  the  power 
of  Congress. 

Section  6.  Interstate  commerce. 

The  meaning  of  interstate  commerce  with  respect  to  the  prohi- 
bitions of  the  Sherman  Act  has  been  defined  in  numerous  decisions, 
but  it  must  suffice  in  this  connection  to  point  out  a  few  of  the  leading 
distinctions  made  in  the  decisions  of  the  Supreme  Court  in  connection 
with  the  interpretation  of  the  Antitrust  Law.  To  present  all  the  dis- 
tinctions which  have  been  made  regarding  what  is  interstate  com- 
merce and  what  is  not  would  require  a  review  of  practically  all  the 
cases  under  the  Sherman  Act  as  well  as  many  others  arising  under 
the  commerce  clause  of  the  Constitution. 

An  early  decision  (Knight  case),  wliich  is  discussed  below,  made  a 
distinction  between  "manufacture"  and  "commerce,"  and  held  that 
a  mere  combination  of  manufacturers  was  not  within  the  purview  of 
the  law.  The  circumstances  of  the  case  and  its  decision  were  so 
peculiar  that  little  miportance  is  attached  to  this  decision  to-day. 
(See  p.  75.)  In  so  far  as  a  combination  of  manufacturers  is  directly 
engaged  in  selling  goods  in  interstate  or  foreign  commerce,  it  may 
come  within  the  scope  of  the  law. 

Further  fight,  moreover,  is  thrown  on  this  subject  by  the  considera- 
tion given  to  the  kinds  of  business  which  are  covered  by  the  law, 
which  are  discussed  in  a  broad  way  in  sections  9  to  12,  inclusive,  of 
this  chapter. 

United  States  v.  E.  C.  Knight  Co.  (156  U.  S.,  1),  Supreme 
Court,  1895. — The  American  Sugar  Refining  Co.  at  the  beginning  of 
1892  had  refineries  located  in  various  States,  with  about  two-thirds  of 
the  production  of  refined  sugar  in  the  United  States  under  its  owner- 
ship or  control,  and  during  1892  it  obtained  all  of  the  remainder  excej^t 
about  2  per  cent,  by  acquiring  through  separate  agreements  at  differ- 
ent times  the  shares  of  four  independent  refineries  by  exchanging 
shares  of  its  own  capital  stock  for  the  shares  of  the  said  companies. 
The  Government  sought  to  compel  the  cancellation  of  the  agreements 
under  wliich  the  shares  were  exchanged,  and  to  enjoin  further  viola- 
tions of  the  Sherman  Act.  The  court  held  that  the  Sherman  Act 
prohibited  monopoly  of  interstate  and  international  commerce,  but 
not  monopoly  in  manufacture,  and  that  the  business  of  refimng  sugar 
bore  no  direct  relation  to  commerce  among  the  States  or  with  foreign 
nations. 

The  court  said  in  part  (pp.  12,  16-17) : 

Doubtless  the  power  to  control  the  manufacture  of  a  given  thing  involves  in  a  cer- 
tain sense  the  control  of  itfl  disposition,  but  this  is  a  secondary  and  not  the  primary 
sense;  and  although  the  exercise  of  that  power  may  result  in  bringing  the  operation 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  75 

of  commerce  into  play,  it  does  not  control  it,  and  affects  it  only  incidentally  and 
indii-ectly.  Commerce  succeeds  to  manufacture,  and  is  not  a  part  of  it.  The  power 
to  regulate  commerce  is  the  power  to  prescribe  the  rule  by  which  commerce  shall  be 
governed,  and  is  a  power  independent  of  the  power  to  suppress  monopoly.  But  it 
may  operate  in  repression  of  monopoly  whenever  that  coines  within  the  rules  by  which 
commerce  is  governed  or  whenever  the  transaction  is  itself  a  monopoly  of  commerce. 
*  *  *  It  was  in  the  light  of  well-settled  principles  that  the  act  of  July  2,  1890, 
was  framed.  Congress  did  not  attempt  thereby  to  assert  the  power  to  deal  with 
monopoly  directly  as  such;  or  to  limit  and  restrict  the  rights  of  corporations  created 
by  the  States  or  the  citizens  of  the  States  in  the  acquisition,  control,  or  disposition 
of  property;  or  to  regulate  or  prescribe  the  price  or  prices  at  which  such  property 
or  the  products  thereof  should  be  sold;  or  to  make  criminal  the  acts  of  persons  in  the 
acquisition  and  control  of  property  wliich  the  States  of  their  residence  or  creation 
sanctioned  or  permitted.  Aside  from  the  provisions  applicable  where  Congress  might 
exercise  municipal  power,  what  the  law  struck  at  was  combinations,  contracts,  and 
conspu'acies  to  monopolize  trade  and  commerce  among  the  several  States  or  with 
foreign  nations;  but  the  contracts  and  acts  of  the  defendants  related  exclusively  to 
the  acquisition  of  the  Philadelpliia  refineries  and  the  business  of  sugar  refining  in 
Pennsylvania,  and  bore  no  direct  relation  to  commerce  between  the  States  or  with 
foreign  nations.  The  object  was  manifestly  private  gain  in  the  manufacture  of  the 
commodity,  but  not  through  the  control  of  interstate  or  foreign  commerce.  It  is- 
true  that  the  bill  alleged  that  the  products  of  these  refineries  were  sold  and  dis- 
tributed among  the  several  States,  and  that  all  the  companies  were  engaged  in  trade 
or  commerce  with  the  several  States  and  with  foreign  nations;  but  this  was  no  more 
than  to  say  that  trade  and  commerce  served  manufacture  to  fulfill  its  fuiiction.  Sugar 
was  refined  for  sale,  and  sales  were  probably  made  at  Philadelphia  for  consumption, 
and  tmdoubtedly  for  resale  by  the  first  purchasers  throughout  Pennsylvania  and 
other  States,  and  refined  sugar  was  also  forwarded  by  the  companies  to  other  States 
for  sale.  Nevertheless  it  does  not  follow  that  an  attempt  to  monopolize,  or  the  actual 
monopoly  of,  the  manufactiure  was  an  attempt,  whether  executory  or  consummated, 
to  monopolize  commerce,  even  though,  in  order  to  dispose  of  the  product,  the  instru- 
mentality of  commerce  was  necessarily  invoked.  There  was  nothing  in  the  proofs 
to  indicate  any  intention  to  put  a  restraint  upon  trade  or  commerce,  and  the  fact, 
as  we  have  seen,  that  trade  or  commerce  might  be  indirectly  affected  was  not  enough 
to  entitle  complainants  to  a  decree. 

A  stronp^  dissenting  opinion  was  rendered  by  Justice  Harlan. 

While  the  Ivniglit  case  has  never  been  expressly  overruled,  recent 
decisions  have  held  similar  combinations  of  manufacturing  companies 
which  sold  their  ])roducts  in  interstate  commerce  to  be  mthin  the 
prohibitions  of  the  Sherman  Act. 

In  Standard  Oil  Co.  v.  United  States  (221  U.  S.,  1),  1911,  and  in 
United  States  v.  American  Tobacco  Co.  (221  U.  S.,  106),  1911,  the 
Kjiight  case  was  relied  on  by  the  defendants  to  exclude  them  from  the 
operation  of  the  law.  In  the  former  case,  however,  the  court  in 
referrhig  to  tliis  argument,  said  (pp.  68-69): 

That  the  act,  even  if  the  averments  of  the  bill  be  tme,  can  not  be  constitutionally 
applied,  because  to  do  so  would  extend  the  power  of  Congress  to  subjects  dehors  the 
reach  of  its  authority  to  regulate  commerce,  by  enabling  that  body  to  deal  mth  mere 
questions  of  production  of  commodities  within  the  States.  But  all  the  structure 
upon  which  this  argument  proceeds  is  based  upon  the  decision  in  United  States  v. 
E.  C.  Knight  Co.,  156  U.  S.,  1.     The  view,  however,  which  the  argument  takes  of 


Y6  EEPORT    OF    THE   COMMISSIONER  OF   CORPORATIONS. 

that  case  and  the  arguments  based  upon  that  view  have  been  so  repeatedly  pressed 
upon  this  court  in  connection  with  the  interpretation  and  enforcement  of  the  Anti- 
trust Act,  and  have  been  so  necessarily  and  expressly  decided  to  be  unsound  as  to 
cause  the  contentions  to  be  plainly  foreclosed  and  to  require  no  express  notice. 

The  Standard  Oil  Co.  was  directly  engaged  in  transportation  between 
the  States,  so  that  thelvjiight  case  would  seem  to  have  no  apphcation. 
In  the  Tobacco  case,  however,  the  transactions  in  question  related 
purely  to  manufacturing  tobacco  and  selhng  the  same,  but  in  spite 
of  insistent  argument  by  the  defendants  based  on  the  Knight  case  the 
court  disregarded  this  aspect  of  the  question. 

Addyston  Pipe  &  Steel  Co.  v.  United  States  (175  U.  S.,  211), 
Supreme  Court,  1899. — Six  corporations  manufacturing  iron  pipe  and 
selling  the  same  in  interstate  commerce  entered  into  various  agree- 
ments intended  to  enhance  the  price  of  pipe  in  such  commerce,  such  as 
dividmg  the  markets  for  the  purpose  of  eliminating  bidding  on  public 
contracts,  etc.  These  concerns  enjoyed  the  bulk  of  the  trade  in  iron 
pipe  in  a  large  number  of  States.  The  Government  sought  an  injunc- 
tion asamst  the  continuation  of  this  combination.  It  was  contended 
that  the  agreements  in  question  had  no  direct  relation  to  interstate 
commerce,  and  under  the  precedent  of  the  Ejiight  case  should  not  be 
held  unlawful.  The  court  held  that  agreements  whereby  all  compe- 
tition was  eliminated  from  bidding  on  pubhc  contracts,  so  far  as  they 
related  to  sales  for  dehvery  beyond  the  State  in  which  the  sales  were 
made,  had  a  direct  relation  to  interstate  commerce  and  were  within 
the  proliibition  of  the  Sherman  Act. 

The  court  said  in  part  (pp.  240-242,  246,  247): 

While  no  particular  contract  regarding  the  furnishing  of  pipe  and  the  price  for  which 
it  should  be  furnished  was  in  the  contemplation  of  the  parties  to  the  combination  at  the 
time  of  its  formation,  yet  it  was  their  intention,  as  it  was  the  purpose  of  the  combina- 
tion, to  directly  and  by  means  of  such  combination  increase  the  price  for  which  all 
contracts  for  the  delivery  of  pipe  within  the  territory  above  described  should  be  made, 
and  the  latter  result  was  to  be  achieved  by  abolishing  all  competition  between  the 
parties  to  the  combination.  The  dhect  and  immediate  result  of  the  combination  was 
therefore  necessarily  a  restraint  upon  interstate  commerce  in  respect  of  articles  manu- 
factured by  any  of  the  parties  to  it  to  be  transported  beyond  the  State  in  which  they 

were  made. 

******* 

As  has  frequently  been  said,  interstate  commerce  consists  of  intercourse  and  traffic 
between  the  citizens  or  inhabitants  of  different  States,  and  includes  not  only  the  trans- 
portation of  persons  and  property  and  the  navigation  of  public  waters  for  that  purpose, 
but  also  the  purchase,  sale  and  exchange  of  commodities.  Gloucester  Ferry  Co.  v. 
Pennsylvania,  114  U.  S.,  196,  203;  Kidd  v.  Pearson,  128  U.  S.,  1,  20.  If,  therefore,  an 
agreement  or  combination  directly  restrains  not  alone  the  manufacture,  but  the  pur- 
chase, sale  or  exchange  of  the  manufactvu'ed  commodity  among  the  several  States,  it  is 
brought  within  the  provisions  of  the  statute.  *  *  *  any  agreement  or  combina- 
tion which  dhectly  operates,  not  alone  upon  the  manufacture,  but  upon  the  sale, 
transportation  and  delivery  of  an  article  of  interstate  commerce,by  preventing  or  re- 
stricting its  sale,  etc.,  thereby  regulates  interstate  commerce  to  that  extent  and  to 


TKUST   LAWS  AND   UNFAIR  COMPETITION.  77 

the  same  extent  trenches  upon  the  power  of  the  national  legislature  and  violates  the 
statute.     We  think  it  plain  that  this  contract  or  combination  elfects  that  result. 

*  *  *  ^Miere  the  contract  is  for  the  sale  of  the  article  and  for  its  delivery  in  another 
State,  the  transaction  is  one  of  interstate  commerce,  although  the  vendor  may  have  also 
agreed  to  manufacture  it  in  order  to  fulfil  his  contract  of  sale.  In  such  case  a  combina- 
tion of  this  character  would  be  properly  called  a  combination  in  restraint  of  interstate 
commerce,  and  not  one  relating  only  to  manufacture.     *    *    * 

In  regard  to  such  of  these  defendants  as  might  reside  and  carry  on  business  in  the 
same  State  where  the  pipe  provided  for  in  any  particular  contract  was  to  be  de- 
livered, the  sale,  transportation  and  delivery  of  the  pipe  by  them  under  that  contract 
would  be  a  transaction  wholly  within  the  State,  and  the  statute  would  not  be  applicable 
to  them  in  that  case.  They  might  make  any  combination  they  chose  with  reference  to 
the  proposed  contract,  although  it  should  happen  that  some  nonresident  of  the  State 
eventually  obtained  it. 

Hopkins  v.  United  States  (171  U.  S.,  578),  Supreme  Court, 
1898. — The  Kansas  City  Live  Stock  Exchange  was  an  unmcorporated 
association  of  commission  men  doing  business  at  stockyards  partly 
located  on  each  side  of  the  boundary  line  between  the  States  of 
Missouri  and  Kansas.  The  commission  men,  individually,  received 
consignments  of  cattle  from  the  said  States  and  various  other  States 
and  Territories  and  sold  them  for  account  of  the  owners.  Members 
of  the  exchange  were  prohibited  from  employing  agents  except  at  a 
fixed  salary,  or  sending  i)repaid  telegrams  or  information  as  to  the 
condition  of  the  market.  They  were  also  prohibited  from  buying 
cattle  from  commission  men  in  Kansas  City  who  were  not  members 
of  the  exchange.  The  commission  men,  to  a  large  extent,  loaned 
money  to  the  cattle  raisers  and  took  mortgages  on  the  cattle  for 
security;  they  also  undertook  to  feed  the  cattle  consigned,  to  prepare 
them  for  the  market,  etc.  The  Government  brought  a  suit  to  dissolve 
the  exchange  and  to  enjoin  fiu-ther  combination  of  like  character,  as 
in  violation  of  the  Sherman  Act. 

The  court  held  that  the  location  of  the  stockyards  was  nt)t  material 
with  respect  to  the  question  of  interstate  commerce,  and  that  the  busi- 
ness of  commission  men  was  not  interstate  commerce. 

The  com-t  said  in  part  (j)p.  590,  591): 

The  selling  of  an  article  at  its  destination,  which  has  been  sent  from  another  State, 
while  it  may  be  regarded  as  an  interstate  sale  and  one  which  the  importer  was  entitled 
to  make,  yet  the  services  of  the  individual  employed  at  the  place  where  the  article  is 
sold  are  not  so  connected  with  the  subject  sold  as  to  make  them  a  portion  of  interstate 
commerce,  and  a  combination  in  regard  to  the  amount  to  be  charged  for  such  service  is 
not,  therefore,  a  combination  in  restraint  of  that  trade  or  commerce. 

Montague  &  Co.  v.  Lowry  (193  U.  S.,  38),  Supreme  Court,  1904. — 
An  association  of  dealers  in  tiles  in  California  and  manufacturers  of 
tiles  in  other  States  was  formed,  whereby  the  dealers  agreed  to  buy 
from  such  manufacturers  only  and  to  sell  unset  tiles  to  other  dealers 
at  Hst  prices,  which  were  more  than  50  per  cent  higher  than  the  prices 
they  i)aid  the  manufacturers,  the  manufacturers  agreeing,  on  the 


78  EEPOET  OF   THE   COMMISSIONER   OF   COEPOEATIONS. 

other  hand,  to  sell  to  member  dealers  only.  Lowry,  an  independent 
dealer,  brought  an  action  for  damages  under  section  7  of  the  Antitrust 
Act.  The  court  held  that  although  the  sales  of  unset  tiles  were  within 
the  State  of  California,  and  although  this  scheme 'aimed  at  an  enhance- 
ment of  prices  in  California,  it  was  so  bound  up  with  the  agreement  of 
manufacturers  in  other  States  not  to  sell  to  nonmembers  that  it 
amounted  to  a  restramt  of  interstate  commerce  within  the  meaning 
of  the  Sherman  Act. 

The  court  said  in  part  (pp.  45-48) :  -- 

It  is  urged  that  the  sale  of  unset  tiles,  provided  for  in  the  seventh  section  of  the 
by-laws,  is  a  transaction  wholly  within  the  State  of  California  and  is  not  in  any  event  a 
violation  of  the  act  of  Congress  which  applies  only  to  commerce  between  the  States. 
The  provision  as  to  this  sale  is  but  a  part  of  the  agreement,  and  it  is  so  united  with  the 
rest  as  to  be  incapable  of  separation  without  at  the  same  time  altering  the  general 
purpose  of  the  agi-eement.  The  whole  agi'eement  is  to  be  construed  as  one  piece,  in 
which  the  manufactm-ers  are  parties  as  well  as  the  San  Francisco  dealers,  and  the 
refusal  to  sell  on  the  part  of  the  manufacturers  is  connected  with  and  a  part  of  the 
scheme  which  includes  the  enhancement  of  the  price  of  the  unset  tiles  by  the  San 
Francisco  dealers.  The  whole  thing  is  so  bound  together  that  when  looked  at  as  a 
whole  the  sale  of  unset  tiles  ceases  to  be  a  mere  transaction  in  the  State  of  California, 
and  becomes  part  of  a  purpose  which,  when  carried  out,  amounts  to  and  is  a  contract  or 
combination  in  restraint  of  interstate  trade  or  commerce. 

*  *  *  the  combination,  if  carried  out,  directly  effects  a  restraint  of  interstate 
commerce.    *    *    * 

The  purchase  and  sale  of  tiles  between  the  manufacturers  in  one  State  and  dealers 
therein  in  California  was  interstate  commerce  within  the  Addyston  Pipe  case,  175  U.  S. , 
211.  It  was  not  a  combination  or  monopoly  among  manufactm'ers  simply,  but  one 
between  them  and  dealers  in  the  manufactm-ed  article,  which  was  an  article  of  com- 
merce between  the  States. 

GiBBs  V.  McNeeley  (118  Fed.,  120),  Circuit  Court  of  Appeals, 
1902. — An  association  comprising  manufacturers  of  and  dealers  in 
red-cedar  shingles  existed  in  the  State  of  Washington,  which  was  the 
only  State  in  which  red-cedar  shingles  were  produced,  and  the  mem- 
bers thereof  sold  such  shingles  chiefly  to  residents  in  other  States. 
The  said  association  restricted  the  output  of  shingles  and  fixed  the 
prices  at  which  they  were  sold.  A  dealer  brought  an  action  under 
the  Sherman  Law  for  damages  sustained  from  the  said  acts.  The 
court  held  the  association  to  be  a  combination  in  restraint  of  inter- 
state commerce,  and  said  in  part  (p.  126) : 

The  defendants  in  error  were  engaged  in  manufacturing  a  product  of  which,  as  they 
well  knew,  more  than  80  per  cent  was  to  be  sold,  delivered,  and  used  in  States  other 
than  that  of  its  manufacture.  They  were  in  the  business  of  selling  and  delivering 
shingles  to  purchasers  in  other  States.  In  fixing  a  list  of  prices  they  fixed  it  not  alone 
for  domestic  trade,  but  for  external  commerce  as  well.  The  inevitable  result  of  the 
combination  is  to  enhance  the  price  and  restrain  the  trade  of  shingles  in  all  the  States. 
In  the  E.  C.  Knight  Co.  case  it  was  held  that  a  monopoly  to  manufacture  did  not 
necessarily  affect  interstate  commerce.  The  reason  for  so  holding  is  apparent.  From 
the  creation  of  a  monopoly  to  manufacture,  it  does  not  necessarily  follow  that  inter- 
state commerce  in  the  monopolized  article  will  in  any  degree  be  interfered  with.     The 


TKUST  LAWS  AND   UNFAIR   COMPETITIOISr.  79 

total  production  of  the  manufactured  article  and  its  price  may,  notwithstanding  the 
monopoly,  remain  unaffected.  In  that  case  it  was  said,  "There  was  nothing  in  the 
proofs  to  indicate  any  intention  to  put  a  restraint  upon  trade  or  commerce."  But 
this  can  not  be  said  of  a  combination  of  manufacturers  in  one  State  who  agree  to  arbi- 
trarily increase  the  price  and  diminish  the  total  output  of  a  manufactured  product 
which  is  made  only  in  that  State,  but  which  is  principally  bought  and  used  in  other 
States.  The  intention  to  put  a  restraint  upon  interstate  commerce  in  such  a  case 
is  evident,  and  the  restraint  is  not  indii-ect,  but  direct,  and  it  is  the  necessary  and 
inevitable  result  of  the  combination. 

Section  6.  Foreign  commerce. 

The  decisions  of  the  courts  with  respect  to  what  constitutes  com- 
merce ''with  foreign  nations"  in  comiection  with  the  mterpretation 
of  the  Sherman  Law  are  few  in  number,  and  the  two  decisions  ren- 
dered by  the  Supreme  Court  involving  an  exposition  of  the  law  on  the 
subject  touch  this  matter  in  an  almost  incidental  way.  While  in  the 
first  opinion  (United  Fruit  Co.  case,  see  p.  80  below)  the  court  dis- 
cussed the  question  very  briefly,  it  was  held  that  acts  committed  in  a 
foreign  country  and  not  repugnant  to  its  laws,  although  done  in 
pursuance  of  a  conspiracy  entered  into  in  the  United  States  with 
intent  to  restrain  the  importation  of  goods  into  the  United  States  by 
the  plaintiff  afforded  it  no  ground  for  a  private  action  for  damages. 
It  may  be  pointed  out  in  this  connection  that  no  reference  was 
made  to  the  provisions  of  the  Wilson  Tariff  Act  of  1894,  sections  73 
to  77  (see  pp.  125-126),  regarding  restraint  of  trade  in  the  importa- 
tion of  goods  from  foreign  countries.  It  is  noteworthy,  however,  that 
in  a  suit  b}^  the  Government  to  restrain  the  execution  of  a  contract  in 
restraint  of  foreign  commerce  (see  p,  81)  the  cu-cuit  com't  in  its 
opinion  specifically  referred  to  the  fact  that  it  contemplated  the  com- 
mission of  acts  in  this  country.  In  a  case  in  the  Circuit  Court  of 
Appeals  (see  below)  prior  to  the  above-mentioned  decision  of  the 
Supreme  Court,  no  distinction  of  this  character  appears  to  have  been 
made,  and  the  opinion  does  not  show  where  the  acts  held  to  be  a 
violation  of  the  law  were  committed.  According  to  the  opinion  of  the 
circuit  court  above  referred  to,  the  execution  of  a  contract  to  restrain 
the  export  trade  of  the  United  States,  entered  mto  in  a  foreign  country 
but  involving  acts  done  in  this  country,  may  be  prevented. 

Thomsen  v.  Union  Castle  Mail  S.  S.  Co.  et  al.  (166  Fed. 
251) ,  Circuit  Court  of  Appeals,  1908. — This  was  an  action  for  treble 
damages  under  the  Sherman  Law.  The  plaintiff  alleged  that  defend- 
ants, carriers  in  the  South  African  trade,  had  united  as  "The  South 
African  Linos,"  fixed  rates  and  required  shippei-s  to  pay  a  percentage 
in  addition  to  a  reasonable  freight  rate  which  they  should  receive  back 
if  they  did  not  ship  by  other  lines.  The  court  held  that  the  manifest 
purpose  of  the  combmalion  was  to  prevent  competition  between 
members  by  maintaining  uniform  rates  and  to  eliminate  competition 


80  EEPOKT  OF    THE   COMMISSIONER  OF   CORPORATIONS. 

with  other  Hnes  by  requiring  shippers  to  pay  that  which  was  equiva- 
lent to  forfeit  money;  that  the  fact  that  the  combination  was  formed 
in  a  foreign  country  was  immaterial,  as  it  affected  the  foreign  com- 
merce of  this  country  and  was  put  into  operation  here.  The  combi- 
nation was,  therefore,  unlawful  under  the  Sherman  Act. 

American  Banana  Co.  v.  United  Fruit  Co.  (213  U.  S.  347), 
Supreme  Court,  1909. — Both  parties  to  this  action  to  recover  treble 
damages  under  the  Sherman  Act  were  corporations  organized  in  the 
United  States.  It  was  alleged  in  substance  that  the  defendant  was 
organized  in  1899  and  was  engaged  in  importing  bananas  into  the 
United  States  from  Central  and  South  America;  that  for  the  purpose 
of  monopolizing  such  trade  between  such  countries,  of  regulating 
prices,  controlling  production,  and  preventing  competition,  the  defend- 
ant acquired  the  property  and  business  of  several  competitoi-s,  entered 
into  contracts  regulating  prices  and  restricting  business -with  other 
competitors,  acquired  the  controlling  interest  in  others,  and  organized 
a  common  selling  agent  for  all;  that  in  1903  one  McConnell  started  a 
banana  plantation  in  Panama  and  began  to  build  a  railway  to  the 
nearest  port,  affording  the  only  practicable  means  of  access  to  the 
plantation;  that  he  was  notified  by  the  defendant  that  he  must  either 
combine  or  stop;  that  the  plaintiff  corporation,  organized  for  the 
purpose  of  growing  and  buying  bananas  in  Central  America  and 
importing  them  into  the  United  States,  purchased  said  plantation  and 
railroad  concession  from  McConnell;  that  subsequently  Costa  Rican 
soldiers  and  officials,  instigated  by  the  defendant,  seized  a  portion  of 
the  plantation  and  a  cargo  of  supplies,  and  stopped  the  construction 
of  the  railway;  that  the  plaintiff  tried  to  induce  Costa  Rica  to  with- 
draw its  soldiers  and  officials  and  tried  to  induce  the  United  States  to 
interfere  but  was  thwarted  in  both  by  the  defendant;  that  the  defend- 
ant purchased  an  alleged  title  to  the  plaintiff's  plantation;  that  the 
defendant  and  its  associates  combined  to  prevent  the  sale  of  bananas 
to  other  exporters  than  themselves  and  made  such  arrangements  with 
growers  that  there  v^ as  no  market  in  which  bananas  could  be  purchased 
by  the  plaintiff  for  export,  and  had  prevented  the  plaintiff"  from  buying 
for  export  and  sale;  and  that  the  defendant  had  sought  to  injure  the 
plaintiff's  business  by  offering  positions  to  its  employees  and  by  dis- 
charging or  threatening  to  discharge  its  own  employees  who  were 
stockholders  of  the  plaintiff  corporation. 

The  circuit  court  dismissed  the  complaint  upon  motion,  as  not 
setting  forth  a  cause  of  action.  This  judgment  was  affirmed  by  the 
Circuit  Court  of  Appeals  and  the  case  was  brought  to  the  Supreme 
Court  by  writ  of  error.  The  judgment  was  again  affii-med,  the  court 
holding  that  damages  can  not  be  recovered  for  injury  resulting  from 
the  acts  of  a  foreign  sovereignty,  done  within  its  own  territory,  though 
mduced  by  defendants  in  furtherance  of  a  conspiracy  to  restrain  the 


TRUST   LAWS   AND    UNFAIR    COMPETITION.  81 

foreign  commerce  of  the  United  States;  nor  for  acts  of  defendants 
done  in  foreign  territory  but  permitted  by  local  law,  though  done 
pursuant  to  a  conspiracy  entered  into  in  this  country. 

Regarding  the  acts  of  representatives  of  the  United  Fruit  Co.,  done 
in  Panama,  the  court  says  (p.  359): 

As  to  the  buying  at  a  high  price,  etc.,  it  is  enough  to  say  that  we  have  no  ground  for 
Buijposing  that  it  was  unlawful  in  the  countries  where  the  purchases  were  made. 
Giving  to  this  complaint  every  reasonable  latitude  of  interpretation  we  are  of  opinion 
that  it  alleges  no  case  under  the  act  of  Congress  and  discloses  nothing  that  we  can  sup- 
pose to  have  been  a  tort  where  it  Avas  done.  A  conspiracy  in  this  country  to  do  acts 
in  another  jmisdiction  does  not  draw  to  itself  those  acts  and  make  them  milawful,  if 
they  are  permitted  by  the  local  law. 

United  States  v.  Hamburg-Amerikanische  Packet-Fahrt- 
Actien-Gesellschaft  et  al.  (200  Fed.  806) ,  Circuit  Court,  1911. — 
The  Government  filed  its  biU  to  restrain  the  further  execution  of  an 
agreement  to  form  an  association  called  the  Atlantic  Conference, 
relating  to  the  carriage  of  steerage  passengers  between  the  United 
States  and  Europe. 

The  bill  alleged  a  contract  providing  for  a  division  of  traffic,  the 
pooling  of  receipts,  and  the  enforcement  of  the  agreement.  The  fixing 
of  rates,  it  was  charged,  was  left  to  individual  discretion,  though  the 
holders  of  75  per  cent  of  the  shares  of  traffic  could  direct  any  party  to 
raise  or  reduce  its  charges.  The  bill  also  alleged  excessive  and  arbi- 
trary rates  as  a  result  of  the  combination  and  a  virtual  monopoly  of 
the  steerage  passenger  traffic  covered  by  the  agreement.  A  demurrer 
interposed  by  the  defendants  was  overruled,  the  court  holding  that 
(1)  the  agreement  directly  and  materially  affected  the  foreign  com- 
merce of  the  United  States  in  that  it  diverted  a  part  thereof,  viz,  the 
business  of  carrying  steerage  passengers  (the  court  limiting  its  remarks 
to  eastbound  traffic)  from  the  natural  channels  of  free  competition  and 
prescribed  what  percentage  each  line  should  carry;  (2)  it  was  imma- 
terial where  the  agreement  was  entered  into;  (;^)  the  averments  made 
out  a  combination  and  conspiracy  in  violation  of  the  Sherman  Act. 
The  court,  in  part,  said  (p.  807) : 

The  agi-eement,  directly  and  materially  affects  foreign  commerce  and  is  partly  intra- 
tonitorial  because  it  is  to  be  carried  out  in  part  in  the  United  States.  Confining  our- 
selves to  eastbound  traffic,  it  is  evident  that  the  contract  contemplates  the  solicitation 
of  business,  the  making  of  contracts  of  carriage,  the  taking  on  board  of  piussengers,  and 
the  actual  commencement  of  transportation  within  the  territory  of  the  United  States. 
It  requires  acts  to  be  done  ill  this  country;  such  acts  are  as  material  and  essential  as 
those  to  bo  performed  abroad,  and  the  part  of  the  contract  requiring  them  can  not  be 
separated  from  the  remainder 

Wlien  this  case  came  up  for  trial  in  the  district  court  the  terms 
of  the  conference  agreement  were  held  to  be  reasonable  and  not  in 
violation  of  the  Sherman  Law,  but  an  mjunction  issued  restraining 
30035°— IG 0 


82  REPORT  OF    THE   COMMISSIONER   OF   CORPORATIONS. 

the  defendants  from  combining  to  place  special  vessels,  called  '^  fight- 
ing ships,"  near  the  vessels  of  steamship  lines  not  members  of  the 
defendant  combination  and  bidding  below  their  own  rates  in  order  to 
take  the  traffic  away  from  a  rival  Ime.^ 

United  States  v.  Pacific  &  Arctic  Railway  &  Navigation  Co. 
ET  AL.  (228  U.  S.,  87),  Supreme  Court,  1913. — In  this  case  fom* 
corporations,  one  organized  under  the  laws  of  West  Virginia,  one 
under  the  laws  of  Canada,  and  two  under  the  laws  of  British  Colum- 
bia, together  with  certain  of  their  officers,  were  indicted  for  a  con- 
spiracy to  monopolize  and  for  a  monopolization  of  the  transportation 
between  ports  in  the  United  States,  British  Columbia,  and  Alaska. 
The  route  over  which  the  traffic  moved  was  by  steamship  lines  from 
ports  in  the  United  States  and  Vancouver  to  Skagway,  thence  via 
raih'oad  to  the  headwaters  of  the  Yukon  River,  thence  by  boat  down 
the  Yukon  River  to  Dawson  and  other  places.  It  was  urged  on  de- 
murrer to  the  indictment  that  as  part  of  the  transportation  route  was 
outside  of  the  United  States  the  Sherman  Act  did  not  apply.  Re- 
specting this  contention,  the  Supreme  Court,  in  reversing  a  judgment 
sustaining  the  demurrer,  said  in  part  (pp.  105-106): 

The  next  contention  of  defendants  is  that  as  part  of  the  transportation  route  was 
outside  of  the  United  States  the  Antitrust  Law  does  not  apply.  The  consequences 
and,  indeed,  legal  impossibility  are  set  forth  to  such  application,  and,  it  is  said, 
"make  it  obvious  that  our  laws  relating  to  interstate  and  foreign  commerce  were  not 
intended  to  have  any  effect  upon  the  carriage  by  foreign  roads  in  foreign  countries, 
and  *  *  *  it  is  equally  clear  that  our  laws  cannot  be  extended  so  as  to  control  or 
affect  the  foreign  carriage."  This  is  but  saying  that  laws  have  no  extra-territorial 
operation;  but  to  apply  the  proposition  as  defendants  apply  it  would  put  the  trans- 
portation route  described  in  the  indictment  out  of  the  control  of  either  Canada  or  the 
United  States.  These  consequences  we  cannot  accept.  The  indictment  alleges  that 
the  four  companies  which  constitute  the  ^Miite  Pass  &  Yukon  Route  (referred  to  as 
the  railroad)  and  owned  and  controlled  by  the  same  persons,  entered  into  the  combi- 
nation and  conspiracy  alleged,  with  the  intention  alleged,  with  the  Wharves  Company 
and  the  defendant  steamship  companies.  In  other  words,  it  was  a  control  to  be  exer- 
cised over  transportation  in  the  United  States,  and,  so  far,  is  within  the  jurisdiction  of 
the  laws  of  the  United  States,  criminal  and  civil.  If  we  may  not  control  foreign  citi- 
zens or  corporations  operating  in  foreign  territory,  we  certainly  may  control  such 
citizens  and  corporations  operating  in  our  territory,  as  we  undoubtedly  may  control 
oiu"  own  citizens  and  our  own  corporations. 

United  States  v.  Prince  Line  et  al.  ;  United  States  v.  American- 
Asiatic  S.  S.  Co.  ET  al.  (220  Fed.,  230),  District  Court,  1915. — 
These  cases  were  both  suits  to  dissolve  steaitiship  conferences  sun- 
ilar  m  many  respects  to  that  mvolved  in  the  Hamburg-American 
case.  The  traffic  of  the  lines  was  between  the  United  States  and 
foreign  countries,  and  in  the  Prince  Line  case,  at  least,  the  defend- 
ant steamship  lines  were  all  alien  corporations  or  copartnerships, 
with  their  principal  places  of  bushiess  m  foreign  countries.     While 

1  U.  S.  V.  Hamburg-American  S.  S.  Line  et  al.,  21G  Fed.,  971  (1914). 


TEUST   LAWS  AND   UNFAIR  COMPETITION.  83 

the  terms  of  the  conference  agreements  were  held  not  to  violate  the 
Sherman  Antitrust  Act,  the  defendants  were  enjoined  in  the  Prmce 
Line  case  from  refusmg  to  carry  cargo  at  their  regular  berth  rates 
when  there  was  unengaged  space  ui  their  vessels. 

American  Tobacco  Co.  v. United  States  (221  U.  S.,  106),  Supreme 
Court,  1911. — In  this  case  the  lower  court  dismissed  the  Government's 
bill  as  to  two  foreign  corporations  named  as  defendants,  viz,  the  Impe- 
rial Tobacco  Co.  and  the  British-American  Tobacco  Co.  On  appeal 
the  Government  contended  that  the  bill  against  these  companies 
should  not  have  been  dismissed  but  that  the  companies  should  have 
been  commanded  to  observe  the  Sherman  Act  so  far  as  their  dealings 
in  the  cases  were  concerned. 

The  fuial  decree  in  the  suit  directed,  among  other  thmgs,  that 
covenants  between  the  Imperial  Tobacco  Co.,  the  American  Tobacco 
Co.,  and  the  American  Cigar  Co.,  by  which  the  former  and  certam  of 
its  directors  agi-eed  not  to  engage  in  the  manufacture  or  sale  of  to- 
bacco in  the  United  States,  and  the  two  American  companies  and 
certain  of  their  directors  agreed  not  to  engage  in  said  business  m 
Great  Britain  or  Ireland,  and  aU  three  agreed  not  to  engage  in  said 
business  in  countries  other  than  Great  Britain,  Ireland,  and  the 
United  States  be  resciaded,  except  such  as  related  wholly  to  business 
in  foreign  countries  or  such  as  were  covenants  exclusively  between 
foreign  corporations  and  related  wholly  to  business  in  or  between 
foreign  countries. 

It  may  be  noted  that  it  was  provided  in  the  contracts  contaming 
the  objectionable  covenants  that  they  should  be  construed  and  take 
effect  as  contracts  made  m  England  and  m  accordance  with  the  law 
of  England. 

Section  7.  Eestraint  of  trade. 

The  meaning  of  the  term  "restraint  of  trade"  as  used  in  the  Sher- 
man Act,  has  been  the  subject  of  frequent  definition  by  the  courts. 
The  first  authoritative  view  was  given  by  the  Supreme  Court  in 
the  Trans-Missouri  Freight  Association  case  (see  p.  84),  and  was 
in  effect  that  evciy  contract  in  restramt  of  trade,  whether  such 
restramt  was  reasonable  in  its  character  or  not,  was  prohibited. 
This  view  was  subsequently  somewhat  modified,  at  least  in  the  form 
of  expression,  by  the  same  justice  in  the  same  court,  in  the  Joint 
Trafhc  Association  case.  (See  p.  85.)  A  further  departure  from 
this  view  was  made  in  the  Standard  Oil  case  (sec  p.  86),  which 
was  also  followed  in  the  American  Tobacco  case  (see  p.  88).  In  the 
last  two  cases  the  view  taken  was  substantially  that  the  restraint  of 
trade  which  was  prohibited  by  the  Sherman  Act  could  be  determined 
by  the  courts  by  applying  the  same  standard  of  interpretation  tliat  had 
been  applied  by  the  courts  in  the  interpretation  of  the  common  law 


84  KEPOET   OF    THE   COMMISSIONER   OF    COEPOEATIONS. 

in  England  and  in  this  country  with  regard  to  restraint  of  trade  and 
monopoly. 

United  States  v.  Trans-Missouri  Freight  Association  (166 
U.  S.,  290),  Supreme  Court,  1897. — In  1889  certain  railway  compa- 
nies formed  an  association  agreement  for  the  purpose,  among  other 
things,  of  fixmg  the  rates  of  transportation,  aUeged  to  be  reasonable, 
in  an  area  comprismg  a  largo  part  of  the  United  States,  and  of  fining 
the  members  who  failed  to  maintam  the  rates  so  fixed.  This  associa- 
tion continued  in  operation  after  the  passage  of  the  Sherman  Act  on 
July  2,  1890.  The  Government  brought  suit  to  have  the  association 
dissolved  and  the  parties  thereto  enjoined  from  further  combination 
of  like  character. 

It  was  claimed  by  the  Government  that  the  rates  fixed  were  exces- 
sive, but  apparently  no  attempt  was  made  to  prove  this  point.  The 
defendant  railroads  set  up  the  defense  that  the  rates  were  reasonable 
and  that  without  such  agi'eement  the  railroads  would  mcur  great  loss 
and  possibly  rum;  hence,  they  claimed,  the  agreement  was  a  reason- 
able restraint  of  trade  and  not  prohibited  by  the  act. 

The  court  held  that  the  prohibitions  of  the  Sherman  Act  apply  to 
aU  contracts  m  restramt  of  uiterstate  or  foreign  commerce  without 
exception  or  limitation,  and  are  not  confined  to  those  "ui  which  the 
restrauit  is  unreasonable. 

The  court  said  in  part  (p.  328): 

The  term  is  not  of  such  limited  signification.  Contracts  in  restraint  of  trade  have 
been  known  and  spoken  of  for  hundreds  of  years  both  in  England  and  in  this  country, 
and  the  term  includes  all  kinds  of  those  contracts  which  in  fact  restrain  or  may  restrain 
trade.  Some  of  such  contracts  have  been  held  void  and  unenforceable  in  the  courts  by 
reason  of  their  restraint  being  unreasonable,  while  others  have  been  held  valid  because 
they  were  not  of  that  nature.  A  contract  may  be  in  restraint  of  trade  and  still  be  valid 
at  common  law.  Although  valid,  it  is  nevertheless  a  contract  in  restraint  of  trade,  and 
would  be  so  described  either  at  common  law  or  elsewhere.  By  the  simple  use  of  the 
term  "contract  in  restraint  of  trade,"  all  contracts  of  that  nature,  whether  valid  or 
otherwise,  would  be  included,  and  not  alone  that  kind  of  contract  which  was  invalid 
and  unenforceable  as  being  in  unreasonable  restraint  of  trade.  \Mien,  therefore,  the 
body  of  an  act  pronounces  as  illegal  every  contract  or  combination  in  restraint  of  trade 
or  commerce  among  the  several  States,  etc.,  the  plain  and  ordinary  meaning  of  such 
language  is  not  limited  to  that  kind  of  contract  alone  which  is  in  unreasonable  restraint 
of  trade,  but  all  contracts  are  included  in  such  language,  and  no  exception  or  limitation 
can  be  added  without  placing  in  the  act  that  which  has  been  omitted  by  Congress. 

As  a  possible  but  not  explicit  modification  of  this  rigid  and  sweeping 
rule,  the  following  sentence  should  be  noted  (p.  329): 

A  contract  which  is  the  mere  accompaniment  of  the  sale  of  property,  and  thus 
entered  into  for  the  purpose  of  enhancing  the  price  at  which  the  vendor  sells  it,  which 
in  effect  is  collateral  to  such  sale,  and  where  the  main  purpose  of  the  whole  contract  is 
accomplished  by  such  sale,  might  not  be  included,  within  the  letter  or  spirit  of  the 
statute  in  question. 


TRUST  LAWS  AND  UNFAIR   COMPETITION".  85 

In  a  vigorous  dissenting  opinion  of  four  justices  it  was  denied,  how- 
ever, that  the  term  "restraint  of  trade"  had  a  generic  meanmg  which 
included  all  contracts  restrammg  the  freedom  of  trade,  whether  rea- 
sonable or  unreasonable,  and  that  where  such  language  was  used  it  was 
not  a  definition.  The  dissenting  opinion  on  this  point  was  as  follows 
(p.  346): 

Is  it  correct  to  say  that  at  common  law  the  words  "restraint  of  trade  "  had  a  generic 
signification  which  embraced  all  contracts  which  restrained  the  freedom  of  trade, 
whether  reasonable  or  unreasonable,  and,  therefore,  that  all  such  contracts  are  within 
the  meaning  of  the  words  "every  contract  in  restraint  of  trade"?  I  think  a  brief 
consideration  of  the  histoiy  and  development  of  the  law  on  the  subject  will  not  only 
establish  the  inaccm-acy  of  this  proposition,  but  also  demonstrate  that  the  words 
"restraint  of  trade"  embrace  only  contracts  which  unreasonably  restrain  trade,  and, 
therefore,  that  reasonable  contracts,  although  they,  in  some  measure,  "restrain  trade," 
are  not  within  the  meaning  of  the  words.  It  is  true  that  in  the  adjudged  cases  language 
may  be  found  referring  to  contracts  in  restraint  of  trade  which  are  valid  because 
reasonable.  But  this  mere  form  of  expression ,  used  not  as  a  definition ,  does  not  main- 
tain the  contention  that  such  contracts  are  embraced  within  the  general  terms  every 
contract  in  resti-aint  of  trade. 

United  States  v.  Joint  Traffic  Association  (171  U.  S.,  505), 
Supreme  Court,  1898. — The  facts  and  the  judgment  of  the  court 
in  this  case  have  been  given  in  some  detail  above  (see  p.  73);  the 
combination  in  question  was  a  rate-fixing  agreement  of  railroad  com- 
panies. Counsel  for  the  raihoads  argued  that  an  agi'oement  to  fix 
reasonable  rates  was  not  in  restraint  of  trade  within  the  meaning  of 
the  Sherman  Act.  The  opinion  of  the  court,  which  was  given  by 
tha  same  justice  as  in  the  Ti-ans-]\Iissouri  case,  maintained  the  same 
position  as  before,  but  the  language  was  much  less  sweeping  and 
made  the  distinction  between  the  restraints  of  a  direct  and  indirect 
nature. 

The  court  said  in  part  (p.  568): 

In  Hopkins  v.  United  States,  decided  at  this  term,  post,  578,  we  say  that  the  statute 
applies  only  to  those  conti-acts  whose  direct  and  immediate  effect  is  a  restraint  upon 
interstate  commerce,  and  that  to  treat  the  act  as  condemning  all  agi-eements  under 
which,  as  a  result,  the  cost  of  conducting  an  interstate  commercial  business  may  be 
increased,  would  enlarge  the  application  of  the  act  far  beyond  the  fair  meaning  of  the 
language  used.  The  effect  upon  interstate  commerce  must  not  be  indirect  or  inci- 
dental only.  An  agreement  entered  into  for  the  purpose  of  promoting  the  legitimate 
business  of  an  individual  or  corpoi-atior ,  with  no  purpose  to  thereby  affect  or  restrain 
interstate  commerce,  and  which  does  not  directly  restrain  such  commerce,  is  not,  as 
we  think,  covered  by  the  act,  although  the  agi-eement  may  indirectly  and  remotely 
affect  that  commerce.  We  also  repeat  what  is  said  in  the  case  above  cited,  that  "the 
act  of  Congress  must  have  a  reasonal)le  construction,  or  else  there  would  scarcely  be  an 
agreement  or  contract  among  business  men  that  could  not  be  said  to  have,  indirectly 
or  remotely,  some  bearing  upon  interstate  commerce,  and  possibly  to  restraiii  it." 
To' suppose,  as  is  assumed  by  counsel,  that  the  effect  of  the  decision  in  the  Trans- 
Missouri  case  is  to  render  illegal  most  business  contracts  or  combinations,  however 
indispensable  and  necessary  they  may  be,  because,  as  they  assert,  they  all  restrain 


86  EEPORT   OF    THE   COMMISSIONER  OF   CORPORATIONS. 

trade  in  some  remote  and  indirect  degree,  is  to  make  a  most  violent  assiimption  and 
one  not  called  for  or  justified  by  the  decision  mentioned,  or  by  any  other  decision  of 
this  court. 

This  interpretation  of  every  contract  in  restraint  of  trade  provided 
a  transition  to  the  doctrine  advanced  in  the  Standard  Oil  case,  which 
follows. 

Standard  Oil  Co.  v.  United  States  (221  U.  S.,  1),  Supreme 
Court,  1911. — The  Standard  Oil  Co.,  a  New  Jersey  corporation 
engaged  in  refining  oil,  owned  the  capital  stock  of  numerous  other 
corporations  engaged  in  producing  oil,  in  transporting  oil  by 
pipe  hne,  tank  cars,  tank  vessels,  etc.,  in  refining  oil,  and  in  mar- 
keting oil  in  various  States  of  the  United  States  and  in  foreign 
countries.  This  corporation  and  its  subsidiary  companies  trans- 
ported more  than  four-fifths  of  the  crude  oil  from  the  eastern  oil 
fields,  manufactured  more  than  three-fourths  of  the  refuied  oil  in 
the  United  States,  and  marketed  more  than  four-fifths  of  the  illumi- 
nating oil  and  naphtha  sold  in  the  United  States.  The  combination 
was  consohdated  by  a  trust  agreement  in  1882,  which  was  superseded 
by  a  holding  company  in  1899.  The  trust  and  the  holding  company 
acquired  through  control  of  the  subsidiary  companies  the  power  to  fix 
the  price  of  crude  oil  and  the  rates  of  transportation  thereon.  They 
also  prevented  competition  between  these  numerous  subsidiary  com- 
panies. The  Government  claimed  there  was  a  continuing  combina- 
tion in  restraint  of  trade  and  attempt  to  monopolize  a  part  of  inter- 
state and  foreign  commerce.  The  court  held  that  the  Standard  Oil 
Co.  was  a  combination  in  restraint  of  interstate  commerce. 

The  terms  of  the  law,  ''every  contract,  combination  in  the  form  of 
trust  or  otherwise,  or  conspiracy,  in  restraint  of  trade  or  commerce," 
were  held  to  signify  all  undue  interferences  with  trade,  of  whatever 
form  or  description,  and  the  existence  of  such  interference  was  a 
matter  for  the  court  to  determine  according  to  the  facts  in  the 
case  and  to  the  standard  of  reason  which  had  been  applied  in  the 
interpretation  of  the  common  law. 

The  court  said  in  part  (pp.  59-60) : 

(a)  That  the  context  manifests  that  the  statute  was  drawn  in  the  light  of  the  exist- 
ing practical  conception  of  the  law  of  restraint  of  trade,  because  it  groups  as  within 
that  class,  not  only  contracts  which  were  in  restraint  of  trade  in  the  subjective  sense, 
but  all  contracts  or  acts  which  theoretically  were  attempts  to  monopolize,  yet  which 
in  practice  had  come  to  be  considered  as  in  restraint  of  trade  in  a  broad  sense. 

(6)  That  in  view  of  the  many  new  forms  of  contracts  and  combinations  which  were 
being  evolved  from  existing  economic  conditions,  it  was  deemed  essential  by  an  all- 
embracing  enumeration  to  make  sure  that  no  form  of  contract  or  combination  by 
which  an  undue  restraint  of  interstate  or  foreign  commerce  was  brought  about  could 
save  such  restraint  from  condemnation.  The  statute  under  this  view  evidenced  the 
intent  not  to  restrain  the  right  to  make  and  enforce  contracts,  whether  resulting  from 
combination  or  otherwise,  which  did  not  unduly  restrain  interstate  or  foreign  com- 


TRUST  LAWS  AND   UNFAIR   COMPETITION".  87 

merce,  but  to  protect  that  commerce  from  being  restrained  by  methods,  whether  old 
or  new,  which  would  constitute  an  interference  that  is  an  undue  restraint. 

(c)  And  as  the  contracts  or  acts  embraced  in  the  iirovision  were  not  expressly 
defined,  since  the  enumeration  addressed  itself  simply  to  classes  of  acts,  those  classes 
being  broad  enough  to  embrace  every  conceivable  contract  or  combination  wliich 
could  be  made  concerning  trade  or  commerce  or  the  subjects  of  such  commerce,  and 
thus  caused  any  act  done  by  any  of  the  enumerated  methods  anywhere  in  the  whole 
field  of  human  activity  to  be  illegal  if  in  restraint  of  trade,  it  inevitably  follows  that 
the  provision  necessarily  called  for  the  exercise  of  judgment  which  required  that  some 
standard  should  be  resorted  to  for  the  purpose  of  determining  whether  the  prohibitions 
contained  in  the  statute  had  or  had  not  in  any  given  case  been  violated.  Thus  not 
specifying  but  indul)itably  contemplating  and  requiring  a  standard,  it  follows  that  it 
was  intended  that  the  standard  of  reason  which  liad  been  applied  at  the  common  law 
and  in  this  country  in  dealing  with  subjects  of  the  character  embraced  by  the  statute, 
was  intended  to  be  the  measure  used  for  the  purpose  of  determining  whether  in  a 
given  case  a  particular  act  had  or  had  not  brought  about  the  wrong  against  which  the 
statute  pro\'ided. 

Regarding  the  relation  of  this  interpretation  of  the  law  to  previous 
judicial  decisions  on  the  sams  subject  the  court  said  (pp.  67-68) : 

And  in  order  not  in  the  slightest  degree  to  be  wanting  in  frankness,  we  say  that  in 
so  far,  however,  as  by  separating  the  general  language  used  in  the  opinions  in  the 
Freight  Association  and  Joint  Traffic  cases  from  the  context  and  the  subject  and 
parties  with  which  the  cases  were  concerned,  it  may  be  conceived  that  the  language 
referred  to  conflicts  with  the  construction  which  we  give  the  statute,  they  are  neces- 
sarily now  limited  and  qualified.  We  see  no  possible  escape  from  this  conclusion  if 
we  are  to  adhere  to  the  many  cases  decided  in  this  court  in  which  the  Antitrust  Law 
has  been  applied  and  enforced  and  if  the  duty  to  apply  and  enforce  that  law  in  the 
future  is  to  continue  to  exist.  The  first  is  true,  because  the  construction  which  we 
now  give  the  statute  does  not  in  the  slightest  degree  conflict  with  a  single  previous 
case  decided  concerning  the  Antitrust  Law  aside  from  the  contention  as  to  the  Freight 
Association  and  Joint  Traffic  cases,  and  because  every  one  of  those  cases  applied  the 
rule  of  reason  for  the  purpose  of  determining  whether  the  subject  before  the  court  was 
within  the  statute.  The  second  is  also  true,  since,  as  we  have  already  pointed  out, 
unaided  by  the  light  of  reason  it  is  impossible  to  understand  how  the  statute  may  in 
the  future  be  enforced  and  the  public  policy  which  it  establishes  be  made  efficacious. 

Although  the  decision  in  tliis  case  was  unanimous  and  eight  justices 
concurred  in  the  opinion  thereon,  which  was  i)rcpared  by  the  Chief 
Justice,  one  of  them,  Justice  Harlan,  wrote  a  separata  opinion  con- 
curring in  tha  conclusion  of  the  court  but  dissenting  from  some  of  the 
language  used  in  the  opinion.  The  dissentmg  part  of  this  opmion 
related  to  tha  interpretation  of  the  words  ''every  contract,  combina- 
tion in  the  form  of  trust  or  otherwise,  or  conspiracy,  in  restraint  of 
trade  or  commerce."     Justice  Harlan  Sfiid  in  part  (pp.  101-103): 

When  counsel  in  the  present  case  insisted  upon  a  reversal  of  the  former  rulings  of 
this  court,  and  asked  such  an  interpretation  of  the  Antitrust  Act  as  would  allow  reason- 
able restraints  of  interstate  commerce,  this  court,  in  deference  to  established  jiractice, 
should,  I  submit,  have  said  to  them:  "That  question,  according  to  our  practice,  is  not 
open  for  further  discussion  here.  This  court  long  ago  deliberately  held  (1)  that  the 
act,  interpreting  its  words  in  their  ordinary  acceptation,  prohibits  all  restraints  of 
interstate  commerce  by  combinations  in  whatever  form,  and  whether  reasonable  or 


88  EEPOET    OP    THE    COMMISSIONER   OF    CORPORATIONS. 

unreasonable;  (2)  the  question  relates  to  matters  of  public  policy  in  reference  to 
commerce  among  the  States  and  with  foreign  nations,  and  Congress  alone  can  deal 
with  the  subject;  (3)  this  court  would  encroach  upon  the  authority  of  Congress  if, 
under  the  guise  of  construction,  it  should  assume  to  determine  a  matter  of  public 
policy;  (4)  the  parties  must  go  to  Congress  and  obtain  an  amendment  of  the  Antitrust 
Act  if  they  think  this  court  was  wrong  in  its  former  decisions;  and  (5)  this  court  can 
not  and  will  not  judicially  legislate,  since  its  function  is  to  declare  the  law,  while  it 
belongs  to  the  legislative  department  to  make  the  law."  Such  a  course,  I  am  sure, 
would  not  have  offended  the  ' '  rule  of  reason . ' ' 

But  my  brethren,  in  their  wisdom,  have  deemed  it  best  to  pursue  a  different  course. 
They  have  now  said  to  those  who  condemn  our  former  decisions  and  who  o])ject  to  all 
legislative  prohibitions  of  contracts,  combinations  and  trusts  in  restraint  of  interstate 
commerce,  ."You  may  now  restrain  such  commerce,  provided  you  are  reasonable 
about  it;  only  take  care  that  the  restraint  is  not  undue. "  The  disposition  of  the  case 
under  consideration,  according  to  the  views  of  the  defendants,  will,  it  is  claimed, 
quiet  and  give  rest  to  "  the  business  of  the  country. ' '  On  the  contrary,  I  have  a  strong 
conviction  that  it  will  throw  the  business  of  the  country  into  confusion  and  invite 
widely-extended  and  harassing  litigation,  the  injurious  effects  of  which  will  be  felt 
for  many  years  to  come.  When  Congress  prohibited  every  contract,  combination 
or  monopoly,  in  restraint  of  commerce,  it  prescribed  a  simple,  definite  rule  that  all 
could  understand,  and  which  could  be  easily  applied  by  eveiyone  wishing  to  obey 
the  law,  and  not  to  conduct  their  business  in  violation  of  law.  But  now,  it  is  to  be 
feared,  we  are  to  have,  in  cases  without  number,  the  constantly  recurring  inquiry — 
difficult  to  solve  by  proof — whether  the  particular  contract,  combination,  or  trust 
involved  in  each  case  is  or  is  not  an  "unreasonable"  or  "undue"  restraint  of  trade. 
Congi-ess,  in  effect,  said  that  there  should  be  no  restraint  of  trade,  in  any  form,  and  this 
court  solemnly  adjudged  many  years  ago  that  Congress  meant  what  it  thus  said  in 
clear  and  explicit  words,  and  that  it  could  not  add  to  the  words  of  the  act.  But  those 
who  condemn  the  action  of  Congress  are  now,  in  effect,  informed  that  the  courts  will 
allow  such  restraints  of  interstate  commerce  as  are  shown  not  to  be  unreasonable  or 
undue. 

United  States  v.  American  Tobacco  Co.  (221  U.  S.,  106),  Su- 
preme Court,  1911. — The  American  Tobacco  Co.  was  a  combination 
of  numerous  concerns  engaged  in  the  manufacture  of  tobacco  products 
and  their  sale  in  interstate  commerce.  In  all  the  most  important 
branches  of  the  business  (except  cigars)  it  had  acquired  control 
of  much  the  greater  part  of  the  total  business  in  the  United  States. 
Apart  from  an  initial  combination  of  competitors,  this  was  accom- 
pHshcd  largely  b}'  buying  out  competitors  indi^ddually,  with  the  condi- 
tion that  they  would  not  reengage  in  the  business,  and  merging  them 
into  several  larger  companies.  The  combination  also  resorted  to  the 
use  of  bogus  independent  companies,  excessive  price  cutting,  and 
various  other  methods  of  unfair  competition. 

Tliis  combination  the  court  declared  to  be  contrary  to  both  sections 
1  and  2  of  the  Sherman  Act,  and  in  this  comiection  defmed  the 
meaning  of  the  term  "restraint  of  trade"  in  the  first  section,  as 
follows  (pp.  179-180): 

Applying  the  rule  of  reason  to  the  construction  of  the  statute,  it  was  held  in  the 
Standard  Oil  Case  that  as  the  words  "  restraint  of  trade"  at  common  law  and  in  the  law 
of  this  country  at  the  time  of  the  adoption  of  the  Antitrust  Act  only  embraced  acts  or 


TEUST  LAWS  AND  UNFAIE   COMPETITION".  89 

contracts  or  agreements  or  combinations  which  operated  to  the  prejudice  of  the  public 
interests  by  unduly  restricting  competition  or  unduly  obstructing  the  due  course 
of  trade  or  which,  either  because  of  their  inherent  nature  or  effect  or  because  of  the 
evident  piirpose  of  the  acts,  etc.,  injuriously  restrained  trade,  that  the  words  as  used 
in  the  statute  were  designed  to  have  and  did  have  but  a  like  significance.  It  was 
therefore  pointed  out  that  the  statute  did  not  forbid  or  restrain  the  power  to  make 
normal  and  usual  contracts  to  further  trade  by  resorting  to  all  normal  methods,  whether 
by  agreement  or  otherwise,  to  accomplish  such  purpose.  In  other  words,  it  was  held, 
not  that  acts  which  the  statute  prohibited  could  be  removed  from  the  control  of  its 
prohibitions  by  a  finding  that  they  were  reasonable,  but  that  the  duty  to  inter- 
pret which  inevitably  arose  from  the  general  character  of  the  term  restraint  of 
trade  required  that  the  words  restraint  o£  trade  should  be  given  a  meaning  which 
would  not  destroy  the  individual  right  to  contract  and  render  difficult  if  not  im- 
possible any  movement  of  trade  in  the  channels  of  interstate  commerce — ^the  free 
movement  of  which  it  was  the  purpose  of  the  statute  to  protect.  The  soundness  of 
the  rule  that  the  statute  should  receive  a  reasonable  construction,  after  further  mature 
deliberation,  we  see  no  reason  to  doubt. 

In  this  excerpt  attention  is  called  especially  to  the  statement  that 
"it  was  held,  not  that  acts  which  the  statute  prohibited  could  be 
removed  from  the  control  of  its  prohibitions  by  findmg  that  they 
were  reasonable,"  but  that  the  duty  to  interpret  these  general  terms 
required  that  a  reasonable  construction  should  be  given  them. 

Justice  Harlan  concurred  with  the  court  in  the  judgment  rendered, 
but  dissented  with  respect  to  certain  matters  connected  mth  the 
decree,  and  particularly  mth  respect  to  the  interpretation  of  the 
term  "restraint  of  trade"  in  the  Sherman  Act.  He  said  in  part 
(p.  192): 

By  every  conceivable  form  of  expression,  the  majority,  in  the  Trans- Missouri  and 
Joint  Traffic  cases,  adjudged  that  the  act  of  Congress  did  not  allow  restraint  of  inter- 
state trade  to  any  extent  or  in  any  form,  and  three  times  it  expressly  rejected  the 
theory,  which  had  been  persistently  advanced  that  the  act  should  be  construed  as  if 
it  had  in  it  the  word  "  umeasonable  "  or  "undue."  But  now  the  court,  in  accordance 
with  what  it  denominates  the  "rule  of  reason,"  in  effect  inserts  in  the  act  the  word 
"undue,"  which  means  the  same  as  "unreasonable,"  and  thereby  makes  Congress 
say  what  it  did  not  say,  what,  as  I  tliink,  it  plainly  did  not  intend  to  say  and  what, 
since  the  passage  of  the  act,  it  has  explicitly  refused  to  say.  It  has  steadily  refused 
to  amend  the  act  so  as  to  tolerate  a  restraint  of  interstate  commerce  even  where  such 
restraint  could  be  said  to  be  "reasonable"  or  "due."  lu  short,  the  court  now,  by 
judicial  legislation,  in  effect  amends  an  act  of  Congress  relating  to  a  subject  over  which 
that  department  of  the  Government  has  exclusive  cognizance.    *    *•  * 

Section  8.  Monopolize  and  attempt  to  monopolize. 

The  decisions  under  the  Sherman  Act  wliich  have  depended  on 
the  apphcation  of  section  2  of  the  law  have  been  comparatively 
uifrequent,  at  least  in  the  Supreme  Court,  and  in  those  decisions 
the  instances  where  a  clear  statement  appears  of  the  meaning  of 
the  words  "monopolize"  and  "attempt  to  monopolize"  are  rare. 
This  is  partly  because  in  such  cases  the  court  has  often  been  con- 
fronted with  a  complicated  state  of  facts  embracing  a  series  of  devel- 


90  EEPORT  OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

opments  in  business  organization,  a  great  variety  of  metliods  of 
conducting  business,  and  a  complex  e'conomic  result. 

The  most  important  example  of  monopoly  brought  before  the 
court  was  probably  the  Standard  Oil  Co.,  wliile  one  of  the  most 
subtle  schemes  to  estabhsh  monopoly  is  found  m  the  Wall  Paper 
combination.     Both  of  these  are  discussed  below. 

In  the  statement  of  facts  in  the  Standard  Oil  case,  a  part  of  that 
given  in  the  court  below  wliich  is  expressly  referred  to  as  being  con- 
sidered in  the  opinion,  has  been  also  summarized. 

Standard  Oil  Co.  v.  United  States  (221  U.  S.,  1),  Supreme 
CouR-T,  1911. — The  facts  m  this  case  have  been  stated  generally  in 
another  connection.  (See  p.  86.)  Es])ecially  pertment  here  are  the 
following  facts:  The  Standard  Oil  Co.  had  acquired  almost  complete 
domination  of  pipe-line  transportation  and  was  m  a  position  to  dic- 
tate crude-oil  prices.  Partly  in  consequence  of  this  fact  and  partly 
m  consequence  of  the  combination  of  competing  concerns  under  the 
control  of  a  single  corporation,  it  refined  and  sold  much  the  greater 
part  of  the  oil  refined  or  sold  m  the  United  States. 

The  court  held  that  the  Standard  Oil  combination  was  in  violation 
of  section  2  of  the  Sherman  Law.  To  "monopoUze"  or  "attempt  to 
monopolize,"  the  court  said,  was  forbidden  with  a  view  to  make  more 
complete  the  prohibitions  of  section  1,  namely,  by  forbidding  these 
methods  of  restraining  trade  also. 

The  court  said  in  part  (pp.  61,  62,  74,  75): 

Undoubtedly,  the  words  ' '  to  monopolize  "  and  ' '  monopolize  "  as  used  in  the  section 
reach  every  act  bringing  about  the  prohibited  results.  The  ambiguity,  if  any,  ia 
involved  in  determining  what  is  intended  by  monopolize.  But  this  ambiguity  ia 
readily  dispelled  in  the  light  of  the  previous  history  of  the  law  of  restraint  of  trade  to 
which  we  have  referred  ^  and  the  indication  which  it  gives  of  the  practical  evolution  by 
which  monopoly,  and  the  acts  which  produce  the  same  result  as  monopoly,  that  is, 
an  undue  restraint  of  the  course  of  trade,  all  came  to  be  spoken  of  as,  and  to  be  indeed 
synonymous  with,  restraint  of  trade.  In  other  words,  having  by  the  first  section 
forbidden  all  means  of  monopolizing  trade,  that  is,  unduly  restraining  it  by  means  of 
every  contract,  combination,  etc.,  the  second  section  seeks,  if  possible,  to  make  the 
prohibitions  of  the  act  all  the  more  complete  and  perfect  by  embracing  all  attempts 
to  reach  the  end  prohibited  by  the  first  section,  that  is,  restraints  of  trade,  by  any 
attempt  to  monopolize,  or  monopolization  thereof,  even  although  the  acts  by  which 
Buch  results  are  attempted  to  be  brought  about  or  are  brought  about  be  not  embraced 
within  the  general  enumeration  of  the  first  section.  And,  of  course,  when  the  second 
section  is  thus  harmonized  with  and  made  as  it  was  intended  to  be  the  complement  of 
the  first,  it  becomes  obvious  that  the  criteria  to  be  resorted  to  in  any  given  case  for  the 
purpose  of  ascertaining  whether  violations  of  the  section  have  been  committed,  is  the 
rule  of  reason  guided  by  the  established  law  and  by  the  plain  duty  to  enforce  the 
prohibitions  of  the  act  and  thus  the  public  policy  which  its  restrictions  were  obviously 
enacted  to  subserve.  And  it  is  worthy  of  observation,  as  we  have  previously  remarked 
concerning  the  common  law,  that  although  the  statute  by  the  comprehensiveness  of 
the  enumerations  embodied  in  both  the  first  and  second  sections  makes  it  certain  that 


1  See  pp.  4r-5, 6. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  91 

its  purpose  was  to  prevent  undue  restraints  of  every  kind  or  nature,  nevertheless  by 
the  omission  of  any  direct  prohibition  against  monopoly  in  the  concrete  it  indicates 
a  consciousness  that  the  freedom  of  the  individual  right  to  contract  when  not  unduly 
or  improperly  exercised  was  the  most  efficient  means  for  the  prevention  of  monopoly, 
since  the  t-peration  of  the  centrifugal  and  centripetal  forces  resulting  from  the  right 
to  freely  contract  was  the  means  by  which  monopoly  would  be  inevitably  prevented 
if  no  extraneous  or  sovereign  power  imposed  it  and  no  right  to  make  unlawful  contracts 
having  a  monopolistic  tendency  were  permitted.  In  other  words  that  freedom  to 
contract  was  the  essence  of  freedom  from  undue  restraint  on  the  right  to  contract. 
*  *  *  *  .  *  * 

We  see  no  cause  to  doubt  the  correctness  of  these  conclusions,  considering  the  subject 
from  every  aspect,  that  is,  both  in  view  of  the  facts  established  by  the  record  and  the 
necessaiy  operation  and  effect  of  the  law  as  we  have  construed  it  upon  the  inferences 
deducible  from  the  facts,  for  the  following  reasons: 

(o)  Because  the  unification  of  power  and  control  over  petroleum  and  its  products 
which  was  the  inevitable  result  of  the  combining  in  the  New  Jersey  corporation  by  the 
increase  of  its  stock  and  the  transfer  to  it  of  the  stocks  of  so  many  other  corporations, 
aggregating  so  vast  a  capital,  gives  rise,  in  and  of  itself,  in  the  absence  of  countervailing 
circumstances,  to  say  the  least,  to  the  prima  facie  presumption  of  intent  and  purpose 
to  maintain  the  dominancy  over  the  oil  industry,  not  as  a  result  of  normal  methods  of 
industrial  development,  but  by  new  means  of  combination  which  were  resorted  to  in 
order  that  greater  power  might  be  added  than  would  otherwise  have  arisen  had  normal 
methods  been  followed,  the  whole  with  the  purpose  of  excluding  others  from  the  trade 
and  thus  centralizing  in  the  combination  a  perpetual  control  of  the  movements  of 
petroleum  and  its  products  in  the  channels  of  interstate  commerce. 

(6)  Because  the  prima  facie  presumption  of  intent  to  restrain  trade,  to  monopolize 
and  to  bring  about  monopolization  resulting  from  the  act  of  expanding  the  stock  of  the 
New  Jersey  corporation  and  vesting  it  with  such  vast  control  of  the  oil  industry,  is 
made  conclusive  by  considering  (1)  the  conduct  of  the  persons  or  coi'porations  who  were 
mainly  instrumental  in  bringing  about  the  extension  cf  j^ower  in  the  New  Jersey 
corporation  before  the  consummation  of  that  result  and  prior  to  the  formation  cf  the 
trust  agreements  of  1879  and  1882;  (2)  by  considering  the  proof  as  to  what  was  done 
under  those  agreements  and  the  acts  which  immediately  preceded  the  vesting  of  power 
in  the  New  Jersey  corporation  as  well  as  by  weighing  the  modes  in  which  the  power 
vested  in  that  corporation  has  been  exerted  and  the  results  which  have  arisen  from  it. 

Continental  Wall  Paper  Co.  v.  Louis  Voight  &  Sons  Co.  (212 
U.  S'.,  227),  Supreme  Court,  1909. — More  than  30  companies  and 
firms  manufacturing  wall  paper  in  various  States  and  selling  the  same 
in  interstate  commerce  formed  a  combination  which  comprised  98  per 
cent  of  the  production  and  sales  thereof  in  the  United  States.  This 
combination  organized  the  Continental  Wall  Paper  Co.,  whose  stock 
was  owned  and  whose  du'ectors  were  chosen  by  the  parties  to  the 
combination,  and  wliich  was  constituted  a  selhng  company  for  the 
said  parties. 

The  Continental  Wall  Paper  Co.  in  the  further  carrying  out  of  the 
plan  of  combmation  made  agi'eements  with  the  jobbers  of  wall  paper 
intended  to  compel  them  to  patronize  exclusively  the  membei's  of  the 
combination  and  to  sell  the  goods  purchased  at  prices  fixed  by  the 
combination.  Jobbers  refusing  such  agreement  were  not  to  be  sup- 
plied with,  wall  paper.     Immediately  after  forming  this  combination 


92  EEPOKT   OF    THE   COMMISSIONER  OP   COEPORATIONt. 

the  prices  of  wall  paper  were  greatly  enhanced,  both  to  the  jobbers 
and  to  consumers.  One  of  the  jobbers  who  owed  the  Contmental 
Wall  Paper  Co.  for  wall  paper  purchased  under  such  a  contract  was 
sued  for  payment  thereon,  and  set  up  in  defense  that  the  obligation 
was  not  enforceable,  for  the  reason  that  the  contract  was  a  part  of  a 
combination  which  was  contrary  to  the  Sherman  Act.  The  plaintiff 
demurred  thereto,  thus  confessing  for  legal  purposes  the  truth  of  the 
facts  alleged,  and  when  the  demurrer  was  overruled  refused  to  plead 
further.  The  validity  of  the  defense  depended  on  whether  this  con- 
tract was  a  part  of  a  combination  in  violation  of  the  Antitrust  Act. 
It  was  held  that  it  was  in  violation  of  both  sections  1  and  2  of  the  said 
act. 

The  court  said  in  part  (p.  255) : 

That  the  combination  represented  by  the  plaintiff  company  is  within  the  prohibi- 
tions of  the  above  act  of  Congress  is  clear  from  the  facts  admitted  by  the  demurrer.  We 
assume,  therefore,  without  discussion — for  discussion  is  unnecessary — that  there  is  a 
combination,  of  which  the  Continental  Wall  Paper  Company  is  the  representative,  and 
that,  in  violation  of  that  act,  such  combination  was  formed  with  the  intent,  and  will 
have  the  effect,  directly,  to  restrain  as  well  as  monopolize  trade  and  conunerce  among 
the  several  States  and  with  foreign  nations. 

The  court  approved  also  of  the  foUowmg  part  of  the  opinion  of  the 
court  below  (148  Fed.,  947-948) : 

The  conspiring  mills  were  situated  in  many  states.  The  consumers  [of  wall  papei'] 
embraced  the  whole  citizenship  of  the  United  States.  The  jobbers  and  wholesalers, 
who  were  to  be  coerced  into  contracts  to  buy  their  entire  demands  from  the  Continental 
Wall  Paper  Company  or  be  driven  out  of  business,  were  in  every  state. 

Before  the  combination,  each  of  the  combining  companies  was  engaged  in  both 
state  and  interstate  commerce.  The  freedom  of  each,  with  respect  to  prices  and 
terms,  was  restrained  by  the  agreement  and  interstate  commerce  directly  affected 
thereby,  as  well  as  by  the  enhancement  of  prices  which  resulted.  A  more  complete 
monopoly  in  an  article  of  universal  use  has  probably  never  been  brought  about.  It 
may  be  that  the  wit  of  man  may  yet  devise  a  more  complete  scheme  to  accomplish 
the  stifling  of  competition;  but  none  of  the  shifts  resorted  to  for  suppressing  freedom 
of  commerce  and  securing  undue  prices,  shown  by  the  reported  cases,  is  half  so  com- 
plete in  its  details.  None  of  the  schemes  with  which  this  may  be  compared  is  more 
certain  in  results,  more  widespread  in  its  operation,  and  more  evil  in  its  purposes. 
It  must  fall  within  the  definition  of  a  "restraint  of  trade,"  whether  we  confine 
ourselves  to  the  common-law  intei-pretation  of  that  term,  or  apply  that  given  to  the 
term  as  used  in  the  federal  act. 

Section  9.  Trading  and  manufacturing  combinations. 

The  Sherman  Act  is  expressly  du-ected  agamst  combinations  in 
restraint  of  interstate  trade;  hence  it  is  unnecessary  to  cite  cases  to 
show  that  trading  combinations  may  be  in  the  purview  of  the  act. 
In  fact,  it  must  be  shown  that  a  combmation  directly  affects  inter- 
state commerce  or  trade  in  order  to  bring  it  within  the  law.  For 
this  reason  also  an  exhaustive  statement  of  what  is  meant  by  inter- 
state commerce  would  incidentally  show  what  branches  of  busmess 


TRUST   LAWS  AND   UNFAIR   COMPETITION,  93 

or  other  activities  are  comprehended  within  the  meaning  of  the  law. 
It  is  more  convenient,  however,  for  a  clear  outline  of  the  scope  of  the 
law  to  take  up  the  })rmcipal  branches  of  business  activity  separately. 

Trading  combmations  m  restramt  of  trade,  as  defined  by  the 
Supreme  Court  m  recent  decisions,  as  abeady  stated,  are  within  the 
prohibition  of  the  law,  provided  they  are  engaged  in  interstate 
commerce. 

In  the  discussion  of  the  topic  of  mterstate  commerce  it  was  shown 
that  at  the  begummg  a  distmction  was  made  in  the  Knight  case  (see 
p.  74  above)  between  manufacture  and  commerce,  and  it  was  held 
that  combinations  of  manufacturers  as  such  were  not  necessarily 
combinations  in  restraint  of  mterstate  trade.  Practically  aU  manu- 
facturers and  combmations  of  manufacturers,  however,  are  engaged 
in  trade  and  commerce,  as  there  is  no  pecuniary  profit  m  manufacture 
mtliout  the  sale  of  the  product.  It  is  quite  possible,  of  course,  that  a 
combmation  of  manufacturers  might  exist  wliich  was  not  engaged  m 
interstate  or  foreign  commerce,  and,  therefore,  would  not  be  within 
the  prohibition  of  the  law.  Generally  spealdng,  however,  manufac- 
turing combmations  are  engaged  in  mterstate  commerce^  andj  if  so 
engaged,  would  doubtless  be  held  obnoxious  to  the  Sherman  Act, 
provided  such  combinations  were  in  restrauit  of  trade,  as  defined  by 
the  Supreme  Court. 

Section  10.  Labor  combinations. 

That  combinations  of  labor  in  so  far  as  they  are  in  restraint  of 
interstate  trade  and  commerce  were  proliibited  by  the  Sherman  Act 
was  decided  as  early  as  1893,  but  no  decision  was  made  on  this  sub- 
ject by  the  Supreme  Court  until  190Sj  when  tliis  rule  was  afiirmed. 
Labor  combinations  generally  have  not  been  held  unlawful. 

LoEWE  V.  Lawlor,  or  Danbxiry  IIatters'  CASE  (208  U.  S.,  274), 
Supreme  Coutit,  1908. — A  manufacturer  of  hats  at  Danbury,  Conn., 
engaged  in  interstate  commerce  in  the  sale  of  hats,  was  boycotted  by 
the  United  States  Hatters  of  North  America,  a  labor  union,  because 
ho  would  not  agree  to  employ  union  labor  exclusively.  The  hat 
manufacturer  brought  an  action  at  law  for  the  recovery  of  damages 
under  section  7  of  the  Sherman  Law.  The  brief  of  the  defendants 
made  no  claim  that  combinations  in  restraint  of  trade,  if  made  by 
laborers  or  labor  unions,  would  be  excluded  from  the  operation  of 
the  act.  The  coiu't  held  that  the  act  was  ap2)licable  to  tliis  case,  and 
said  in  part  (p.  301) : 

Nor  can  the  act  in  question  be  held  inap^jlicable  because  defendants  were  not 
themselves  engaged  in  interstate  commerce.  The  act  made  no  distinction  between 
classes.  It  provided  that  "every"  contract,  combination  or  conspiracy  in  restraint 
of  trade  was  illegal.  The  records  of  Congress  show  that  several  efforts  were  made  to 
excmi)t,  by  legislation,  organizations  of  farmers  and  laljorers  from  the  operation  of 
the  act  and  that  all  these  efforts  failed,  so  that  the  act  remained  as  we  have  it  before  us. 


94  EEPOET   OF   THE   COMMISSIONEE   OF   COEPOEATIONS. 

An  important  case  in  an  inferior  Federal  court  was  the  following: 

United  States  v.  Debs  et  al.  (64  Fed.,  724),  circuit  court, 
1894, — Debs  and  others  had  led  a  strike  which  forcibly  interfered 
with  the  movement  of  trains  and  the  transportation  of  the  mails 
and  goods.  They  were  enjoined  to  desist,  and  failing  to  do  so  pro- 
ceedings for  contempt  in  equity  were  instituted.  The  court  held 
that  the  court  below  had  not  exceeded  its  jurisdiction  and  that  there 
was  a  conspiracy  in  restraint  of  trade  contrary  to  the  Sherman  Act 
which  was  broad  enough  to  embrace  conspiracies  of  laboring  men  as 
well  as  of  capitahsts. 

Wliile  this  case  was  appealed  and  the  judgment  affirmed  in  the 
Supreme  Court,  the  grounds  of  the  decision  were  not  the  same.  The 
Supreme  Court,  however,  expressly  stated  that  it  did  not  thereby 
intend  to  deny  the  correctness  of  the  opinion  of  the  court  below. 
(158  U.  S.  564.) 

Another  case  in  an  inferior  Federal  court,  decided  in  1893,  was  as 
follows : 

United  States  v.  Workingmen's  Amalgamated  Council  of 
New  Orleans  (54  Fed.,  994),  Circuit  Court,  1893. — A  labor  com- 
bination which  comprised  workmen  in  various  trades,  including  dray- 
men, interfered  with  the  shipment  of  goods  in  interstate  commerce 
in  New  Orleans  by  threats  and  force  to  compel  the  employment  of 
union  labor  only.  The  Government  brought  a  suit  in  equity  to  obtain 
an  injunction  restraining  such  interference.  The  court  granted  the 
injunction,  chiefly  on  the  basis  of  the  Sherman  Act,  on  the  ground 
that  the  members  of  the  union  were  guilty  of  a  conspiracy  in  restraint 
of  mterstate  commerce. 

The  court  said  in  part  (p.  996) : 

It  is  true  this  statute  lias  not  been  much  expounded  by  judges,  but,  as  it  seems  to 
me,  its  meaning,  as  far  as  relates  to  the  sort  of  combinations  to  which  it  is  to  apply,  is 
manifest,  and  that  it  includes  combinations  which  are  composed  of  laborers  acting 
in  the  interest  of  laborers. 

The  followmg  case  is  of  interest  m  this  connection,  as  well  as  m 
connection  with  the  Clayton  Antitrust  Act  (see  p.  138),  in  regard  to 
the  question  of  the  constitutionality  of  the  express  exemption  of 
labor  combinations  from  the  operation  of  the  antitrust  laws. 

International  Harvester  Co.  v.  Commonwealth  of  Missouri 
(234  U.  S.,  199),  Supreme  Court,  1914. — Quo  warranto  proceedings 
against  the  International  Harvester  Co.  in  the  supreme  court  of 
Missouri  under  the  antitrust  laws  of  that  State  were  carried  to  the 
United  States  Supreme  Court.  The  appellant  company  contended 
that  the  Missouri  statute  was  unconstitutional  because  it  exempted 
from  its  operation  and  penalties  aU  "  combmations  of  persons  en- 
gaged ui  labor  pursuits"  and  was  limited  to  "persons  and  corpora- 
tions dealmg  hi  commodities."     The  United  States  Supreme  Court 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  95 

held  that  the  courts  can  not  disturb  the  power  of  classification  wliich 
a  legislature  may  exercise  ''unless  the  courts  can  clearly  see  that 
there  is  no  fair  reason  for  the  law  that  would  not  require  with  equal 
force  its  extension  to  others  whom  it  leaves  untouched." 

After  citing  a  number  of  cases  the  court  went  on  to  say  (pp.  214- 
215): 

Other  cases  might  be  cited  whose  instances  illustrate  the  same  principle  and  in  which 
this  court  has  refused  to  accept  the  higher  generalizations  urged  as  necessary  to  the 
fulfillment  of  the  constitutional  guaranty  of  the  equal  protection  of  the  law,  and  in 
which  we,  in  effect,  held  that  it  is  competent  for  a  legislature  to  determine  upon  what 
differences  a  distinction  may  be  made  for  the  purpose  of  statutory  classification  be- 
tween objects  otherwise  having  resemblances.  Such  power,  of  course,  cannot  be 
arbitrarily  exercised.     The  distinction  made  must  have  reasonable  basis.     *    *    * 

And  so  in  the  case  at  bar.  "Whether  the  Missouri  statute  should  have  set  its  con- 
demnation on  restraints  generally,  prohibiting  combined  action  for  any  purpose  and 
to  everybody,  or  confined  it  as  the  statute  does  to  manufacturers  and  vendors  of  articles 
and  permitting  it  to  purchasers  of  such  articles;  prohibiting  it  to  sellers  of  commodities 
and  permitting  it  to  sellers  of  services,  was  a  matter  of  legislative  judgment  and  we  can- 
not say  that  the  distinctions  made  are  palpably  arbitrary,  which  we  have  seen  is  the 
condition  of  jiidicial  review.  It  is  to  be  remembered  that  the  question  presented  is 
of  the  power  of  the  legislature,  not  the  policy  of  the  exercise  of  the  power.  To  be  able 
to  find  fault,  therefore,  with  such  policy  is  not  to  establish  the  invalidity  of  the  law 
based  upon  it. 

It  is  said  that  the  statute  as  construed  by  the  Supreme  Court  of  the  State  comes 
within  our  ruling  in  Connolly  v.  Union  Sewer  Pipe  Co.,  184  U.  S.  540,  but  we  do  not 
think  so.     If  it  did  we  should,  of  course,  apply  that  ruling  here. 

The  Federal  antitrust  laws  have  been  modified  with  respect  to 
labor  combinations  by  certain  provisions  of  the  Clayton  Act  which 
is  described  below.     (See  pp.  138,  141-142.) 

Section  11.  Eailroad  combinations. 

The  application  of  the  Sherman  Law  to  common  carriers  by  rail- 
road was  established  at  a  comparatively  early  date,  namely,  by  a 
decision  of  the  Supreme  Court  in  1897. 

United  States  v.  Trans-Missouri  Freight  Association  (166 
U.  S.,  290),  Supreme  Court,  1897. — The  facts  in  this  case  have  been 
set  forth  above  (p.  84),  wliich,  briefly  stated,  are  that  a  rate-fixing 
pool  had  been  formed  by  certain  interstate  railway  companies,  and 
continued  to  operate  after  the  passage  of  the  Sherman  Act.  The 
Government  sought  to  have  the  railroad  companies  enjoined  from 
further  combinations  of  this  character.  The  railroad  companies 
claimed  that  the  Sherman  Law  did  not  apply  to  them.  The  court 
held  that  contracts  in  restraint  of  interstate  commerce  made  by 
railroad  companies  were  \vithin  the  proliibitions  of  the  law. 

The  court  said  in  part  (pp.  312-314): 

A  contract  therefore  that  is  in  restraint  of  trade  or  commerce  is  by  the  strict  language 
of  the  act  prohibited  even  though  such  contract  is  entered  into  between  competing 


96  EEPOKT  OF   THE   COMMISSIONER   OF   CORPOEATIONS. 

common  carriers  by  railroad,  and  only  for  the  purposes  of  thereby  affecting  traffic 
rates  for  the  transportation  of  persons  and  property. 

*  *  *  An  act  which  prohibits  the  making  of  every  contract,  etc.,  in  restraint  of 
trade  or  commerce  among  the  several  States,  would  seem  to  cover  by  such  language 
a  contract  between  competing  raihoads,  and  relating  to  traffic  rates  for  the  transpor- 
tation of  articles  of  commerce  between  the  States,  provided  such  contract  by  its  direct 
effect  produces  a  restraint  of  trade  or  commerce.    *    *    * 

But  it  is  maintained  that  an  agreement  like  the  one  in  question  on  the  part  of  the 
railroad  companies  is  authorized  by  the  Commerce  Act,  which  is  a  special  statute 
applicable  only  to  railroads,  and  that  a  construction  of  the  Trust  Act  (which  is  a 
general  act)  so  as  to  include  within  its  provisions  the  case  of  raihoads,  carries  with 
it  the  repeal  by  implication  of  so  much  of  the  Commerce  Act  as  authorized  the  agree- 
ment.   *    *    * 

The  first  answer  to  this  argument  is  that,  in  our  opinion,  the  Commerce  Act  does 
not  authorize  an  agreement  of  this  nature.  It  may  not  in  terms  prohibit,  but  it  is  far 
from  conferring  either  directly  or  by  implication  any  authority  to  make  it. 

Other  important  cases  shomDg  the  apphcabOity  of  the  Sherman 
Law  to  railroads  are  the  United  States  v.  Joint  Traffic  Association;  ^ 
Northern  Securities  Co.  v.  United  States;  ^  and  United  States  v.  Union 
Pacific  Railroad  Co.^  The  first  two  have  ah-eady  been  discussed 
under  other  aspects  of  the  question  (see  pp.  72-73,  85-86),  while  the 
second  is  also  important  in  connection  mth  forms  of  combination  and  is 
discussed  below  under  the  subject  of  holcUng  companies.    (See  p.  103.) 

Section  12.  Farmers'  combinations. 

There  has  been,  apparently,  only  one  decision  by  the  Federal  courts 
touching  the  question  whether  farmers'  combinations  in  restraint  of 
interstate  commerce  are  included  mthin  the  prohibitions  of  the  Sher- 
man Act,  and  this  case  is  not,  perhaps,  very  clear  on  this  point. 
Besides  this,  however,  there  is  an  obiter  dictum  in  another  case  and  a 
decision  with  regard  to  a  State  antitrust  statute  which  supports  the 
inference  that  farmers'  combinations  are  not  exempted. 

Steers  v.  United  States  (192  Fed.,  1),  Circuit  Court  of  Ap- 
peals, 1911. — A  farmer  and  two  tenants  dehvered  four  hogsheads  of 
tobacco  at  a  railway  station  consigned  to  a  person  in  another  State, 
although  a  pool  of  tobacco  growers  in  the  vicinity,  called  the  ''  Society 
of  Equity"  or  the  '^Burley  Society,"  had  arranged  to  hold  all  tobacco 
at  that  time  and  opposed  such  sales.  Tlie  farmer  was  notified  by 
certain  neighbors  that  he  must  not  ship  the  tobacco  or  it  would  be 
destroyed,  and  they  procured  from  him  an  order  to  take  the  tobacco 
from  the  station  agent  and  return  it  to  him.  A  large  body  of  men  re- 
covered the  tobacco  from  the  station  agent  and  informed  him  he  must 
not  ship  any  unpooled  tobacco.  A  grand  jury  brought  an  indict- 
ment for  violation  of  the  Sherman  Act  against  12  persons,  of  whom 
8  were  convicted  and  fined.  The  defense  apparently  made  no 
attempt  to  distinguish  farmers'  combinations  from  other  combina- 

1  171  U.  S.,  505  (1S98).        2  193  u.  S.,  197  (1904).        3  220  U.  S.,  470  (1912). 


TRUST   LAWS   AND   UNFAIE    COMPETITION.  97 

tions.  Tile  court  affirmed  the  judgments  of  conviction  and  the  sen- 
tences imposed. 

In  the  Danbuiy  Hatters'  case  (Loewc  v.  Lawlor,  208  U.  S.,  274), 
which  has  been  already  discussed  (sec  p.  93  above),  the  court  made 
the  statement  that  "organizations  of  farmers  and  laborers"  were  not 
exempted  from  the  prohibitions  of  the  law.  Apparently,  however,  this 
was  an  obiter  dictum  so  far  as  farmers'  organizations  are  concerned. 

A  case  arose,  however,  with  relation  to  a  State  antitrust  law,  which 
was  adjudicated  by  the  Supreme  Court  of  the  United  States  and 
which  throws  some  light  on  this  subject.  The  facts  in  this  case,  and 
the  essential  part  of  the  decision  relating  to  this  subject,  were  as 
follows : 

Connolly  v.  Union  Sewer  Pipe  Co.  (184  U.  S.,  540),  Supreme 
Court,  1902. — The  pipe  company  brought  an  action  in  the  Federal 
courts  against  one  Connolly  to  obtain  payment  on  his  notes  for  the 
purchase  of  pipe.  One  defense  set  up  was  that  the  pipe  company  was 
a  trust  contrary  to  the  statute  of  the  State  of  lUinois  of  July  1,  1893, 
section  10  of  which  act  provided  that  the  purchaser  of  articles  from 
a  trust  could  plead  this  act  in  a  suit  to  recover  payment  therefor  in 
bar  of  such  payment.  The  statute  in  section  1  prohibited  trusts  and 
other  combinations  to  restrict  trade,  to  prevent  competition,  to  limit 
production,  to  fix  prices,  etc.  In  section  9  the  following  provision 
was  made : 

The  pix)visions  of  this  act  shall  not  apply  to  agricultural  products  or  live  stock  while 
in  the  hands  of  the  producer  or  miser. 

The  court  held  that  the  defense  made  could  not  be  allowed  because 
this  statute  of  the  State  of  lUinois  was  unconstitutional. 

The  conclusions  of  the  court  on  this  matter. were  as  follows  (])p. 
563-564) : 

Returning  to  the  particular  case  before  us,  and  repeating  or  summarizing  some 
thoughts  already  expressed,  it  may  be  observed  that  if  combinations  of  capital,  skill 
or  acts,  in  respect  of  the  sale  or  purchase  of  goods,  merchandise  or  commodities, 
whereby  such  combinations  may,  for  their  benefit  exclusively,  control  or  establish 
prices,  are  hurtful  to  the  public  interests  and  should  be  suppressed,  it  is  impossible 
to  perceive  why  like  combinations  in  respect  of  agricultural  jiroducts  and  live  stock 
are  not  also  hurtful.  Two  or  more  engaged  in  selling  dry  goods,  or  groceries,  or  meats, 
or  fuel,  or  clothing,  or  medicines,  are,  under  the  statute,  criminals,  and  subject  to  a 
fine,  if  they  combine  their  capital,  skill  or  acts  for  the  j)urpose  of  establisliing,  con- 
trolling, increasing  or  reducing  prices,  or  of  preventing  free  and  unrestrained  compe- 
tition amongst  themselves  or  others  in  the  sale  of  their  goods  or  merchandise;  but  their 
neighbors,  who  happen  to  be  agriculturalists  and  livestock  raisere,  may  make  combi- 
nations of  that  character  in  reference  to  their  grain  or  live  stock  without  incurring  the 
prescribed  penalty.  Under  what  rule  of  permissible  classification  can  such  legislation 
be  sustained  as  consistent  with  the  equal  protection  of  the  laws?  It  can  not  be  said 
that  the  exemption  made  by  the  ninth  section  of  the  statute  was  of  slight  conse- 
quence, as  affecting  the  general  public  interested  in  domestic  trade  and  entitled  to  be 
protected  against  combinations  formed  to  control  prices  for  their  own  benefit;  for  it 

30035°— 16 7 


98  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

can  not  be  disputed  that  agricultural  products  and  live  stock  in  Illinois  constitute  a 
veiy  large  part  of  the  wealth  and  property  of  that  State. 

We  conclude  this  part  of  the  discussion  by  saying  that  to  declare  that  some  of 
the  class  engaged  in  domestic  trade  or  commerce  shall  be  deemed  criminals  if  they 
violate  the  regulations  prescribed  by  the  State  for  the  pui-pose  of  protecting  the  public 
ao-ainst  illegal  combinations  formed  to  destroy  competition  and  to  control  prices,  and 
that  others  of  the  same  class  shall  not  be  bound  to  regard  those  regulations,  but  may 
combine  their  capital,  skill  or  acts  to  destroy  competition  and  to  control  prices  for 
their  special  benefit,  is  so  manifestly  a  denial  of  the  equal  protection  of  the  laws  that 
further  or  extended  argument  to  establish  that  position  would  seem  to  be  unnecessary. 

We  therefore  hold  that  the  act  of  1893  is  repugnant  to  the  Constitution  of  the  United 
States,  unless  its  ninth  section  can  be  eliminated,  leaving  the  rest  of  the  act  in  opera- 
tion. 

The  Federal  antitrust  laws  have  been  niocUficd  with  respect  to  com- 
binations among  farmers,  etc.,  by  certain  provisions  of  the  Clayton 
Act  which  is  described  below.     (See  p.  138.) 

Section  13.  Forms  of  combination  in  restraint  of  trade. 

The  Sherman  Law  in  section  1  prohibits  "every  contract,  combi- 
nation in  the  form  of  trust  or  otherwise,  or  conspiracy,  in  restraint 
of  trade"  in  interstate  commerce,  etc.  Thus,  all  kinds  of  contracts, 
combinations,  and  consphacies  are  forbidden,  if  in  restraint  of 
interstate  commerce.  Leaving  the  question  of  interstate  commerce 
aside,  it  is  important  to  consider  what  are  the  chief  devices, 
whether  by  contract,  combination,  or  conspiracy,  that  have  been  prac- 
ticed and  held  illegal  under  this  law.  Among  the  more  important 
of  these  may  be  distinguished  the  following:  (a)  Agreements  under 
\mtten  or  oral  contracts  to  fix  prices,  to  restrict  production,  to 
divide  markets,  etc.;  (b)  consolidation  of  competing  interests  tlu-ough 
"trusts,"  holding  companies,  or  by  complete  merger  of  owner- 
ship. The  latter  class  may  be  considered  first.  The  "trust"  form 
of  combination  was  obsolescent  at  the  time  the  act  under  con- 
sideration was  passed,  and  there  are  no  cases  which  need  be  con- 
sidered under  that  head.  The  two  other  types  of  combitiation,  how- 
ever, are  very  important,  namely,  holding  companies  and  mergers. 

It  should  be  very  carefully  noted  that  in  respect  to  many  of  the 
agreements  or  practices  herein  set  forth  that  the  courts  do  not  pur- 
port to  have  passed  on  them  as  isolated  features. 

Section  14.  Mergers. 

The  most  complete  form  of  combination  which  has  been  held  to  be 
within  the  purview  of  the  Sherman  Act  is  the  merger;  that  is,  a 
combination  which  consolidates  directly  in  a  single  ownersliip  all 
or  a  large  part  of  the  property  and  business  of  the  various  competing 
interests  comprehended  in  the  combination.  No  case  has  yet  been 
decided  by  the  Supreme  Court  concerning  a  combination  which  was  a 


TRUST   LAWS   AND    UNFAIR    COMPETITION.  99 

complete  merger,  i.  e.,  in  wliicli  all  the  properties  brought  under  a 
common  control  were  owned  directly  by  one  corporation.  The  most 
important  instance  of  a  partial  merger  was  the  American  Tobacco 
Co.,  and  the  opinion  of  the  court  in  tliis  case  is  referred  to  below. 
Anotlier  important  partial  merger  was  that  of  the  du  Pont  Powder 
Co.  The  fhial  judicial  decision  in  this  instance  was  rendered  in  a 
circuit  court,  and  the  opinion  in  this  case  also  is  referred  to  below. 
The  clearest  case  of  a  merger  was  decided  in  a  district  court  (United 
States  V.  International  Harvester  Co.),  which  is  also  noted  below. 
This  case  has  been  appealed  to  the  Supreme  Court  and  is  now 
pending. 

United  States  v.  American  Tobacco  Co.  (221  U.  S.,  lOG), 
Supreme  Court,  1911. — The  American  Tobacco  Co.,  formed  in  1890, 
was  originally  a  combmation  of  competmg  cigarette  manufacturers 
having  about  95  per  cent  of  the  total  production  of  the  United  States, 
who  transferred  their  manufacturing  property  and  business  to  the 
American  Tobacco  Co.  in  exchange  for  its  stock.  This  corporation 
then  expanded  its  busmess  into  plug  tobacco  by  purchasmg  the 
businesses  of  several  manufacturers,  who  agreed  not  to  reengage 
therem.  Other  more  important  plug  makers  were  invited  to 
join  the  combination,  and  on  then'  refusal  a  price-cutting  competitive 
policy  was  adopted  which  was  ended  by  the  purchase  of  some  of  them. 
The  combination,  with  certain  other  plug  manufacturers,  organized 
the  Continental  Tobacco  Co.  in  1898,  and  conveyed  to  it  the  property 
and  business  pertaining  to  the  plug  branch  of  the  business,  taking  in 
exchange  most  of  the  stock  of  the  company;  part  of  the  stock  of  the 
Continental  Tobacco  Co.,  together  with  cash,  was  given  in  exchange  for 
most  of  the  stock  of  another  important  tobacco  manufacturing  con- 
cern— the  P.  Lorillard  Co.  From  1900  to  1902  two  companies  were 
organized  which  acquired  dominating  positions  in  the  snuff  and  licorice 
businesses,  respectively,  while  less  important  combinations  were  formed 
in  the  cigar  and  stogie  branches,  all  of  these  bemg  controlled  through 
stock  ownersliipby  the  combination.  Further,  in  1901  a  few  of  the 
leading  shareholders  of  the  American  Tobacco  Co.,  and  a  few  other 
large  capitahsts,  organized  the  Consolidated  Tobacco  Co.,  a  financial 
company  merely,  which  acquired  most  of  the  common  stock  of  the 
American  Tobacco  Co.  in  exchange  for  its  bonds.  In  1904  the 
American,  Contmental,  ami  Consolidated  Tobacco  companies  were 
all  merged  into  a  new  corporation  called  the  American  Tobacco  Co., 
this  merger  continuhig  to  hold  also  the  stocks  of  various  other  tobacco 
companies.  The  few  capitalists  who  controlled  the  ConsoHdated 
Tobacco  Co.  thus  became  the  dominatmg  shareholders  in  this  merger. 
Throughout  the  period  from  1899  to  the  time  of  the  suit,  1907,  many 
millions  were  expended  by  the  combination  in  buying  out  competing 
tobacco  companies  and  closing  down  their  plants,  while  their  former 
owners  agreed  not  to  reenter  their  respective  lines  of  busmess. 


100  EEPORT   OF    THE   COMMISSIONER   OF   COEPORATIONS. 

The  court  held  that  the  combmatioii  was  an  attempt  to  monopo- 
lize and  a  monopolization  of  the  tobacco  trade,  contrary  to  the  Sher- 
man Act,  and  said  in  part  (pp.  181-183): 

Considering  then  the  undisputed  facts  which  we  have  previously  stated,  it  remains 
only  to  determine  whether  they  establish  that  the  acts,  contracts,  agreements,  com- 
binations, etc.,  which  were  assailed  were  of  such  an  unusual  and  wrongful  character 
as  to  bring  them  within  the  prohibitions  of  the  law.  That  they  were,  in  our  opinion, 
so  overwhelmingly  results  from  the  undisputed  facts  that  it  seems  only  necessary  to 
refer  to  the  facts  as  we  have  stated  them  to  demonstrate  the  correctness  of  this  con- 
clusion. Indeed,  the  history  of  the  combination  is  so  replete  with  the  doing  of  acts 
which  it  was  the  obvious  purpose  of  the  statute  to  forbid,  so  demonstrative  of  the  exist- 
ence from  the  beginning  of  a  purpose  to  acquire  dominion  and  control  of  the  tobacco 
trade,  not  by  the  mere  exertion  of  the  ordinary  right  to  contract  and  to  trade,  but  by 
methods  devised  in  order  to  monopolize  the  trade  by  driving  competitors  out  of  busi- 
ness, which  were  ruthlessly  carried  out  upon  the  assumption  that  to  work  upon  the 
fears  or  I'^^Y  upon  the  cupidity  of  competitors  would  make  success  possible.  We 
say  these  conclusions  are  inevitable,  not  because  of  the  vast  amount  of  property 
aggregated  by  the  combination,  not  because  alone  of  the  many  corporations  which 
the  proof  shows  were  united  by  resort  to  one  device  or  another.  Again,  not  alone  be- 
cause of  the  dominion  and  control  over  the  tobacco  trade  which  actually  exists,  but 
because  we  think  the  conclusion  of  wrongful  purpose  and  illegal  combination  is  over- 
whelmingly established  by  the  following  considerations: 

(a)  By  the  fact  that  the  very  first  organization  or  combination  was  impelled  by  a  pre- 
viously existing  fierce  trade  war,  evidently  inspired  b.y  one  or  more  of  the  minds 
which  brought  about  and  became  parties  to  that  combination. 

(6)  Because,' immediately  after  that  combination  and  the  increase  of  capital  which 
followed,  the  acts  which  ensued  justify  the  inference  that  the  intention  existed  to 
use  the  power  of  the  combination  as  a  vantage  ground  to  fmlher  monopolize  the  trade 
in  tobacco  by  means  of  trade  conflicts  designed  to  injure  others,  either  by  driving  com- 
petitors out  of  the  business  or  compelling  them  to  become  parties  to  a  combination — 
a  purpose  whose  execution  was  illustrated  by  the  plug  war  which  ensued  and  its 
results,  by  the  snuff  war  which  followed  and  its  results,  and  by  the  conflict  which 
immediately  followed  the  entry  of  the  combination  in  England  and  the  division  of  the 
world's  business  by  the  two  foreign  contracts  which  ensued. 

(t)  By  the  ever-present  manifestation  which  is  exhibited  of  a  conscious  wrong- 
doing by  the  form  in  which  the  various  transactions  were  embodied  from  the  begin- 
ning, ever  changing  but  ever  in  substance  the  same.  Now  the  organization  of  a  new 
company,  now  the  control  exerted  by  the  taking  of  stock  in  one  or  another  or  in  several, 
so  as  to  obscure  the  result  actually  attained,  nevertheless  uniform,  in  their  manifesta- 
tions of  the  purpose  to  restrain  others  and  to  monopolize  and  retain  power  in  the 
hands  of  the  few  who,  it  would  seem,  from  the  beginning  contemplated  the  mastery 
of  the  trade  which  practically  followed. 

((/)  By  the  gradual  absorption  of  control  over  all  the  elements  essential  to  the  suc- 
cessful manufacture  of  tobacco  products,  and  placing  such  control  in  the  hands  of 
seemingly  independent  corporations  serving  as  perpetual  barriers  to  the  entry  of  others 
into  the  tobacco  trade. 

(e)  By  persistent  expenditure  of  millions  upon  millions  of  dollars  in  buying  out 
plants,  not  for  the  purpose  of  utilizing  them,  but  in  order  to  close  them  up  and  render 
them  useless  for  the  purposes  of  trade. 

(/)  I^y  the  constantly  recuning  stipulations,  whose  legality,  isolatedly  viewed,  we 
are  not  considering,  by  which  numbers  of  persons,  v,diether  manufacturers,  stock- 
holders or  employees,  were  required  to  bind  themselves,  generally  for  long  periods, 
not  to  compete  in  the  future.     Indeed,  when  the  results  of  the  undisputed  proof  which 


TEUST   LAWS  AND   UNFAIR  COMPETITION.  101 

WO  have  stated  arc  fully  apprehended,  and  the  wrongful  acts  which  they  exhibit  are 
considered,  there  comes  inevitably  to  the  mind  the  conviction  that  it  was  the  danger 
which  it  was  deemed  would  arise  to  individual  liberty  and  the  public  well-being  from 
acts  like  those  which  this  record  exhibits,  which  led  the  legislative  mind  to  conceive 
and  to  enact  the  Antitrust  Act,  considerations  which  also  serve  to  clearly  demonstrate 
tliat  the  combination  here  assailed  is  within  the  law  as  to  leave  no  doubt  that  it  is  our 
plain  duty  to  apply  its  proliibitions. 

Considering  the  form  of  remedy  and  the  difficulties  attend<ant 
thereon,  the  court  said  with  reference  to  the  extensive  merger  of 
ownership  (pp.  185-186): 

Because  in  this  case  it  is  obvious  that  a  mere  decree  forbidding  stock  ownership  by 
one  part  of  the  combination  in  another  part  or  entity  thereof,  would  afford  no  adequate 
measure  of  reUef,  since  different  ingredients  of  the  combination  would  remain  unaf- 
fected, and  by  the  very  nature  and  character  of  tlToir  organization  would  be  able  to 
continue  the  wi'ongful  situation  wliich  it  is  our  duty  to  destroy. 

In  connection  \\ith  this  decision  it  should  be  pointed  out  that  the 
form  of  dissolution  which  was  finally  accepted  by  the  com't  proAided 
for  an  extensive  splitting  up  into  companies,  specially  created  for  this 
purpose,  not  onlj^  of  the  American  Tobacco  Co.  but  also  of  some  of  the 
chief  subsidiary  companies,- such  as  the  snuff  company  and  the 
licorice  company.  (See  pp.  18-21 .)  In  other  words,  where  a  merger  of 
property  and  business  had  been  accomphshed,  the  court  provided  that 
it  should  be  divided  among  several  independent  companies  in  order 
to  reestablish  conditions  in  harmony  with  the  law. 

United  States  v.  E.  I.  du  Pont  de  Nemours  &  Co.  (188  Fed., 
127),  Circuit  Court,  1911. — The  United  States  brought  suit  to  pro- 
cure the  dissolution  of  a  combination  of  powder  manufacturers. 
The  facts  and  the  decision  in  this  case  are  shown  in  the  following 
excerpt  from  the  opinion  of  the  court  (pp.  151-152): 

The  record  of  the  case  now  before  us  shows  that  from  1872  to  1902,  a  period  of  30  j^earg, 
the  piu-pose  of  the  trade  associations  had  been  to  dominate  the  powder  and  explosives 
trade  in  the  United  States,  by  fixing  prices,  not  according  to  any  law  of  supply  and 
demand,  for  they  arbitrarily  limited  the  output  of  each  member,  but  according  to  the 
will  of  their  managers.  It  appears,  further,  that  although  these  associations  were 
not  always  strong  enough  to  control  absolutely  the  prices  of  explosives,  their  purpose 
to  do  so  was  never  abandoned.  Under  the  last  of  the  trade  association  agi-eements— 
the  one  dated  July  1,  1896,  and  wliich  was  in  force  until  June  30,  1904— the  control 
of  the  combination  was  firmer  than  it  had  before  been.  Succeeding  the  death  of 
Eugene  du  Pont  in  January,  1902,  and  the  advent  of  Thomas  Coleman  du  Pont  and 
Pierre  S.  du  Pont,  the  attempt  was  made  to  continue  the  restraint  upon  interstate 
commerce  and  the  monopoly  then  existing  by  vesting,  in  a  few  coi-porations,  the  title 
to  the  assets  of  all  the  corporations  affiliated  with  the  trade  association,  then  dissolving 
the  corporations  whose  assets  had  been  so  acquired,  and  binding  the  few  corporations 
owning  the  operating  plants  in  one  holding  company,  wliich  should  be  able  to  pre- 
scribe poUcies  and  control  the  business  of  all  the  subsidiaries  without  the  uncertainties 
attendant  upon  a  combination  in  the  nature  of  a  trade  association.  That  attempt 
resulted  in  complete  success. 

Much  the  larger  part  of  the  trade  in  black  and  smokeless  powder  and  dynamite 
in  the  United  States  is  now  under  the  control  of  the  combination  supported  by  the 


102  REPORT   OF    THE   COMMISSIONER    OF   CORPORATIONS. 

28  defendants  above  named.  That  combination  is  the  successor  of  the  combination 
in  existence  from  1896  to  June  30,  1904.  It  is  a  significant  fact  that  the  trade  associa- 
tion, organized  under  the  agreement  of  July  1,  1896,  was  not  dissolved  until  June  30, 
1904.  It  had  been  utilized  until  that  date  by  Thomas  Coleman  du  Pont,  Pierre  S. 
du  Pont,  and  Alfred  I.  du  Pont  in  suppressing  competition  and  thereby  building  up 
a  monopoly.  Between  February,  1902,  and  June,  1904,  the  combination  had  been  so 
completely  transmuted  into  a  corporate  form  that  the  trade  association  was  no  longer 
necessary.  Consequently  the  trade  association  was  dissolved,  and  the  process  of 
dissolving  the  corporations  whose  capital  stocks  had  been  acquired,  and  concentrating 
their  physical  assets  in  one  great  corporation,  was  beguru  Before  the  plan  had  been 
fully  carried  out  this  suit  was  commenced.  The  proofs  satisfy  us  that  the  present 
form  of  the  combination  is  no  less  obnoxious  to  the  law  than  was  the  combination  under 
the  trade  association  agreement,  which  was  dissolved  on  June  30,  1904.  The  28 
defendants  are  associated  in  a  combination  which,  whether  the  individual  defendants 
were  aware  of  the  fact  or  not,  has  violated  and  still  plans  to  violate  both  section  1  and 
section  2  of  the  antitrust  act.  We  conclude  that  it  is  our  plain  duty  to  grant  such 
a  decree  as  will  prevent  and  restrain  fiu-ther  violations  of  the  act. 

United  States  v.  International  Harvester  Co.  (214  Fed., 
987),  District  Court,  1914. — Five  of  the  leading  manufacturers  of 
harvesting  machinery,  who  controlled  the  output  of  over  80  per  cent 
of  the  business  in  the  United  States,  conveyed  their  properties  to 
the  International  Harvester  Co.,  a  corporation  which  had  been 
organized  for  the  purpose  of  taking  over  and  operating  the  businesses. 
Subsequently,  the  plants  and  good  wiU  of  several  smaller  competing 
factories  were  purchased  and  the  manufacture  of  additional  kinds 
of  farm  machinery  was  taken  up.  The  Government  brought  suit 
against  the  International  Harvester  Co.  as  an  illegal  combination. 
The  court  held  that  the  company  from  the  beginning  had  been  in 
violation  of  the  Sherman  Act. 

The  court  said,  in  part  (p.  994) : 

No  weight  is  attached  therefore  to  the  means  by  which  the  combination  was  formed 
if  a  combination  within  the  purview  of  the  statutes  was  created.  That  it  was  a  com- 
bination of  five  companies  is  clear.  The  fact  that  this  combination  took  the  form 
of  a  new  corporation  is  imma'terial.  United  States  v.  American  Tobacco  Co.,  221 
U.  S.  106,  31  Sup.  Ct.  632,  55  L.  Ed.  663;  United  States  v.  E.  I.  Du  Pont  De  Nemours 
&  Co.  (C.  C.)  188  Fed.  127. 

Was  this  combination  in  restraint  of  trade?  It  substantially  suppressed  all  com- 
petition between  tne  five  companies,  and  the  restraint  of  competition  between  com- 
bining companies  is  as  illegal  as  destruction  of  competition  between  them  without 
combining. 

Mr.  Justice  Hook,  who  concurred  in  the  opinion  -of  the  court,  filed 
a  separate  opinion,  in  which  he  said,  in  part  (p.  1001) : 

I  concur  in  the  foregoing  opinion.  The  International  Harvester  Company  is  not 
the  result  of  the  normal  growth  of  the  fair  enterprise  of  an  individual,  a  partnersliip 
or  a  corporation.  On  the  contrary,  it  was  created  by  combining  five  great  competing 
companies  wliich  controlled  more  than  80  per  cent,  of  the  trade  in  necessary  farm 
implements,  and  it  still  maintains  a  sulistantial  domiaance.  That  is  the  controlling 
fact;  all  else  is  detail. 

This  case  has  been  appealed  and  is  now  pending. 


TRUST  LAWS  AND  UNFAIR   COMPETITION.  103 

Section  15.  Holding-  companies. 

Tho  liolding  company  as  a  device  for  combining  competitive 
interests  succeeded  to  the  "trust"  form  of  organization,  as  already 
described  in  Chapter  I.  (See  pp.  8-9.)  The  hokUng  company  in  its 
pure  form  is  one  wliich  simply  owns  the  stocks  of  the  companies 
whose  property  and  business  are  under  its  control.  Most  holding 
companies,  however,  own  and  operate  directl}^  a  part  of  the  property 
and  business  under  theu'  control.  A  few  years  after  the  enactment 
of  the  Sherman  Law  it  became  one  of  the  principal  methods  of  com- 
bining competitors.  No  authoritative  decision  by  the  Supreme 
Court  was  made  with  regard  to  its  legality  until  the  Northern  Securi- 
ties case  was  decided  in  1904. 

Northern  Securities  Co.  v.  United  States  (193  U.  S.,  197), 
Supreme  Court,  1904. — The  facts  in  this  case  are  more  fully  stated 
on  page  73.  More  briefly  they  were  as  follows:  Stockholders  in  two 
parallel  and  competing  interstate  railroads  organized  the  Northern 
Securities  Co.  to  acquire  and  hold  the  shares  of  the  said  railroads, 
and  in  consequence  most  of  the  shares  of  the  said  two  raih'oad  com- 
panies were  so  acquired.  Most  of  the  shareholders  of  the  railroad 
companies  exchanged  their  shares  for  shares  of  the  Northern  Securi- 
ties Co.  on  an  agreed  basis.  The  Government  brought  suit  to  prevent 
the  Northern  Securities  Co.  from  voting  such  shares,  and  to  compel  it 
to  reexchange  them  for  its  own  shares,  etc. ;  also  to  enjoin  the  carrying 
out  of  the  scheme  of  coml)ination.  The  court  held  that  this  com- 
bination in  the  form  of  a  holding  company  was  m  restraint  of  inter- 
state commerce  and  contrary  to  the  Sherman  Act. 

Justice  Harlan,  speaking  for  himself  and  three  other  justices, 
said  in  part  (p.  338) : 

But  even  if  the  State  allowed  consolidation  it  would  not  follow  that  the  stockholders 
of  two  or  more  State  raihoad  corporatioiis,  having  competing  lines  and  engaged  in 
intcTRtats  commerce,  could  lawfully  combine  and  form  a  distinct  corporatioii  to  hold 
the  stock  of  the  constituent  corporations,  aud,  by  destroying  comi^etition  between 
them,  in  violation  of  the  act  of  Congress,  restrain  commerce  among  the  States  and  with 
foreign  nations. 

Justice  Brewer  in  his  concurring  opinion  said  in  part  (p.  362) : 

There  was  a  combination  by  several  individuals  separately  owning  stock  in  two 
competing  railroad  companies  to  place  the  control  of  both  in  a  single  corjioration.  The 
purpose  to  combine  and  by  combination  destroy  competition  existed  before  the 
organization  of  the  corporation,  the  Securities  Company  *  *  *.  A  corporation, 
while  by  fiction  of  law  recognized  for  some  purposes  as  a  person  and  for  purposes  of 
jurisdiction  as  a  citizen,  is  not  endowed  with  the  inalienable  rights  of  a  natural  per- 
son. It  is  an  artificial  person,  created  and  existing  only  for  the  convenient  transac- 
tion of  business.  In  this  case  it  was  a  mere  instrumentality  by  which  separate  rail- 
road properties  were  combined  under  one  contml.  That  combination  is  as  direct  a 
restraint  of  trade  by  destroying  competition  as  the  appointment  of  a  committee  to 
regulate  rates. 


104  REPOET   OF    THE   COMMISSIONER  OF   CORPORATIONS. 

Standard  Oil  Co.  v.  United  States  (221  U.  S.,  1),  Supreme 
Court,  1911.— The  facts  in  this  case  have  been  abeady  stated  in 
connection  with  other  topics.  (See  pp.  86,  90.)  Briefly  stated  for 
the  present  purpose,  the  essential  points  in  question  were  as  follows: 
The  Standard  Oil  Co.  was  a  combination  embracing  most  of  the  pipe- 
line, oil-refining,  and  oil-marketing  business  in  the  country,  built 
up  at  first  principally  by  the  amalgamation  of  competing  interests. 
These  were  organized  under  a  common  control  through  a  deed  of 
trust  in  1882,  and  subsequently  through  a  holding  company,  the 
Standard  Oil  Co.  of  New  Jersey,  which  owned  the  stock  of  a  large 
number  of  subsidiary  companies  controlled  by  the  combination. 
When  this  form  of  organization  was  adopted  the  New  Jersey  company 
increased  its  authorized  capital  stock  from  $10,000,000  to 
$110,000,000.  Its  shares  were  issued  to  the  former  owners,  or  bene- 
ficial owners,  of  the  shares  of  the  subsidiary  companies,  which  were 
in  turn  acquired  by  the  holding  company. 

The  court  held  that  the  series  of  acts  by  which  the  combination 
was  formed,  and  in  particular  the  holding  company  established  in 
1899,  constituted  a  violation  of  both  sections  1  and  2  of  the  Sherman 
Law.  With  more  particular  reference  to  the  form  of  organizing  the 
combination,  the  court  said  in  part  (pp.  72-75) : 

Giving  to  the  facts  just  stated  the  weight  which  it  was  deemed  they  were  entitled 
to,  in  the  light  afforded  by  the  proof  of  other  cognate  facts  and  circumstances,  the  court 
below  hold  that  the  acts  and  dealings  established  by  the  proof  operated  to  destroy 
the  "potentiality  of  competition"  which  otherwise  would  have  existed  to  such  an 
extent  as  to  cause  the  transfers  of  stock  which  were  made  to  the  New  Jersey  corpora- 
tion and  the  control  which  resulted  over  the  many  and  various  subsidiary  corporations 
to  be  a  combination  or  conspiracy  in  restraint  of  trade  in  violation  of  the  first  section  of 
the  act,  but  also  to  be  an  attempt  to  monopolize  and  a  monopolization  bringing  about 
a  perennial  violation  of  the  second  section. 

We  SCO  no  cause  to  doubt  the  correctness  of  these  conclusions,  considering  the  sub- 
ject from  every  aspect,  that  is,  both  in  view  of  the  facts  established  by  the  record  and 
the  necessary  operation  and  effect  of  the  law  as  we  have  construed  it  upon  the  infer- 
ences deducible  from  the  facts,  for  the  following  reasons: 

(a)  Because  the  unification  of  power  and  control  over  petroleum  and  its  products 
which  was  the  inevitable  result  of  the  combining  in  the  New  Jersey  corporation  by  the 
increase  of  its  stock  and  the  transfer  to  it  of  the  stocks  of  so  many  other  corporations, 
aggregating  so  vast  a  capital,  gives  rise,  in  and  of  itself,  in  the  absence  of  counter- 
vailing circumstances,  to  say  the  least,  to  the  frimafade  presumption  of  intent  and 
I')urposc  to  maintain  the  dominancy  over  the  oil  industry,  not  as  a  result  of  normal 
methods  of  industrial  development,  but  by  new  means  of  combination  which  were 
resorted  to  in  order  that  greater  power  might  be  added  than  would  otherwise  haA-e 
arisen  had  normal  methods  been  followed,  the  whole  with  the  purpose  of  excluding 
others  from  the  trade  and  thus  .centralizing  in  the  combination  a  perpetual  control  of 
the  movements  of  petroleum  and  its  products  in  the  channels  of  interstate  commerce. 

(h)  Because  the  prima  facie  presumption  of  intent  to  restrain  trade,  to  monopolize 
and  to  bring  about  monopolizatiou  resulting  from  the  act  of  expanding  the  stock  of  the 
New  Jersey  corporation  and  vesting  it  with  such  vast  control  of  the  oil  industry,  is 
made  conclusive  by  considering  (1)  the  conduct  of  the  persons  or  corporations  who 


TRUST  LAWS  AISTD   UiSTFAIR  COMPETITION.  105 

were  maiuly  instrumental  in  bringing  about  the  extension  of  power  in  the  New  Jersey 
corporation  before  the  consummation  of  that  result  and  prior  to  the  formation  of  the 
trust  agreements  of  1879  and  1882;  (2)  by  considering  the  proof  as  to  what  was  done 
under  those  agreements  and  the  acts  which  immediately  preceded  the  vesting  of  power 
in  the  New  Jersey  corporation  as  well  as  by  weighing  the  modes  in  which  the  power 
vested  in  that  corporation  has  been  exerted  and  the  results  which  have  arisen  from  it. 

Witli  reference  to  the  decree  of  the  court  below,  the  opinion  con- 
tained the  following  statement  (pp.  79-80): 

So  far  as  the  decree  held  that  the  ownership  of  the  stock  of  the  New  Jersey  corpora- 
tion constituted  a  combination  in  violation  of  the  first  section  arid  an  attempt  to  create 
a  monopoly  or  to  monopolize  under  the  second  section  and  commanded  the  dissolution 
of  the  combination,  the  decree  was  clearly  appropriate.  And  this  also  is  true  of  sec- 
tion 5  of  the  decree  which  restrained  both  the  New  Jersey  corporation  and  the  subsidiary 
corporations  from  doing  anything  which  would  recognize  or  give  effect  to  further 
ownership  in  tlie  New  Jersey  corporation  of  the  stocks  which  were  ordered  to  be 
retransf  erred . 

Section  16.  Agreements  to  fix  prices. 

The  most  direct  attempt  at  price  enhancement  has  been  by  means 
of  agreements  to  fix  prices.  Such  agreements  have  been  held  to  be 
illegal,  as  being  in  restraint  of  trade,  and  as  attempts  to  monopolize, 
in  so  far  as  they  relate  to  interstate  commerce.  These  have  existed 
among  railroads  as  well  as  among  manufacturing  and  trading  con- 
cerns. They  may  be  either  sellers'  or  buyers'  agreements — usually 
the  former,  though  occasionally,  as  in  the  case  of  the  beef  packers  (see 
po  106), buyers  have  combmed  to  depress  purchase  prices.  The  earhest 
instance  of  an  agreement  to  fix  prices  held  illegal  by  the  Supreme 
Court  under  the  Sherman  Law  was  an  agreement  to  fix  the  prices  of 
railroad  transportation. 

United  States  v.  Trans-Missouri  Freight  Association  (1G6 
U.  S.,  290),  Supreme  Court,  1897. — The  facts  in  the  case  have 
already  been  stated.  (See  p.  84.)  For  the  i3resent  pm-pose  it  is 
sufficient  to  recall  that  an  association  of  railway  companies  had  made 
an  agreement  to  fix  the  rates  of  transj^ortation  in  an  area  comprismg 
several  States,  under  which  members  failing  to  mamtain  such  rates 
were  subject  to  fine.  In  the  suit  in  equity  brought  by  the  Gov- 
ernment it  was  sought  to  chssolve  the  association  and  enjoin  the 
parties  thereto  from  f mother  action  under  the  combination.  The 
defendants  claimed  that  the  rates  so  fixed  were  reasonable.  The 
court  held,  as  akcady  noted  in  the  previous  statement  of  the  case, 
that  the  question  of  reasonableness  did  not  enter.  The  court  said 
(pp.330,  341): 

The  claim  that  the  company  has  the  right  to  charge  reasonable  rates,  and  that, 
therefore,  it  has  the  right  to  enter  into  a  combination  with  competing  roads  to  main- 
tain such  rates,  can  not  be  admitted.  The  conclusion  does  not  follow  from  an  admis- 
sion of  the  premise.  TMiat  one  company  may  do  in  the  way  of  charging  reasonable 
rates  is  radically  different  from  entering  into  an  agreement  with  other  and  competing 


106  EEPOET   OF    THE   COMMISSIONER   OF    COEPOEATIONS. 

roads  to  keep  up  the  rates  to  that  point.  If  there  be  any  competition  the  extent 
of  the  charge  f(jr  the  service  will  he  seriously  affected  1)y  that  fact.  *  *  *  com- 
petition is  allowed  no  play;  it  is  shut  out,  and  the  rate  is  practically  fixed  by  the  com- 
panies themselves  by  vii-tue  of  the  agreement,  so  long  as  they  abide  by  it.    *    *    * 

The  question  ie  one  of  law  in  regard  to  the  meaning  and  effect  of  the  agreement  itself, 
namely:  Does  the  agreement  restrain  trade  or  commerce  in  any  way  so  as  to  be  a 
violation  of  the  act?  We  have  no  doubt  that  it  does.  The  agreement  on  its  face 
recites  that  it  is  entered  into  "for  the  purpose  of  mutual  protection  by  establishing 
and  maintaining  reasonable  rates,  rules  and  regulations  on  all  freight  traffic,  both 
through  and  local."  To  that  end  the  association  is  formed  and  a  body  crea  ted  wliich  is 
to  adopt  rates  which,  when  agreed  to,  are  to  be  the  governing  rates  for  all  the  companies, 
and  a  violation  of  which  subjects  the  defaulting  company  to  the  payment  of  a  penalty, 
and  although  the  parties  have  a  right  to  withdraw  from  the  agi'eement  on  giving  thirty 
days'  notice  of  a  desire  so  to  do,  yet  while  in  force  and  assuming  it  to  be  lived  up  to, 
there  can  be  no  doubt  that  its  dii-ect,  immediate  and  necessary  effect  is  to  put  a 
restraint  upon  trade  or  commerce  as  described  in  the  act. 

United  States  v.  Jellico  Mountain  Coal  &  Coke  Co.  et  al. 
(46  Fed.,  432),  circuit  court,  1S91. — Tliis  case  was  a  suit  in  equity 
against  the  members  of  the  "Nashville  Coal  Exchange,"  which  was 
composed  of  coal-mining  companies  in  Kentucky  and  Tennessee  and 
coal  dealers  in  Nashville,  a  combmation  formed  'Ho  estabUsh  prices 
on  coal  at  Nashville,  Tenn.,  and  to  change  same  from  time  to  time, 
as  occasion  may  require."  The  combmation  agreement  provided  a 
penalty  for  scllmg  below  the  prices  so  fixed.  The  court  held  that 
this  combination  was  in  restramt  of  interstate  commerce,  and  con- 
stituted also  an  attempt  to  monopohze  the  coal  busmess  between 
the  State  of  Kentucky  and  NashviUe,  Tenn.,  basing  its  decision  on 
the  agreements  to  fix  prices  and  not  to  deal  with  nonmembers,  as 
the  elements  constituting  restraint. 

The  court  said  (p.  436) : 

These  provisions,  so  far  as  this  combination  could  do  so,  fixed  the  lowest  price  of  coal 
to  consumers  in  and  near  Nashville  at  13  cents  per  bushel,  and  prevented  coal  being 
sold  there  at  a  cheaper  rate,  no  matter  how  much  less  it  might  cost  in  an  open  and 
unobstructed  market.  Nor  is  this  all.  The  exchange  ordains  that  "  owners  or  opera- 
tors of  mines  shall  not  sell  or  ship  coal  to  any  firm,  person,  or  corporation  in  Nashville 
or  West  Nashville  or  East  Nashville  who  are  not  members  of  this  exchange,  and  dealers 
shall  not  buy  coal  from  any  one  who  is  not  a  member  of  the  exchange. ' '  The  coal  trade 
is  confined,  so  far  as  the  market  supply  is  concerned ,  to  transactions  between  the  miner 
and  dealer,  the  prices  are  fixed  by  them,  and  the  miner  and  dealer  only  are  eligible 
to  membership.  The  miners  of  the  concern  can  not  sell  to  any  dealer  in  or  near 
Nashville  who  is  not  a  party  to  the  agreement,  nor  can  such  dealer  purchase  coal  of 
any  miner  anywhere  who  is  not  a  member  of  the  body.  The  operations  of  both  are 
confined  within  the  membership.  So  far  as  Nashville  is  concerned,  they  can  not  go 
to  cheaper  or  more  favorable  markets,  or  deal  with  those  who  would  give  more  favor- 
able terms.    The  restraint  is  positive  and  undeniable. 

United  States  v.  Swift  &  Co.  (196  U.  S.,  375),  Supreme  Court, 
1905. — Tliis  was  a  suit  m  equity  by  the  Government  for  anmjunction 
agamst  Swift  &  Co.  and  other  packing  companies  controlling  about 
60  per  cent  of  the  trade  in  fresh  meat  in  the  United  States.     The 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  107 

Government  charged  a  combination  of  a  dominant  portion  of  the 
dealers  in  fresh  meat  throughout  the  United  States  not  to  bid  against 
each  other  in  the  live-stock  markets  of  the  different  States;  to  bid  up 
prices  for  a  few  days  in  order  to  mduce  the  cattlemen  to  send  their 
stock  to  the  stockyards ;  to  fix  prices  at  wliich  the}*  sell,  and  to  that 
end  to  restrict  sliipments  of  meat  when  necessary;  to  estabhsh  a  uni- 
form rule  of  credit  to  dealers,  and  to  keep  a  blackhst;  to  make  uniform 
and  improper  charges  for  cartage;  to  get  less  than  la^\'ful  rates  from 
railroads  to  the  exclusion  of  competitors;  and  to  conspire  with  one  an- 
other and  with  the  railroads,  and  with  others,  to  monopohze  the  supply 
and  distribution  of  fresh  meat  throughout  the  United  States.  A 
demurrer  to  the  declaration  was  overruled,  the  court  holdmg  that  such 
a  combmation  is  within  the  prohibitions  of  the  Sherman  Act.  In 
grantuig  the  prehminary  injunction  sought  by  the  Government,  the 
circuit  court  said  (122  Fed.,  534) : 

Whatever  combination  has  the  direct  and  necessary  effect  of  restricting  competition, 
is,  within  the  meaning  of  the  Sherman  act  as  now  interpreted,  restraint  of  trade. 

Thus  defined,  there  can  be  no  doubt  that  the  agreement  of  the  defendants  to  refrain 
from  bidding  against  each  other  in  the  purchase  of  cattle,  is  coml)ination  in  restraint 
of  trade;  so  also  theu"  agreement  to  bid  up  prices  to  stimidate  shipments,  intending  to 
cease  fi-om  bidding  when  the  shipments  have  arri^'ed.  The  same  result  follows  when 
we  turn  to  the  combination  of  defendants  to  fix  prices  upon,  and  restrict  the  quantities 
of  meat  sliipped  to  their  agents  or  their  customers.  Such  agi'eements  can- be  nothing 
ies.5  than  restriction  upon  ct)mpetition,  and,  therefore,  combination  in  restraint  of 
trade;  and  thus  viewed,  the  petition,  as  an  entii-ety,  makes  out  a  case  under  the 
Sherman  act. 

The  Supreme  Court  affirmed  the  opinion  of  the  lower  court,  basing 
its  oi)mion  on  all  the  facts  taken  together,  of  which  price  fixing  was  an 
important  element,  and  said  m  part  (pp.  396  and  400) : 

The  scheme  as  a  whole  seems  to  us  to  be  within  reach  of  the  law.  The  constituent 
elements,  as  we  have  stated  them,  are  enough  to  give  to  the  scheme  a  body  and,  for  all 
that  we  can  say,  to  accompUsh  it.  Moreover,  whatever  we  may  think  of  them  sepa- 
rately when  we  take  them  up  as  distinct  charges,  they  are  alleged  sufficiently  as  ele- 
ments <)f  the  scheme.  It  is  suggested  tliat  tlie  se^•eral  acts  charged  are  lawful  and  that 
intent  can  make  no  difference.  But  they  are  bound  together  as  the  parts  of  a  single 
plan.    The  plan  may  make  the  parts  unlawful.     *    *    * 

Under  the  act  it  is  the  duty  of  the  court,  when  applied  to,  to  stop  the  conduct. 
The  tiling  done  and  intended  to  be  done  is  perfectly  definite:  with  the  jjurpose 
mentioned,  directing  the  defendants'  agents  and  inducing  each  other  to  refrain  from 
competition  in  bids.  The  defendants  can  not  be  ordered  to  compete,  but  tliey 
properly  can  be  forbidden  to  give  directions  or  to  make  agreements  not  to  compete. 
See  Achh/ftinn  Pipe  &  Steel  Co.  v.  United  States,  175  U.  S.,  211.  The  injunction 
follows  the  charge. 

Section  17.  Agreements  to  limit  output. 

Agreements  to  limit  output  have  sought  to  accomplish  as  effectively 
the  same  end — higher  prices — as  the  more  direct  methods  of  price 
fixing.  To  curtail  production  has  been  one  of  tlic  objects  of  many 
association  agreements. 


108  REPORT   OF   THE   COMMISSIONER  OF   CORPORATIONS. 

GiBBs  V.  McNeeley  (lis  Fed.,  120),  Circuit  Court  of  Appeals, 
1902. — The  facts  in  this  case  have  been  already  set  forth.  (See  p.  78.) 
It  is  necessar}^  here  only  to  say  that  they  relate  to  an  association  of 
manufacturers  and  dealers  in  red-cedar  sliingles  in  the  State  of 
Waslungton,  formed  for  the  purpose  of  controlling  the  production  and 
price  of  such  shingles,  which  were  made  only  in  that  State  but  were 
principally  sold  and  used  in  other  States,  and  which,  by  its  action  in 
closing  the  miUs  of  its  members,  had  reduced  the  production  and  had 
also  arbitrarily  increased  the  prices  at  which  the  product  was  sold. 
This  was  held  to  be  an  unlawful  combination  under  the  Sherman 
Law.     The  court  said  (p.  127): 

The  combination  in  the  case  before  the  com"t  is  more  than  a  combination  to  regulate 
prices;  it  is  a  combination  to  control  the  production  of  a  manufactured  article  more 
than  four-fifths  of  which  is  made  for  interstate  trade,  and  to  diminish  competition 
in  its  production,  as  well  as  to  advance  its  price.  These  features,  we  think,  determine 
its  object,  and  bring  it  under  the  condemnation  of  the  law. 

Cravens  v.  Carter-Crume  Co.  (92  Fed.,  479),  Circuit  Court 
OF  Appeals,  1S99. — Manufacturers  of  woodenware,  representing  80 
per  cent  of  the  total  product  of  the  country,  formed  a  combination 
for  the  purpose  of  restricting  the  production  of  wooden  dishes  through- 
out the  country  and  keeping  up  the  price  thereof.  To  this  end  it 
was  intended  that  all  the  factories  would  be  brought  under  the  con- 
trol of  a  central  organization— the  National  Mercantile  Co. — which 
was  to  regulate  the  prices  of  the  woodenware. 

Cravens,  a  party  to  the  combination  contract,  was  guaranteed  cer- 
tain dividends  by  the  Carter-Crume  Co.  for  closmg  his  factory  for 
a  year  and  performing  other  acts.  He  brought  suit  against  the 
Carter-Crume  Co.  to  recover  the  amount  of  the  dividends  so  guar- 
anteed to  him.  The  court  held  that,  in  the  case  of  articles  in  com- 
mon use  at  least,  the  contract  could  not  be  enforced,  since  illegal 
under  the  Sherman  Act.     The  court  said  (p.  485) : 

The  parties  who  were  engaged  in  these  transactions,  of  whom  the  plaintiff  was  one, 
representing  80  per  cent  of  the  total  product,  luidertook  to,  and  did  in  fact,  form  a 
combination  for  the  purpose  of  restricting  the  production  of  wooden  dishes  through- 
out the  country  and  keeping  up  the  prices  thereof.  The  articles  to  which  this  com- 
bination had  reference  were  articles  in  common  use.  The  plaintiff's  contracts  were 
part  of  the  means  employed  for  effecting  the  common  object,  and  he  secured  the 
means  of  sharing  in  the  profits  expected  to  be  gained  through  the  combination .  To  this 
end  all  the  factories  were  expected  to  be  brought  under  the  control  of  the  National 
Mercantile  Company,  which  was  to  regulate  the  prices.  The  plaintiff  testified  that 
it  was  the  purpose  to  close  his  factory,  and  not  run  it  at  all.  He  further  testified  that 
xt  was  the  purpose  "to  get  all  the  factories  in  line,"  in  order  "to  maintain  prices.'' 
He  was  guaranteed  $9,000  for  closing  his  factory  for  a  year,  and  the  contract  included 
all  the  dish  machines  that  might  come  into  his  possession  or  control,  thus  disabUng 
himself  from  maoufactiiriug,  and  he  ol^Ugated  himself  not  to  sell  any  wood  dishes  to 
any  other  person,  directly  or  indirectly,  during  the  continuance  of  the  contract. 
It  is  manifest  that  it  was  the  expectation,  and  that  the  parties  intended,  to  get  a 


TEUST   LAWS  AND  UNFAIR   COMPETITION.  109 

sufficiently  large  number  of  manufacturers  into  the  combination  to  practically  acconi- 
plish  their  purpose.  We  can  not  doubt  that  such  a  combination,  for  such  pmposes, 
waa  opposed  to  public  policy,  and  therefore  unlawful. 

Section  18.  Agreements  to  apportion  output. 

Agreements  to  apportion  output  differ  Ironi  agreements  to  limit 
output  in  that  the  former  specifically  allot  the  quantities  to  be  pro- 
duced or  sold  by  the  several  members  of  the  combination.  In  the 
second  case  cited  (see  p.  110) — that  of  the  Window  Glass  Jobbers — 
there  was  not  only  an  allotment  of  the  manufacturers'  output  but 
also  of  the  quantities  which  the  several  jobbers  could  buy. 

United  States  v.  Chesapeake  &  Ohio  Fuel  Co.  (115  Fed.,  610), 
Circuit  Court  of  Appeals,  1902. — By  a  contract  between  the 
Chesapeake  &  Ohio  Fuel  Co.  and  an  association  composed  of  14  per- 
sons, firms,  and  corporations  independently  engaged  in  producing 
coal  and  coke  in  a  certain  district,  the  company  was  to  handle  for  a 
term  of  years  the  entire  output  of  the  members  of  the  association 
intended  for  the  western  market,  and  bound  itself  not  to  sell  the  prod- 
uct of  any  competitors.  The  association  had  an  executive  committee 
which  from  time  to  time  fixed  the  minimum  price  at  which  the  coal 
and  coke  should  be  sold,  and  the  company  agreed  to  pay  such  price, 
to  obtain  as  large  a  profit  as  possible,  and  to  account  to  the  associa- 
tion for  the  proceeds,  deductmg  its  compensation,  which  was  not  to 
exceed  10  cents  ])or  ton.  The  amount  of  product  to  be  furnished  by 
each  member  of  this  association  was  also  to  be  fixed  by  the  executive 
committee  and  each  was  to  receive  payment  at  the  same  rate,  to  be 
based  upon  the  average  price  realized  for  the  particular  grade  fur- 
nished duruig  the  current  month.  It  was  stipulated  that  other  pro- 
ducers of  coal  might  become  parties  to  the  contract  by  a  majority 
vote  of  the  members  of  the  association.  This  was  a  suit  in  equity 
by  the  Government  to  annul  the  contract,  to  enjoin  its  performance 
and  to  dissolve  the  combmation  as  illegal  under  the  Sherman  Act. 
The  court  held  that  the  contract  and  the  combination  of  the 
defendants  thereunder  were  in  restramt  of  trade  and  commerce 
among  the  several  States,  and  that  such  trade  had  in  fact  been 
restrained,  in  the  performance  of  the  contract.  A  decree  was  entered 
enjoining  the  defendants  and  each  of  them  from  selhng  or  shipping, 
under  the  contract  coal  or  coke,  into  any  State  other  than  the  State 
in  which  they  reside,  and  dissolvhig  the  combination  of  the  defend- 
ants under  the  contract. 

The  court  said  in  part  (p.  621): 

A  consideration  vl  these  provisions,  assuming  that  the  contract  relates  to  interstate 
commerce,  would  seem  to  make  plain  the  violation  of  the  statute  of  1890.  Here  are 
14  dealers  who  have  neither  formed  a  corporation  nor  a  partnership,  ])ut  have  limited 
to  the  terms  of  this  agi'eement  their  rights  for  five  years  in  the  mining  and  shipping 
of  coal  upon  one  of  their  main  outlets  to  the  market.     They  have  restricted  their  right 


110  EEPORT   OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

to  produce  coal  for  sucli  shipment  to  the  amount  designated  by  the  committee.  They 
have  restricted  sales  to  this  purchaser  to  a  2>i"ice  to  he  fixed  by  the  committee.  They 
have  eliminated  competition  in  the  market  among  themselves.  They  liave  restricted 
the  purchaser  so  that  he  may  not  buy  from  others  in  competition  with  themselves. 
If  we  correctly  interpret  the  decisions  of  the  supreme  court,  these  provisions  clearly 
restrain  the  freedom  of  interstate  commerce,  which  it  is  the  purpose  of  this  statute 
to  maintain  unfettered  by  such  contracts  and  combinations.     *    *    * 

Wheeler-Stenzel  Co.  v.  National  Window  Glass  Jobbers' 
Association  (152  Fed.,  864),  Circuit  Court  of  Appeals,  1907. — 
The  Wheeler-Stenzel  Co.,  a  wholesale  dealer  and  jobber  in  window 
glass  in  Boston,  doing  an  interstate  business  in  that  product,  com- 
menced an  action  at  law  for  treble  damages  under  the  Sherman  Act 
against  the  National  Window  Glass  Jobbers'  Association,  and  in  its 
declaration  alleged  in  substance  that  the  National  Window  Glass 
Jobbers'  Association  was  a  corporation  controlled  by  certain  wholesale 
dealers  m  window  glass  doing  more  than  75  per  cent  of  the  total 
window-glass  business  in  the  United  States;  that  its  busmess  durmg 
the  time  complained  of  was  purchasing  or  obtaming  contracts  for  the 
purchase  of  window  glass  from  manufacturers  in  certain  specified  States 
for  the  benefit  of  certam  jobbers  and  wholesale  dealers  doing  business 
in  other  States  and  specified  in  a  list  set  forth;  that  such  wholesale 
dealers  owned  a  large  majority  of  the  stock  in  the  association;  that 
the  American  Wmdow  Glass  Co.  owned  and  operated  glass  factories 
in  several  States  and  delivered  its  product  to  wholesale  dealers  in  the 
several  States  and  produced  more  than  70  per  cent  of  the  window  glass 
manufactured  in  the  United  States ;  that  i)rior  to  the  acts  complamed 
of  the  wholesale  dealers  were  uncombined;  that  the  association  en- 
tered into  a  contract  with  the  American  Window  Glass  Co.  and  such 
wholesale  dealers  agreeing  among  other  thmgs  to  restrict  the  sale  of  aU 
glass  manufactured  by  the  said  company  to  the  wholesale  dealers  in 
the  combination,  except  at  prices  higher  than  those  charged  whole- 
salers in  the  combination,  to  restrict  the  quantity  to  be  purchased 
by  each  such  wholesaler,  to  refuse  to  purchase  any  wmdow  glass 
from  any  manufacturer  other  than  the  American  Wmdow  Glass  Co. 
except  at  prices  below  the  price  charged  by  it  to  such  wholesalers, 
to  arbitrarily  fix  prices  to  retailers,  to  authorize  the  American  Win- 
dow Glass  Co.  to  arbitrarily  determine  the  quantity  of  glass  to  be 
purchased  by  each  such  wholesaler,  to  refuse  to  purchase  at  any 
price  from  any  manufacturer  who  did  not  close  his  factory  and 
restrict  his  output  as  he  might  be  arbitrarily  directed  by  the  American 
Window  Glass  Co.;  that  rules  and  regulations  were  established  for- 
bidding wholesalers  in  the  combination  from  selling  to  other  whole- 
salers at  prices  lower  than  the  price  fixed ;  that  the  territory  for  each 
wholesaler  in  the  combination  was  fixed;  that  since  the  combination 
was  effected  the  American  Window  Glass  Co.  had  continually  refused 
to  sell  any  wmdow  glass  to  the  Wheeler-Stenzel  Co.  except  at  unreas- 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  Ill 

onablc  i)ricos  largely  in  excess  of  the  prices  charged  to  the  whole- 
salers ill  the  combination ;  that  prior  to  the  combination  the  Wheeler- 
Stenzel  Co.'s  profit  was  $100,000  annually;  that  by  reason  of  the 
combination  the  said  company  lost  a  very  largo  part  of  its  trade. 
The  defendant  demurred.  The  circuit  court  sustained  the  demurrer. 
The  case  was  then  taken  to  the  Chcuit  Court  of  Appeals  by  writ  of 
error.  The  judgment  of  the  circuit  court  was  reversed.  The  court 
held  that  the  declaration  charged  a  contract  or  combination  in  re- 
straint of  interstate  commerce  in  violation  of  the  Sherman  Act, 
The  court  said  in  part  (pp.  870-871): 

We  think,  in  the  language  quoted,  there  is  sufficiently  averred  the  existence  of  a 
contract  or  combination,  to  which  the  defendant  was  a  party,  which,  by  its  necessary 
operation,  was  in  restraint  of  interstate  trade  and  commerce  in  window  glass.  It 
was  obviously  designed  to  destroy  or  minimize  competition  between  certaia  whole- 
salers and  jobbers  in  window  glass,  alleged  to  be  75  per  cent  of  the  whole  number  so 
engaged  in  the  United  States,  and,  in  the  language  of  the  Supreme  Court,  "to  destroy 
or  restrict  free  competition  in  interstate  commerce  is  to  restrain  such  commerce." 
******* 

There  is  something  more,  however,  set  forth  in  the  declaration  affecting  the  character 
and  operation  of  this  contract.  Prices  to  retail  dealers  were  to  be  arbitrarily  fixed  by 
those  wholesale  dealers,  to  which  prices  they  were  all  requhed  to  conform.  The  quan- 
tity of  glass  to  be  purchased  by  each  of  said  wholesale  dealers  was  to  be  arbitrarily  de- 
termined by  the  American  Window  Glass  Company,  and  they  were  to  be  prohibited 
fi'om  purchasing  from  any  manufacturer  who  should  not  close  his  factories  and  restrict 
the  output  of  glass  when  and  as  required  so  to  do  by  the  American  Window  Glass  Com- 
pany. These  stipulations  clearly  tended  toward  the  creation  of  a  monopoly,  and  if 
adhered  to  and  canied  out,  manifestly  restricted  the  scope  of  competition  in  the  com- 
modity referred  to.  It  may  be  quite  true,  that  such  an  agreement  would  have  been 
valid  at  common  law,  or  if  invalid  as  to  the  parties,  would  not  have  been  illegal,  but 
the  act  of  Congi-ess  has  affected  it  with  illegality,  so  far  as  the  trade  or  commerce 
restrained  l)y  it  is  interstate  in  its  character.  We  conclude,  therefore,  that  the  con- 
tract or  comliination  set  out  in  the  declaration  is  one  hi  violation  of  the  first  section  of 
the  Antitrust  Act,  and  that  an  action  properly  accrues  under  the  seventh  section  to 
any  one  who  has  been  uijured  in  his  business  or  property  by  reason  thereof. 

United  States  Tobacco  Co.  v.  American  Tobacco  Co.  (163 
Fed.,  701),  Circuit  Court,  1908. — This  was  an  action  for  treble 
damages  by  the  United  States  Tobacco  Co.,  a  manufacturer  of  plug 
tobacco  engaged  in  interstate  commerce.  It  alleged  in  its  comj^laint 
in  substance  as  follows:  Two  subsidiary  companies  of  the  American 
Tobacco  Co.,  namely,  MacAndrcws  &  Forbes  Co.  and  J.  S.  Young 
Co.,  were  manufacturers  of  licorice  ])aste  and  controlled  more  than 
85  per  cent  of  the  trade  therein.  These  manufacturers  of  licorice 
paste  entered  into  a  combination  elimuiating  competition,  fixing 
arbitrary  and  noncomjietitivc  prices  for  paste,  and  induced  certam 
competitors  to  fix  arliitrary  prices  m  excess  of  the  normal  and 
reasonable  prices,  and  ai)})ortioned  their  interstate  trade  and  arbi- 
trarily fixed  the  amount  of  business  they  should  do,  and  also  agreed 
with  another  manufacturer,  John  D.  Lewis,  that  the  latter  should 


112  KEPOKT   OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

restrict  his  output  to  a  fixed  quantity  imder  a  penalty.  Demurrer 
to  the  comphxint  was  overruled.  The  court  held  that  the  agi-eement 
constituted  an  interference  with  interstate  commerce  prohibited  by 
the  Sherman  Act^  and  said  m  part  (p.  707): 

As  I  look  at  this  complaint,  the  most  material  allegation  is  the  one  wherein  it  is 
charged  tliat  John  D.  Lewis  contracted  and  agreed  with  the  J.  S.  Young  Company 
that  he  would  not  sell  more  than  1,000,000  pounds  of  such  licorice  paste  during  the 
year  1904,  nor  more  than  50,000  pounds  additional  during  each  year  for  five  years  from 
December  31,  1903,  so  that  the  total  production  of  Lewis  should  not  be  more  than 
1,200,000  pounds  during  the  year  1908. 

Section  19.  Agreements  to  divide  territory. 

Addyston  Pipe  &  Steel  Co.  v.  United  States  (175  U.  S.,  211), 
Supreme  Court,  1899. — The  defendants,  manufacturers  of  cast-iron 
pipe,  had  made  an  agreement,  one  of  the  provisions  of  which  was  that 
certain  cities  were  reserved  to  certain  members  of  the  combination. 
(For  statement  of  facts,  see  also  p.  76).  For  instance,  the  Chatta- 
nooga Foundry  &  Pipe  Works  were  to  "handle  Chattanooga,  Tenn.^ 
and  New  Orleans,  La.,  furnishmg  all  gas  and  water  pipe  in  above- 
named  cities."  When  there  was  a  call  for  bids  from  one  of  these 
cities  the  price  was  agreed  on  by  the  members  of  the  combine;  the 
member  to  whom  the  city  was  reserved  bid  the  agreed  price;  to 
preserve  the  appearance  of  competition,  the  other  members  bid 
liigher  prices;  the  member  to  whom  the  town  was  reserved  got  the 
contract.     The  Supreme  Court  said  in  its  opinion  (p.  241) : 

If  dealers  in  any  commodity  agi'eed  among  themselves  that  any  particular  teiTitory 
bounded  by  state  lines  should  be  fimiished  with  such  commodity  by  certain  mem- 
bers only  of  the  combination,  and  the  others  would  abstain  from  business  in  that  tem- 
tory,  would  not  such  agi-eement  be  regarded  as  one  in  restraint  of  interstate  trade?  If 
the  price  of  the  commodity  were  thereby  enhanced ,  (as  it  naturally  would  be, )  the  char- 
acter of  the  agreement  would  l^e  still  more  clearly  one  in  restraint  of  trade.  Is  there 
any  substantial  difference  where,  by  agreement  among  themselves,  the  parties  choose 
one  of  their  number  to  make  a  bid  for  the  sujiply  of  the  pipe  for  delivery  in  another 
State,  and  agree  that  all  the  other  bids  shall  be  for  a  larger  sum,  thus  practically  restrict- 
ing all  but  the  member  agreed  upon  from  any  attempt  to  supply  the  demand  for  the 
pipe  or  to  enter  into  competition  for  the  business?  Does  not  an  agreement  or  combi- 
nation of  that  kind  restrain  interstate  trade,  and  when  Congress  has  acted  by  the  passage 
of  a  statute  like  the  one  under  consideration,  does  not  such  a  contract  clearly  violate 
that  statute? 

United  States  v.  Standard  Oil  Co.  op  New  Jersey  (221  U.  S., 
1),  Supreme  Court,  1911. — For  statement  of  facts  in  this  case,  see 
page  86.  The  Supreme  Court  noted  among  the  facts  showing  the 
intent  to  monopohze  the  trade  in  oil  (p.  77) — 

The  system  of  marketing  which  was  adopted  by  which  the  country  was  divided 
into  districts  and  the  trade  in  each  district  in  oil  was  turned  over  to  a  designated  cor- 
poration within  the  combination  and  all  others  were  excluded. 


trust  laws  and  unfair  competition.  113 

Wheeler-Stenzel  Co.  v.  National  Window  Glass  Jobbers' 
Association  (152  Fed.,  864),  Circuit  Court  of  Appeals,  1907. — 
The  facts  in  this  case  are  stated  above  (pp.  110,  111).  Division  of  ter- 
ritory was  one  of  the  features  of  the  illegal  contract,  though  it  is 
not  one  that  the  court  called  special  attention  to  in  its  opinion. 

United  States  Tobacco  Co.  v.  American  Tobacco  Co.  (163 
Fed.,  701),  Circuit  Court,  1908. — The  facts  in  this  case  are  stated 
above  (pp.  111-112).  Apportionment  of  customers,  not  territorially 
but  individually,  was  one  of  the  factors  of  the  agreement  which  in  its 
entirety  was  found  to  be  illegal. 

Section  20.  Agreements  to  divide  earnings  or  profits. 

Addyston  Pipe  &  Steel  Co.  v.  United  States  (175  U.  S., 
211),  Supreme  Court,  1899. — As  is  explained  in  the  preceding  sec- 
tion (p.  112),  this  case  dealt  with  a  combination  of  cast-iron  pipe 
manufacturers.  Certain  cities  were  reserved  for  certam  members  of 
the  combine;  the  combine,  however,  fixed  the  price  on  every  contract, 
and  also  fixed  a  bonus  to  be  paid  into  a  pool  by  the  member  to 
whom  the  contract  was  assigned,  wliich  bonus  was  afterwards  divided. 
In  territory  covered  by  the  combination,  but  outside  of  the  reserved 
cities,  when  the  price  on  a  contract  had  been  fixed  by  the  combina- 
tion, the  contract  was  assigned  to  the  member  who  would  pay  the 
highest  bonus  for  the  privilege  of  filhng  it  at  the  price.  This  bonus 
also  went  into  the  pool  for  subsequent  division.  The  Supreme  Court 
quoted  with  approval  the  foUowdng  passage  from  the  opmion  of  the 
Circuit  Court  of  Appeals  (p.  237) : 

The  defendants  were  by  their  combination  therefore  able  to  deprive  the  public 
in  a  large  territory  of  the  advantages  otherwise  accruing  to  them  from  the  proximity 
of  defendants'  pipe  factories  and,  by  keeping  prices  just  low  enough  to  prevent  com- 
petition by  Eastern  manufacturers,  to  compel  the  public  to  pay  an  increase  over  what 
the  price  would  have  been  if  fixed  by  competition  between  defendants,  nearly  equal 
to  the  advantage  in  freight  rates  enjoyed  by  defendants  over  Eastern  competitors. 
The  defendants  acquired  this  power  by  voluntarily  agreeing  to  sell  only  at  prices  fixed 
by  their  committee  and  by  allowing  the  highest  bidder  at  the  secret  "auction  pool" 
to  become  the  lowest  bidder  of  them  at  the  public  letting.  Now,  the  restraint  thus 
imposed  on  themselves  was  only  partial.  It  did  not  cover  the  United  States.  There 
was  not  a  complete  monopoly.  It  was  tempered  by  the  fear  of  competition  and  it 
affected  only  a  part  of  the  price.  But  this  certainly  does  not  take  the  contract  of 
association  out  of  the  annulling  effect  of  the  rule  against  monopolies. ^ 

Continental  Wall  Paper  Co.  v.  Louis  Voight  &  Sons  Co.  (212 
U.  S.,  227),  Supreme  Court,  1909. — In  this  case  (see  p.  91)  there  was 
a  division  of  profits  tlirough  the  device  of  a  central  company  whoso 
shares  were  distributed  among  the  members  of  the  combine  in  propor- 
tion to  then'  production  during  the  preceding  year.  The  whole  output 
of  the  members  was  sold  actually  or  nominally  to  the  central  com- 

>  85  Fed.,  292-293. 
30035°— 10 8 


114  EEPORT  OF   THE   COMMISSIONER  OF   COEPOEATIONS. 

paiiy  ill  such  a  way  that  practically  the  whole  profit  accrued  to  it. 
The  result  was  that  profits  were  finally  dividetl,  not  with  any  relation 
to  the  current  business  of  the  several  members  of  the  combine,  but 
in  proportion  to  their  output  during  the  year  before  the  combine 
was  formed.     The  Supreme  Court  said  (p.  255) : 

That  the  combination  represented  by  the  plaintiff  company  is  within  the  prohibi- 
tions of  the  above  act  of  Congress  is  clear  from  the  facts  admitted  by  the  demurrer. 
"We  assume,  therefore,  without  discussion — for  discussion  is  unnecessary — that  there 
is  a  combination,  of  which  the  Continental  Wall  Paper  Company  is  the  representa- 
tive, and  that,  in  violation  of  that  act,  such  combination  was  formed  with  the  intent, 
and  will  have  the  effect,  directly,  to  restrain  as  well  as  monopolize  trade  and  com- 
merce among  the  several  States  and  with  foreign  nations  as  involved  in  the  manufac- 
ture, sale  and  transportation  of  wall  paper  among  the  several  States  and  with  foreign 
nations. 

United  States  v.  MacAndrews  &  Forbes  Co.  (149  Fed.,  823), 
Circuit  Court,  1906. — An  agreement  that  a  subsidiary  of  the  Ameri- 
can Tobacco  Co.,  manufacturmg  licorice  paste,  should  receive  part  of 
the  profits  of  an  outside  manufacturer  thereof,  was  one  of  the  elements 
of  illegality  considered  in  this  case.     (See  p.  111.) 

Section  21.  Corners. 

Attempts  to  "corner  the  market,"  for  the.  purpose  of  raising  the 
price  of  the  commodity  so  cornered,  have  been  held  by  the  Supreme 
Court  to  be  illegal  under  the  Sherman  Act. 

United  States  i\  Patten  (226  U.  S.,  525),  Supreme  Court,  1913. — 
James  A.  Patten  and  others  wore  indicted  for  alleged  violation  of 
the  Sherman  Law.  The  indictment  charged  in  substance  that 
Patten  and  others  had  entered  into  a  combination  agreement  to 
severally  purchase  enough  cotton  to  enable  them  to  control  the 
price  of  cotton,  and  were  engaged  m  a  conspiracy  in  restraint  of 
interstate  commerce  by  doing  what  is  commonly  called  rimnmg  a 
corner  in  that  commodity.  The  important  question  raised  by  the 
defendant's  demurrer  to  the  indictment  was  whether  a  conspiracy 
to  run  a  corner  m  the  available  supply  of  a  staple  commodity,  such 
as  cotton,  normally  a  subject  of  trade  and  commerce  among  the 
States,  and  thereby  to  enhance  artificially  its  price  throughout  the 
country  and  to  compel  all  who  have  occasion  to  obtain  it  to  pay  the 
enhanced  price  or  else  to  leave  their  needs  unsatisfied  is  within  the 
terms  of  section  1  of  the  Sherman  Act. 

The  circuit  court  answered  this  question  in  the  negative.  The 
Supreme  Court  of  the  United  States  reversed  the  decision  of  the  court 
below  by  answering  this  question  in  the  affirmative.  The  Supreme 
Court  said  in  part  (p.  541): 

Section  1  of  the  act,  upon  wliich  the  counts  are  founded,  is  not  confined  to  voluntary 
restraints,  as  where  persons  engaged  in  interstate  trade  or  commerce  agree  to  sup{)ress 
competition  among  themselves,  but  includes  as  well  involuntary  restraints,  as  where 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  115 

persons  not  so  engaged  conspire  to  compel  action  by  others,  or  to  create  artificial  con- 
ditions, which  necessarily  impede  or  burden  the  due  course  of  such  trade  or  commerce 
or  restrict  the  common  lilterty  to  engage  therein.     *    *    * 

It  may  well  be  that  running  a  corner  tends  for  a  time  to  stimulate  competition; 
but  this  does  not  prevent  it  from  being  a  forbidden  restraint,  for  it  also  operates  to 
thwart  the  usual  operation  of  the  laws  of  supply  and  demand,  to  withdraw  the  com- 
modity from  the  normal  current  of  tratle,  to  enhance  the  price  artificially,  to  hamper 
users  and  consumers  in  satisfying  their  needs,  and  to  produce  practically  the  same 

evils  aa  does  the  suppression  of  competition. 

*  -»  *  K-  *  *  * 

It  was  a  consphacy  to  run  a  corner  in  the  market.  The  commodity  to  be  cornered 
was  cotton,  a  product  of  tlie  Southern  States,  largely  used  and  consumed  in  the 
Northern  States.  It  was  a  suljject  of  interstate  trade  and  commerce,  and  tln-ough  that 
channel  it  was  obtained  from  time  to  time  l>y  the  many  manufacturers  of  cotton  fabrics 
in  the  Northern  States.  Tlie  corner  was  to  be  conducted  on  the  Cottcni  Exchange  in 
New  York  City,  but  by  means  which  would  enable  the  conspii-ators  to  obtain  control 
of  the  available  supply  and  to  enhance  the  price  to  all  buyers  in  every  maiket  of  the 
country.  This  control  and  the  enhancement  of  the  price  were  features  of  the  con- 
s^iii-acy  upon  the  attainment  of  wliich  it  is  conceded  its  success  dejiended.  Upon  the 
corner  becoming  effective,  there  could  be  no  trading  in  the  commodity  save  at  the 
will  of  tlie  conspirators  aud  at  such  price  as  their  interests  might  prompt  them  to 
exact.  And  so,  the  conspii-acy  was  to  reach  and  to  bring  witliin  its  dominating 
influence  the  enthe  cotton  trade  of  the  country. 

Bearing  in  mind  that  such  was  the  nature,  object  and  scope  of  the  conspiracy,  we 
regard  it  as  altogether  plain  that  by  its  necessaiy  operation  it  would  dii-ectly  and 
materially  impede  and  bu.rden  the  due  course  of  trade  and  commerce  among  the  States 
and  therefore  inflict  upon  the  jjublic  the  injuries  which  the  Anti-trust  Act  is  designed 
to  prevent.' 

Section  22.  Patents — Use  in  violation  of  Sherman  Law. 

National  Harrow  Co.  v.  Hench  (83  Fed.,  36),  Circuit  Court 
OF  Appeals,  1897.  Several  manufacturei-s  of  harrows  under  various 
United  States  patents  assigned  to  the  National  Harrow  Co.  the  pat- 
ents severally  owned  by  them,  together  with  good  will,  agreeing  among 
other  things  not  to  be  interested  in  the  manufacture  or  sale  of  such 
harrows  except  as  agents  or  Ucensees  of  said  corporation.  The 
National  Harrow  Co.  issued  hcenses  to  the  several  manufacturers, 
subject  to  uniform  terms  and  conditions;  its  licensees  manufactured 
and  sold  at  least  90  per  cent  of  such  harrows  made  in  the  United  States. 
The  licenses  so  issued  prohibited,  among  other  tilings,  the  cutting  of 
prices,  and  provided  that  the  hcensees  should  not  sell  other  harrows 
than  those  authorized  by  the  licenses.  Hench  and  Dromgold,  parties 
to  the  arrangement,  sold  harrows  in  violation  of  the  terms  of  the 
licenses  issued  to  them.  This  was  a  suit  in  equity  by  the  Harrow 
company  against  Hench  and  Dromgold  for  an  injunction,  for  specific 
performance  of  said  hcense  contracts  and  for  an  accounting.  As  a 
defense  to  the  suit  Hench  and  Dromgold  pleaded  that  the  license  con- 
tracts were  in  unreasonaljlc^  restraint  of  trade  and  were  a  part  of  an 

>226U.S.,  541-513. 


116  REPORT  OF    THE   COMMISSIONER   OF   CORPORATIONS. 

unlawful  combination  to  destroy  competition  and  maintain  high 
prices.  The  relief  prayed  for  was  denied  (76  Fed.,  667)  and  an  appeal 
was  taken  to  the  Circuit  Court  of  Appeals.  The  judgment  of  the 
circuit  court  was  affirmed.  The  court  held  that  the  arrangement  was 
an  unlawful  combination  in  restraint  of  trade. 

It  will  be  perceived  that  the  corporation  through  whose  instrumentality  the  pur- 
poses of  the  combination  are  effected  is  simply  clothed  with  the  legal  title  to  the 
assigned  patents,  while  the  several  assignors  are  invested  with  the  exclusive  right  to 
manufacture  and  sell  their  old  style  of  harrows  under  their  own  patents;  but  all  of 
them  must  sell  at  uniform  prices  and  upon  the  same  terms,  without  respect  to  cost  or 
the  merits  of  their  respective  styles  of  harrows,  and  all  the  members  of  the  combination 
are  strictly  forbidden  to  manufacture  or  sell  any  other  style  or  kind  of  float  spring-tooth 
harrow  than  they  are  thus  licensed  to  make  and  sell.    *    *    * 

It  is  true  that  a  j^atentee  has  the  exclusive  control  of  his  invention  during  the  life 
of  the  patent.  He  may  practice  the  invention  or  not,  as  he  sees  fit,  and  he  may  grant 
to  others  licenses  upon  his  own  terms.  But  where ,  as  was  the  case  here ,  a  large  number 
of  independent  manufacturing  concerns  are  engaged  in  making  and  selling,  under 
different  patents  and  in  various  forms,  an  extensively  used  article,  competition 
between  them  is  the  natural  and  inevitable  result,  and  thereby  the  public  interest  is 
promoted.  Therefore,  a  combination  between  such  manufacturers,  which  imposes  a 
widespread  restraint  upon  the  trade,  and  destroys  competition,  is  as  injurious  to  the 
community,  and  as  obnoxious  to  sound  public  policy,  as  if  the  confederates  were 
dealing  in  unpatented  articles.  *  *  *  I  am  constrained  to  regard  the  license  con- 
tracts sued  on  as  part  of  an  illegal  combination,  and  in  unwarrantable  restraint  of  trade. 
I  must,  therefore,  deny  the  plaintiff  the  relief  sought.* 

Standard  Sanitary  Manufacturing  Co.  v.  United  States  (226 
U.  S.;  20),  Supreme  Court,  1912. — The  Standard  Sanitary  Manufac- 
turing Co.  and  15  other  manufacturers  of  sanitarv  enameled  ironware 
combined  in  the  form  of  an  association.  Certain  patents  for  enam- 
eling devices  were  assigned  to  one  Wayman,  secretary  of  the  asso- 
ciation, who  issued  licenses  to  the  various  manufacturers,  members 
of  the  association,  to  manufacture  such  ware.  Prior  to  this  such 
manufacturers  were  independent  and  competitive.  By  agreements 
they  subjected  themselves  to  certain  rules  and  regulations,  among 
others  not  to  sell  their  product  to  the  jobbers  except  at  a  j^rice 
fixed  not  by  competitive  trade  conditions,  but  by  the  decision  of 
a  committee  of  six  of  their  number,  of  w^hich  Wayman  was  chairman, 
and  sale  zones  were  estabhshed  and  prices  fixed  in  each  of  them. 
A  jobber  could  not  obtain  enameled  ware  from  any  manufacturer 
w^lio  was  'in  the  combine  unless  he  entered  the  combination,  and 
the  condition  of  entry  was  not  to  resell  to  plumbers  except  at  prices 
fixed  in  the  jobber's  hcense  agreement.  The  potency  of  the  scheme 
was  estabhshed  by  the  cooperation  of  85  per  cent  of  the  manufacturers, 
and  their  fidehty  to  it  was  secured  not  only  by  trade  advantages  but 
by  a  provision  for  the  return  of  80  per  cent  of  the  royalties  if  the 
agreement  was  faithfully  observed.  The  jobbers  also  were  entitled 
to  certain  rebates  for  the  faithful  observance  of  their  engagements. 

1  76  Fed.,  669-670. 


TEUST   LAWS  AND   UNFAIR   COMPETITION.  117 

It  was  testified  that  90  per  cent  of  the  jobbers  in  number  and  more 
than  90  per  cent  in  purchasing  power  joined  the  combination.  This 
was  a  suit  in  equity  by  the  Goveriunent  to  dissolve  the  alleged  com- 
bination upon  the  grounds  that  it  was  a  violation  of  the  Sherman  Act. 
A  decree  was  entered  in  favor  of  the  Government  in  the  circuit  court, 
and  on  appeal  to  the  Supreme  Court  of  the  United  States  the  decree 
was  affii-med.  The  court  held  that  a  trade  agreement  involving  the 
right  of  all  parties  thereto  to  use  a  certain  patent  which  tran- 
scends what  is  necessary  to  protect  the  use  of  the  patent  or  the 
monopoly  thereof  as  conferred  by  law  and  which  controls  the  out- 
put and  the  price  of  goods  manufactured  by  all  those  using  the 
patent,  is  illegal  under  the  Sherman  Act.  The  court  said  in  part 
(pp.  48-49) : 

The  agreements  clearly,  therefore,  transcended  what  was  necessary  to  protect  the 
use  of  the  patent  or  the  monopoly  which  the  law  confen-ed  upon  it.  They  passed  to  the 
purpose  and  accomplished  a  restraint  of  trade  condemned  by  the  Sherman  law.     *  *  * 

The  agreements  in  the  case  at  bar  combined  the  manufacturers  and  jobbers  of 
enameled  ware  very  much  to  the  same  purpose  and  results  as  the  association  of  manu- 
facturers and  dealers  in  tiles  combined  them  in  Montague  &  Co.  v.  Loiury,  193  U.  S.  38, 
which  combination  was  condemned  by  this  Court  as  offending  the  Shennan  law.  The 
added  element  of  the  patent  in  the  case  at  bar  cannot  confer  immunity  from  a  like  con- 
demnation, for  the  reasons  we  have  stated.  *  *  *  Rights  conferred  by  patents  are 
indeed  very  definite  and  extensive,  but  they  do  not  give  any  more  than  other  rights 
an  universal  license  against  positive  prohibitions.  The  Sherman  law  is  a  limitation  of 
rights,  rights  which  may  be  pushed  to  evil  consequences  and  therefore  restrained. 

Section  23.  Agreements  to  fix  resale  prices. 

Agreements  to  fix  resale  prices  differ  from  ordinary  agreements  of 
competitors  to  fix  prices,  in  that  the  manufacturer  fixes  the  price  at 
which  the  jobbers  or  retailers  shall  sell  the  articles  bought  from  Irim. 
Such  resale  agreements  are  common  in  many  lines  of  industry.  The 
courts  have  passed  upon  some  of  them,  usually  in  connex^tion  with 
other  illegal  features  of  contracts  in  question,  but  frequently  pointmg 
out  tlie  fixing  of  resale  prices  as  an  important  element  in  the  restraint 
or  monopoly  passed  upon.  Man}^  cases  concerning  resale  prices  have 
been  adjudicated  under  the  patent  law,  but  these  are  not  considered 
here,  inasmuch  as  this  section  is  confipicd  solely  to  the  interpreta- 
tion of  the  Sherman  Act  with  respect  to  resale  prices. 

Agreements  to  fix  resale  prices  in  a  number  of  cases  have  been  held 
to  be  illegal  under  the  Sherman  Law.^ 

Continental  Wall  Paper  Co.  v.  Louis  Voigiit  &  Sons  Co.  (212 
U.  S.,  227),  Supreme  Court,  1909. — The  facts  in  this  case  have  been 
already  stated.  (See  p.  91.)  It  will  be  recalled  that  the  Continental 
Wall  Paper  Co.,  a  combination  of  manufacturers  of  wall  paper  compris- 
ing 98  per  cent  of  the  production  and  sales  of  wall  paper  in  the  United 

•  Certain  recent  decisions  of  inferior  Federal  courts  regarding  certain  methods  of  maintaining  resale  prices 
are  not  noted  here  because  made  subsequent  to  Mar.  15, 1915.    (See  footnote  on  p.  72.) 


118  REPORT  OF   THE   COMMISSIONER   OF   CORPORATIONS. 

States,  made  agreements  with  the  jobbers  of  wall  paper  by  which  the 
latter  agreed  to  sell  the  goods  purchased  at  a  price  fixed  by  the  combi- 
nation, and  to  patronize  exclusively  the  members  of  the  combination. 
The  Continental  Wall  Paper  Co.,  under  this  contract,  sued  a  jobber 
for  wall  paper  furnished.  The  Supreme  Court  held  that  the  Wall 
Paper  company  could  not  recover,  since  the  contract  was  part  of  an 
illegal  combination,  quoting  with  approval  (p.  256)  the  opinion  of 
the  Circuit  Court  of  Appeals  to  the  effect  that — 

The  jobbers  and  wholesalers,  who  were  to  be  coerced  into  contracts  to  buy  their 
entire  demands  from  the  Continental  Wall  Paper  Company  or  be  driven  out  of  business, 
were  in  every  State.  Before  the  combination,  each  of  the  combining  companies  was 
engaged  in  both  State  and  interstate  commerce.  The  freedom  of  each,  with  respectto 
prices  and  terms,  was  restrained  by  the  agreement  and  interstate  commerce  directly 
affected  thereby,  as  well  as  by  the  enhancement  of  prices  which  resulted.  A  more 
complete  monopoly  in  an  article  of  universal  use  has  probably  never  been  brought 
about. ^ 

The  Supreme  Court  in  affirming  the  decision  of  the  Circuit  Court  of 
Appeals  said  (pp.  266-267) : 

Upon  the  whole  case,  and  without  further  citation  of  authorities,  we  adjudge,  upon 
the  admitted  facts,  that  the  combination,  represented  by  the  plaintiff  in  this  case, 
was  illegal  under  the  Antitrust  Act  of  1890;  that  it  is  to  be  taken  as  one  intended, 
and  which  will  have  the  effect  directly,  to  restrain  and  monopolize  trade  and  com- 
merce among  the  several  States  and  with  foreign  States;  and  that  the  plaintiff  can  not 
have  a  judgment  for  the  amount  of  the  account  sued  on,  because,  for  the  reasons  we 
have  stated,  such  a  judgment  would,  in  effect,  aid  the  execution  of  the  agreements 
which  constituted  that  illegal  combination. 

Hartman  v.  John  D.  Park  &  Sons'  Co.  (153  Fed.,  24),  Circuit 
Court  of  Appeals,  1907. — In  this  case  the  manufacturer  of  a  pro- 
prietary medicine  sold  the  same  to  wholesale  druggists  under  a  con- 
tract which  bound  the  latter  to  maintain  certain  resale  prices,  and  to 
retail  druggists  under  a  retail-price  agreement  which  bound  the  re- 
tailers to  sell  at  fixed  prices.  These  contracts  were  held  to  be  illegal 
under  the  Sherman  Law.     The  court  said  (pp.  33,  42): 

*  *  *  We  are  *  *  *  unable  to  discover  any  legal  or  economic  reason  which 
justly  exempts  such  articles  when  made  from  all  of  the  rules  of  the  common  law  which 
forbid  unreasonable  restraints  in  trade  and  from  the  Antitrust  Act  of  Congress  in  so 
far  as  trade  in  the  prepared  medicine  is  the  subject  of  interstate  commerce.     *    *    * 

The  plain  effect  of  the  ' '  system  of  contracts, "  the  purposed  relation  of  each  to 
every  other  being  confessed  by  the  very  description  of  the  method  of  carrying  on 
business  stated  in  the  bill,  is,  first,  to  destroy  all  competition  between  jobbers  or 
wholesale  dealers  in  selling  complainant's  preparations.  Complainant  restrains 
himself  by  agreeing  to  sell  at  only  one  price  and  to  only  such  persons  as  will  sign  one 
of  his  system  of  contracts.  The  contracting  wholesalers  or  jobbers  covenant  that 
they  will  sell  to  no  one  who  does  not  come  with  complainant's  license  to  buy,  and 
that  they  will  not  sell  below  a  minimum  price  dictated  by  complainant.  Next,  all 
competition  between  retailers  is  destroyed,  for  each  such  retailer  can  obtain  his 
supply  only  by  signing  one  of  the  uniform  contracts  prepared  for  retailers,  whereby 

1  148  Fed.,  947. 


TRUST  LAWS  AND  UNFAIR   COMPETITION.  119 

he  covenants  not  to  sell  to  any  one  who  proposes  to  sell  again  unless  the  buyer  is 
authorized  in  writing  by  the  complainant,  and  not  to  sell  at  less  than  a  standard  price 
named  in  the  agreement.  Thus  all  room  for  competition  between  retailers,  who 
supply  the  public,  is  made  impossible.  If  these  contracts  leave  any  room  at  any 
point  of  the  line  for  the  usual  play  of  competition  between  the  dealers  in  the  product 
marketed  by  complainant,  it  is  not  discoverable.  Thus  a  combination  between  the 
manufacturer,  the  wholesalers,  and  the  retailers  to  maintain  prices  and  stifle  competi- 
tion has  been  brought  about. 

Dr.  Miles  Medical  Co.  v.  John  D.  Park  &  Sons'  Co.  (220  U.  S., 
373),  Supreme  Court,  191 1. — The  Dr.  Miles  Medical  Co.  sought  an 
injunction  to  prevent  Park  &  Sons'  Co.  from  selling  the  Miles  medi- 
cines at  cut  rates,  on  the  ground  of  a  contract  between  the  parties 
by  which  the  resale  prices  were  fixed.  The  court  held  that  this  pro- 
vision of  the  contract  was  repugnant  to  the  Sherman  Act,  and  said, 
in  part  (pp.  394,  407-408) : 

The  complainant,  a  manufacturer  of  proprietary  medicines  which  are  prepared  in 
accordance  with  secret  formulas,  presents  by  its  bill  a  system,  carefully  devised,  by 
which  it  seeks  to  maintain  certain  prices  fixed  by  it  for  all  the  sales  of  its  products 
both  at  wholesale  and  retail.  Its  purpose  is  to  establish  minimum  prices  at  which 
sales  shall  be  made  by  its  vendees  and  by  all  subsequent  purchasers  who  traffic  in  its 
remedies.  Its  plan  is  thus  to  govern  directly  the  entire  trade  in  the  medicines  it 
manufactures,  embracing  interstate  commerce  as  well  as  commerce  within  the  States 
respectively.     *    *    * 

The  bill  asserts  the  importance  of  a  standard  retail  .price  and  alleges  generally  that 
confusion  and  damage  have  resulted  from  sales  at  less  than  the  prices  fixed.  But 
the  advantage  of  established  retail  prices  primarily  concerns  the  dealers.  The  en- 
larged profits  which  would  result  from  adherence  to  the  established  rates  would  go 
to  them  and  not  to  the  complainant.  It  is  through  the  inability  of  the  favored  dealers 
to  realize  these  profits,  on  account  of  the  described  competition,  that  the  complainant 
works  out  its  alleged  injury.  If  there  be  an  advantage  to  a  manufacturer  in  the 
maintenance  of  fixed  retail  prices,  the  question  remains  whether  it  is  one  which  he 
is  entitled  to  secure  by  agreements  restricting  the  freedom  of  trade  on  the  part  of 
dealers  who  own  what  they  sell.  As  to  this,  the  complainant  can  fare  no  better  with 
its  plan  of  identical  contracts  than  could  the  dealers  themselves  if  they  formed  a 
combination  and  endeavored  to  establish  the  same  restrictions,  and  thus  to  achieve 
the  same  result,  by  agreement  with  each  other.  If  the  immediate  advantage  they 
would  thus  obtain  would  not  be  sufficient  to  sustain  such  a  direct  agreement,  the 
asserted  ulterior  benefit  to  the  complainant  can  not  be  regarded  as  sufficient  to  support 
its  system. 

But  agreements  or  combinations  between  dealers,  having  for  their  sole  purpose  the 
destruction  of  competition  and  the  fixing  of  prices,  are  injurious  to  the  public  interest 
and  void.  They  are  not  saved  by  the  advantages  which  the  participants  expect  to 
derive  from  the  enhanced  price  to  the  consumer.     *    *    * 

The  complainant's  plan  falls  within  the  ])rinci})le  wliich  condemns  contracts  of 
this  class.     It,  in  effect,  creates  a  combination  for  the  prohibited  purposes.     *    *    * 

Section  24.  The  Sherman  Act  not  void  for  uncertainty. 

Since  the  decisions  of  the  Supreme  Court  in  the  Standard  Oil  and 
Tobacco  cases,  it  has  frequently  been  urged  that  the  Sherman  Anti- 
trust Act  is  unconstitutional  in  that  it  is  too  vague  and  indefinite 
to  create  a  criminal  ofTcnse.  This  objection  was  disposed  of  by  the 
Supreme  Court  in  the  following  case. 


120  REPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

Nash  v.  United  States  (229  U.  S.,  373),  Supreme  Court,  1913.— 
An  indictment  returned  in  the  circuit  court  against  the  American 
Naval  Stores  Co.,  the'National  Transportation  &  Terminal  Co.,  and 
six  individuals  charged  a  conspiracy  in  restraint  of  trade  and  a 
conspiracy  to  monopolize  trade  contrary  to  the  Sherman  Act.  A 
demurrer  questioning  both  the  validity  of  the  penal  provisions  of  the 
act  and  the  sufficiency  of  the  indictment  was  overruled.  Five  indi- 
vidual defendants  were  found  guilty,  fined,  and  sentenced  to  three 
months'  imprisonment;  this  judgment  being  afhrmed  by  the  Circuit 
Court  of  Appeals.  A  writ  of  certiorari  was  granted  by  the  Supreme 
Court  which  said  in  part  (pp.  376-378) : 

The  objection  to  the  criminal  operation  of  the  statute  is  thought  to  be  warranted 
by  The  Standard  Oil  Co.  v.  United  States,  221  U.  S.  1,  and  United  States  v.  American 
Tobacco  Co.,  221  U.  S.  106.  Those  cases  may  be  taken  to  have  established  that  only 
such  contracts  and  combinations  are  within  the  act  as,  by  reason  of  intent  or  the 
inherent  nature  of  the  contemplated  acts,  prejudice  the  public  interests  by  unduly 
restricting  competition  or  unduly  obstructing  the  course  of  trade.  221  U.  S.  179. 
And  thereupon  it  is  said  that  tlie  crime  thus  defined  by  the  statute  contains  in  its 
definition  an  element  of  degree  as  to  which  estimates  may  differ,  with  the  result  that 
a  man  might  find  himself  in  prison  because  his  honest  judgment  did  not  anticipate 
that  of  a  jury  of  less  competent  men.  The  kindred  proposition  that  "the  crimina,lity 
of  an  act  cannot  depend  upon  whether  a  jury  may  think  it  reasonable  or  unre?soaable. 
There  must  be  some  definiteness  and  certainty,"  is  cited  from  the  late  Mr.  Justice 
Brewer  sitting  in  the  Circuit  Court.     Tozer  v.  United  States,  52  Fed.  Rep.  917,  919. 

But  apart  from  the  common  law  as  to  restraint  of  trade  thus  taken  up  by  the  statute 
the  law  is  full  of  instances  where  a  man's  fnte  depends  upon  liis  estimating  rightly, 
that  is,  as  the  jury  subsequently  estimate  it,  Rome  matter  of  degree.  If  his  judg- 
ment is  wrong,  not  only  may  he  incur  a  fine  or  a  short  imprisonment,  as  here;  he  may 
incur  the  penalty  of  death.     *    *    * 

We  are  of  opinion  that  there  is  no  constitutional  difficulty  in  the  way  of  enforcing 
the  criminal  part  of  the  act. 

The  judgment  of  the  lower  court  was  reversed  on  the  ground  of 
error  in  the  charge  to  the  jury  and  the  case  is  pending. 

Section  25.  Character  of  judicial  proceedings  under  the  act. 

Judicial  proceedings  under  the  Sherman  Law  may  be  divided  into 
five  broad  classes:  (1)  Criminal  prosecutions;  (2)  suits  in  equity  by 
the  Government;  (3)  condemnation  proceedings  by  the  Government 
with  respect  to  goods  transported  in  interstate  commerce;  (4)  actions 
by  private  parties  for  treble  damages ;  (.5)  actions  at  law  or  suits  in 
equity  between  private  parties  where  the  law  has  been  pleaded  in 
defense,  or  where  relief  has  been  affirmatively  sought  from  restraints 
imposed  by  agreements. 

Criminal  proceedings. — Indictments  under  the  act  have 
charged  conspiracies  in  restraint  of  trade  or  commerce,  or  monopo- 
lizing or  attempting  to  monopofize  the  same.  The  facts  alleged  in 
indictments  have  differed  widely.  Fixing  prices  and  limiting  and 
apportioning  output,  taken  together,  have  been  the  basis  of  indict- 
ments in  some  cases;  in  others  the  employment  of  alleged  unfair  or 


TRUST  LAWS  AND   UNFAIR  COMPETITION.  121 

oppressive  methods  of  competition  have  been  charged  as  constituting 
evidence  of  an  intent  to  violate  the  law.  Among  the  acts  of  com- 
petition which  have  been  complained  of  are  the  following:  (1)  Cut- 
ting prices,  in  some  cases  even  below  the  cost  of  production,  for  the 
purpose  of  injuring  competitors;  (2)  attempting  to  bribe  employees 
of  competitors  to  obtain  information  concerning  their  business;  (3) 
bribing  employees  of  transportation  and  express  companies  to  dis- 
close secrets  as  to  competitors'  shipments;  (4)  Imowingly  making  false 
statements  for  the  pm-pose  of  injuring  competitors;  (5)  securing  the 
product  of  competitors  and  advertising  it  at  greatly  reduced  prices 
to  injure  the  reputation  of  the  product;  (6)  threatening  or  engaging 
in  persecutive  litigation  to  harass  competitors  or  their  patrons;  (7) 
using  bogus  independent  concerns  to  obtain  secrets  of  competitors; 
(8)  inducing  employees  of  competitors  to  leave  their  service  for  the 
purpose  of  embarrassing  them  and  restraining  their  trade;  (9)  re- 
fusing to  sell  to  persons  who  handle  the  product  of  competitors. 

The  indictments  alleging  acts  of  competition  as  evidence  of  an  in- 
tent to  restrain  or  monopolize  trade  or  commerce  have  not  depended 
on  any  single  practice  to  show  a  violation  of  the  law,  but  have  set 
out  a  number  of  such  practices.  In  several  cases  of  tliis  character 
demurrers  to  the  sufficiency  of  the  indictments  have  been  overruled, 
the  court  holding  that  the  acts  set  forth,  if  proven,  were  sufRcient 
to  constitute  a  violation  of  the  law.  Other  indictments  have  de- 
pended on  such  direct  restraints  of  trade  as  fixing  prices  and  limiting 
output.  The  members  of  a  number  of  manufacturers'  associations 
which  fixed  prices  and  limited  and  apportioned  among  themselves 
the  production  of  various  kinds  of  wire  have  been  indicted,  and  on 
pleas  of  nolo  contendere  heav^^  fuies  imposed.  A  prosecution  for  a 
conspiracy  to  run  a  corner  on  the  New  York  Cotton  Exchange  was 
successful,  as  also  one  against  members  of  the  Society  of  Equity  for 
preventing  the  shipment  in  interstate  commerce  of  the  tobacco  of 
nonmembers.^  The  members  of  labor  unions  have  likewise  been  con- 
victed for  conspiracies  to  restrain  trade. 

Eight v-f our  indictments  have  been  returned  under  the  act.  In 
6  of  these  a  verdict  of  guilty  was  secured;  in  5  a  verdict  of  not  guilty 
was  returned ;  in  10  demurrers  to  the  indictments  were  sustained  or  the 
indictment  quashed;  in  28  cases  pleas  either  of  guilty  or  nolo  con- 
tendere were  entered,  and  sentences  of  fine  or  imprisonment  imposed. 
In  only  one  case,  however,  has  a  prison  sentence  been  imposed  and 
served,  and  this  was  on  a  plea  of  guilty.  In  several  other  cases 
prison  sentences  have  been  imposed,  but  the  cases  are  now  pending 
on  appeal.  Seventeen  prosecutions  have  been  dismissed  by  the 
Government,  or  judgments  for  the  Government  in  the  lower  court 
have  been  reversed  and  the  cases  dismissed;  and  18  criminal  cases 
remain  to  be  finally  disposed  of. 

I  See  pp.  9C,  114. 


122  EEPORT   OF    THE   COMMISSIONER   OF   COEPORATIONS. 

In  addition  to  indictments,  there  have  been  a  number  of  prose- 
cutions for  criminal  contempt.  Among  the  more  important  of  tliese 
was  tlie  conviction  of  certain  members  of  the  Southern  Wliolesale 
Grocers'  Association  for  violations  of  a  consent  decree  entered  in  a 
suit  in  equity  by  the  Government.  Convictions  were  obtained  and 
fines  imposed  in  this  case.    (See  pp.  488,  491.) 

Suits  in  equity  by  the  Government. — Eighty-seven  suits  in 
equity  have  been  instituted  by  the  Government  under  the  act.  The 
more  important  of  these  suits  have  been  for  the  dissolution  of  com- 
binations in  corporate  form  or  of  associations  alleged  to  be  in  viola- 
tion of  the  act.  A  large  number  of  bills,  however,  have  prayed  for 
injunctions  against  violations  of  the  act  by  individuals  or  corpora- 
tions, or  have  sought  to  enjoin  the  further  performance  of  contracts 
or  agreements  in  restraint  of  trade. 

Of  the  suits  brought,  judgments  have  been  had  in  favor  of  the 
Government  in  29  cases;  in  13,  decisions  adverse  to  the  Government 
have  been  rendered,  or  the  bills  have  been  dismissed  by  the  Govern- 
ment or  the  cases  allowed  to  rest  after  the  bills  were  filed  or  the 
judgments  on  demurrer  were  rendered  in  favor  of  the  Government. 
Consent  decrees  have  been  entered  in  15  suits,  and  30  suits  are  now 
pending. 

Condemnation  proceedings. —  Only  one  case  has  been  brought 
by  the  Government  to  condemn  property  seized  in  the  course  of 
transportation  from  one  State  to  another.  In  this  instance,  175 
cases  of  cigarettes  were  seized,  but  were  subsequently  released  under 
bond  and  the  case  ultimately  dismissed. 

Actions  for  treble  damages. — Fifty-three  actions  for  treble  dam- 
ages have  been  brought  by  private  parties  under  section  7  of  the  Anti- 
trust Act.*  The  results  of  these  cases  are  not  available  in  detail. 
From  such  information  as  can  be  had  at  this  time  it  appears  that  in 
only  a  small  proportion  of  the  cases  have  damages  been  recovered. 
In  a  number  of  these  cases,  however,  demurrers  to  the  declarations 
have  been  overruled  and  the  records  show  that  the  cases  were  subse- 
quently dismissed.  From  this  it  appears  probable  that  some  of  them 
were  dismissed  as  a  result  of  compromise  between  the  parties. 

Other  suits  between  private  parties. — Seventy-four  suits  be- 
tween private  parties  tried  in  tho  United  States  courts  have  required 
some  interpretation  or  application  of  the  law.  These  cases  have 
included  actions  on  contracts  which  the  defendants  contended  were 
in  violation  of  the  act,  or  in  which  it  was  urged  that  tho  plaintiff  was 
an  unlawful  combination  in  restraint  of  trade,  and  the  court  should 
therefore  not  enforce  the  contract;  suits  in  equity  to  restrain  viola- 
tions of  license  agreements  under  the  patent  act  and  for  damages  for 

1  The  data  for  cases  between  private  parties  is  taken  from  the  United  States  and  Federal  Reports.  It 
is  probable,  therefore,  that  the  figures  do  not  include  all  the  cases,  as  the  reports  do  not  contain  opinions  in 
all  cases  that  arise. 


TKUST   LAWS  AND   UNFAIR  COMPETITION.  123 

violations  of  such  agreements;  actions  for  damages  on  covenants  not 
to  compete  with  the  purchaser  of  a  business,  or  suits  praying  an  injunc- 
tion to  prevent  violations  of  such  agreements;  suits  by  manufacturers 
to  enforce  contracts  for  maintenance  of  resale  prices  fixed  by  them. 

In  51  cases  the  law  has  been  urged  in  defense  and  in  only  16  of  these 
has  it  been  successfully  pleaded;  in  10  instances  it  has  been  made  the 
basis  of  plaintiff's  claim  for  injunctive  rehef  or  damages  and  in  only  3 
of  these  has  judgment  been  entered  for  the  plaintiff.  In  4  other  cases 
the  law  has  been  invoked,  but  the  decisions  have  rested  on  other 
grounds  that  have  involved  some  question  of  jurisdiction  or  suffi- 
ciency of  service  of  process,  and  no  question  of  substantive  rights 
under  the  law  has  been  involved.  In  9  cases  private  parties  have 
sought  by  suits  in  equity  to  restrain  violations  of  the  law  which  they 
deemed  resulted  in  injury  to  themselves;  in  these  suits  the  courts 
have  invariably  held  that  such  action  wiU  lie  only  at  the  suit  of  the 
Government. 

OTHER  ANTITRUST  LAWS. 

Section  26.  General  statement. 

Besides  the  Sherman  Antitrust  Act  of  1890  there  should  be  espe- 
cially noted  certam  provisions  of  the  Act  to  Regulate  Commerce  of 
1887,  of  the  Wilson  Tariff  Act  of  1894  (as  amended  by  an  act  of  Feb 
12,  1913),  of  the  Panama  Canal  Act  of  1912,  and  of  two  recent  laws, 
namely,  the  Federal  Trade  Commission  Act  of  1914  and  the  Clayton 
Antitrust  Act  of  1914.  Each  of  these  laws  deals  either  largely 
or  in  part  with  other  matters  than  trusts  or  combinations  in  restraint 
of  trade.  There  has  been  practically  no  judicial  interpretation  of  the 
meaning  of  those  provisions  of  these  laws  which  are  considered  here, 
except  with  respect  to  the  Act  to  Regulate  Commerce.  The  Federal 
Trade  Commission  Act  and  the  Clayton  Antitrust  Act  were  enacted 
so  recently  that  there  has  been  little  or  no  opportunity  for  such  inter- 
pretation. Besides  these  laws  there  have  been  enacted  certain  others 
which  have  more  or  less  bearing  on  the  enforcement  of  the  antitrust 
acts,  but  these  do  not  require  detailed  consideration  here.' 

1  Among  these  laws  the  following,  which  are  of  a  substantive  character,  may  be  noted: 

(1)  An  act  mak  lug  appropriations  for  sundry  civil  expenses,  etc.,  of  June  23, 1913.  This  law  appropriated 
additional  funds  for  the  Department  of  .Justice  for  the  enforcement  of  the  antitnist  laws,  but  provided  that 
none  of  tliese  moneys  should  be  expended  in  prosecuting  (a)  any  organization  or  individual  for  entering 
into  any  combination  to  increase  wages,  etc.,  or  any  act  done  in  fiirtlierance  thereof,  not  in  itself  lawful,  or 
(6)  producers  of  farm  products  and  associations  of  farmers  cooperating  to  obtain  a  fair  and  rp:isonal)le 
price  for  their  products.    The  same  provision  was  made  in  the  sundry  civil  appropriation  act  of  Aug.  1, 1914. 

(2)  An  act  making  appropriations  for  the  naval  service,  etc.,  of  Mar.  4, 1913.  This  law  provided  that  no 
part  of  the  money  approjiriated  should  be  expended  for  the  purchase  of  certain  steel  products,  armament, 
and  machinery  from  persons,  etc.,  who  have  conspired  to  monopolize  interstate  or  foreign  eommerco  in  such 
articles,  existing  contracts  excepted. 

(3)  An  act  making  appropriations  to  provide  for  the  expenses  of  the  government  of  the  District  of  Colum- 
bia, etc.,  of  Mar.  4, 1913.  This  law  created  a  Public  Utilities  Commission  for  the  District  of  Columbia,  and 
pul)lic-utility  corporations  were  forl)idden,  without  the  consent  of  the  commission,  to  transfer  their  fran- 
chises, to  ac(iuire  the  stocks  or  bonds  of  competing  corporations,  or  to  purchase  the  x>roperty  of  another 
public  utility  for  Die  purjiose  of  consolidation,  etc. 


124  EEPOET  OF   THE   COMMISSIOISrER  OF   CORPORATIONS. 

Section  27.  Act  to  Regulate  Commerce  of  1887. 

The  Act  to  Regulate  Commerce  of  February  4,  1887,  was  apparently 
the  first  Federal  statute  containing  any  provision  aimed  to  prevent 
monopolistic  combinations,  although  the  provision  relating  to  such 
combinations  Is  merely  incidental  to  the  broader  purposes  of  the  law. 

Section  5  of  this  law  prohibits  any  common  carrier  subject  to  this 
act  from  making  any  agreement  with  another  common  carrier  for  the 
pooling  of  freights  of  different  and  competing  railroads  or  from  divid- 
ing the  earnings  of  such  railroads. 

Sec.  5.  That  it  shall  be  unlawful  for  any  common  carrier  subject  to  the  provisions 
of  this  Act  to  enter  into  any  contract,  agreement,  or  combination  with  any  other  com- 
mon carrier  or  carriers  for  the  pooUng  of  freights  of  different  and  competing  railroads,  or 
to  divide  between  them  the  aggregate  or  net  proceeds  of  the  earnings  of  such  railroads, 
or  any  portion  thereof;  and  in  any  case  of  an  agreement  for  the  pooling  of  freights  as 
aforesaid,  each  day  of  its  continuance  shall  be  deemed  a  separate  offense.     *    *    * 

The  only  important  case  apparently  which  has  been  decided  by  the 
Supreme  Court  with  reference  to  the  construction  of  this  section 
was  Southern  Pacific  Co.  v.  Interstate  Commerce  Commission.* 
Certain  western  railroads  had  published  through  rates  on  citrus 
fruits  from  California  to  the  Atlantic  seaboard,  allowing  the  shippers  to 
control  the  routing.  Later,  on  account  of  rebating  to  shippers  prac- 
ticed by  connecting  eastern  roads,  they  issued  new  rates  and  reserved 
to  themselves  the  routing,  at  the  same  time  promising  fair  treatment 
to  the  eastern  roads  and  eventually  giving  them  certain  percentages 
of  guaranteed  tonnage.  The  Interstate  Commerce  Commission,  which 
regarded  this  action  as  subjecting  shippers  to  undue  disadvantage  and 
a  violation  of  section  3  of  the  Act  to  Regulate  Commerce  of  1887, 
ordered  them  to  desist.  The  circuit  court  upheld  the  order,  but  on 
the  ground  that  this  arrangement  was  a  violation  of  the  prohibition 
against  pooling  in  section  5.  The  Supreme  Court  reversed  this  deci- 
sion, however,  holding  that  the  acts  complained  of  were  lawful  and 
did  not  amount  to  a  pooling  of  freights  within  the  meaning  of  section  5. 
The  court  said  in  part  (p.  560) : 

Now,  while  the  most  important,  if  not  the  only,  effect  of  the  routing  agreement  is  to 
take  away  this  rebt  ting  practice,  and  to  hold  all  parties  to  that  agreement  as  part  of  the 
joilit  through  rate  tariff,  we  think  no  case  is  made  out  of  a  violation  of  the  pooling  pro- 
vision in  the  fifth  section  of  the  act,  even  where  the  initial  carrier  promises  fair  treat- 
ment to  the  connecting  roads,  and  carries  out  such  promises. 

Rate  agreements  among  railroads  have  also  been  attacked,  how- 
ever, under  the  Sherman  Antitrust  Law  (see  p.  95),  and  also  combina- 
tions in  the  form  of  holding  companies.     (See  p.  103.) 

1220  U.  S.,  53G  (1906). 


TEUST  LAWS  AND   UNFAIR   COMPETITION.  125 

Section  28.  Wilson  Tariff  Act  of  1894. 

This  law  was  entitled  "An  act  to  reduce  taxation,  to  provide 
revenue  for  the  Govermnent,  and  for  other  purposes,"  and  became' 
a  law  on  August  27,  1894.  In  connection  with  the  legislation  regard- 
ing customs  duties,  certain  provisions  were  inserted  with  a  view  to 
preventing  combinations  in  restraint  of  trade  with  respect  to  the 
foreign  commerce  of  the  United  States.  These  provisions  are  con- 
tained in  sections  73  to  77,  inclusive,  of  the  said  law.  Sections  73 
and  76  were  slightly  amended  on  February  12,  1913,  the  amended 
form  being  shown  below. 

Section  73  of  the  Wilson  Tariff  Act  declares  contrary  to  public 
policy,  illegal,  and  void  every  combination,  etc.,  of  persons  or  cor- 
porations when  any  of  them  is  engaged  in  importing  articles  into 
the  United  States,  and  when  such  combination  is  intended  to  operate 
in  restraint  of  la^vful  trade  or  free  competition  in  lawful  trade,  or 
to  increase  the  market  price  in  the  United  States  of  any  article 
imported  or  of  any  manufacture  into  which  such  imported  article 
enters;  violation  of  the  act  is  declared  a  misdemeanor  and  penalties 
are  provided. 

Sec.  73.  That  every  combiuation,  conspiracy,  trust,  agi-eemeut,  or  contract  is 
hereby  declared  to  be  contrary  to  public  policy,  illegal,  and  void,  when  the  same  is 
made  by  or  between  two  or  moi"e  persons  or  corporations  either  of  whom,  a.s  agent 
or  principal,  is  engaged  in  importing  any  article  from  any  foreign  country  into  the 
United  States,  and  when  such  combination,  conspiracy,  trust,  agi"eement,  or  contract 
is  intended  to  operate  in  restraint  of  lawful  trade,  or  free  competition  in  lawful  trade 
or  commerce,  or  to  increase  the  market  price  in  any  part  of  the  United  States  of  any 
article  or  articles  imported  or  intended  to  be  imported  into  the  United  States,  or 
of  any  manufacture  into  which  such  imported  article  enters  or  is  intended  to  enter. 
Every  person  who  is  or  shall  hereafter  be  engaged  in  the  importation  of  goods  or  any 
commodity  from  any  foreign  country  in  \iolation  of  this  section  of  this  Act,  or  who 
shall  combine  or  conspke  with  another  to  violate  the  same,  is  guilty  of  a  misdemeanor, 
and,  on  conviction  thereof  in  any  court  of  the  United  States,  such  person  shall  be 
fined  in  a  sum  not  less  than  one  hundred  dollars  and  not  exceeding  five  thousand 
dollars,  and  shall  be  further  punished  by  imprisonment  in  the  discretion  of  the  court, 
for  a  term  not  less  than  three  months  nor  exceeding  twelve  months.' 

Section  74  of  this  act,  which  provides  for  suits  in  equity  by  the 
United  States  Government,  is  practically  identical  in  phraseology 
with  section  4  of  the  Sherman  Antitrust  Act,  except  that  it  is  made 
apphcable  to  offenses  described  in  section  73  of  this  act.  The  precise 
terms  of  this  section,  therefore,  do  not  require  repetition  here. 
(See  p.  71.) 

Section  75  of  this  act,  which  relates  to  the  jurisdiction  of  the 
courts  in  such  ecjuity  suits,  is  practically  identical  in  phraseology 
with  section  5  of  the  Sherman  Antitrust  Act,  except  in  the  section 

1  The  act  of  1913,  roforred  to  above,  amended  this  section  by  inserting  the  words  "as  agent  or  principal " 
near  the  beginning  of  the  section. 


126  EEPORT    OF    THE    COMMISSIONER   OF    COEPORATIONS. 

numbers  referred  to,  and,  therefore,  need  not  be  repeated  here. 
(See  p.  71.) 

Section  76  of  this  act,  which  relates  to  the  seizure  and  condemna- 
tion of  property  owned  by  a  combination,  etc.,  is  practically  the 
same  as  section  6  of  the  Sherman  Antitrust  Act,  except  that  it 
apphes  to  articles  ' '  imported  into  and  being  within  the  United  States 
or  being  in  the  course  of  transportation  from  one  State  to  another, 
or  to  or  from  a  Territory,  or  the  District  of  Columbia,"  instead  of 
to  articles  ' '  in  the  course  of  transportation  from  one  State  to  another, 
or  to  a  foreign  country."^  (See  p.  71.)  It  is  therefore  unnecessary 
to  give  the  precise  terms  in  further  detail. 

Section  77  of  this  act  is  identical  with  section  7  of  the  Sherman 
Antitrust  Act,  except  that  it  is  introduced  with  the  additional  word 
"that,"  and,  therefore,  need  not  be  repeated  here.     (See  p,  72.) 

The  most  striking  variation  of  the  Wilson  Tariff  Act  from  the 
Sherman  Antitrust  Act  is  in  the  definition  of  the  offense  in  section  73, 
which  has  been  given  above.  In  particular  it  should  be  noted  that 
a  combination  ''to  increase  the  market  price"  either  of  an  imported 
article  or  of  an  article  manufactured  from  such  imported  article,  is 
prohibited.  This  provision  is  made  in  addition  to  provisions  pro- 
hibiting combinations  "in  restraint  of  lawful  trade"  or  "free  com- 
petition in  lawful  trade  or  commerce."  No  reference  is  made  in  this 
act  to  monopolizing  or  attempting  to  monopohze. 

Section  29.  Panama  Canal  Act  of  1912. 

An  act  of  August  24,  1912,  to  provide  for  the  opening  of  the 
Panama  Canal,  etc.,  provided  in  section  11,  that  section  5  of  the  Act 
to  Regulate  Commerce  of  February  4,  1887,  should  be  amended 
substantially  as  follows:  After  July  1,  1914,  it  is  declared  unlawful 
for  any  connnon  carrier  subject  to  the  provisions  of  the  act  to  own, 
or  control,  directly  or  indirectly,  or  to  have  any  interest  in  any 
common  carrier  by  water,  or  vessel  carrying  freight  or  passengers, 
operated  through  the  Panama  Canal,  or  elsewhere,  with  which  the 
said  carrier  does  or  may  compete.  Jurisdiction  is  conferred  on  the 
Interstate  Commerce  Commission  to  determine  questions  of  fact 
in  this  connection  and  to  make  orders  in  respect  thereto  which  are 
final.  If  the  commission  is  of  opinion  that  such  service  by  water, 
other  than  through  the  Panama  Canal,  is  being  operated  in  the 
interest  of  the  public,  etc.,  and  will  not  reduce  competition,  it  may 
extend  the  period  for  which  such  service  may  be  operated  beyond 
July  1,  1914,  subject  to  regulation  by  the  commission  in  the  same 
manner  as  the  railroad  which  controls  it  is  regulated.  This  amend- 
ment provides  further  that  no  vessel  may  engage  in  the  coastwise  or 

1  The  act  of  1913,  referred  to  above,  amended  this  section  by  inserting  the  words  "imported  into  and 
being  within  the  United  States,  or  being"  near  the  middle  of  the  section. 


TEUST    LAWS   AND   UNFAIR   COMPETITION,  127 

foreign  trade  of  the  United  States  or  pass  through  the  Panama 
Canal  if  it  is  owned  or  controlled  by  any  person  or  company  doing 
business  in  violation  of  the  Sherman  Antitrust  Act,  or  sections  73 
to  77,  inclusive,  of  the  Wilson  Tariff  Act  of  1894,  or  any  acts  amend- 
ing or  supplementing  either  of  them.  Jurisdiction  in  respect  to  this 
last  provision  is  conferred  on  the  Federal  courts.  The  text  of  the 
foregoing  provisions  is  as  follows: 

From  and  after  the  first  day  of  July,  nineteen  huntlred  and  fourteen,  it  shall  be 
unlawful  for  any  railroad  company  or  other  common  earner  subject  to  the  Act  to 
regulate  commerce  to  own,  lease,  operate,  control,  or  have  any  interest  whatsoever 
(by  stock  ownership  or  otherwise,  either  directly,  indirectly,  through  any  holduig 
company,  or  by  stockholders  or  diix'ctors  in  common,  or  in  any  other  manner)  in  any 
common  carrier  by  water  operated  through  the  Panama  Canal  or  elsewhere  with 
which  said  railroad  or  other  carrier  aforesaid  does  or  may  compete  for  traffic  or  any 
vessel  carrying  freight  or  passengers  upon  said  water  route  or  elsewhere  with  which 
said  railroad  or  other  carrier  aforesaid  does  or  may  compete  for  tratfic;  and  in  case  of 
the  violation  of  this  provision  each  day  in  which  such  violation  continues  shall  be 
deemed  a  separate  offense. 

Jurisdiction  is  hereby  conferred  on  the  Interstate  Commerce  Commission  to  deter- 
mine questions  of  fact  as  to  the  competition  or  possibility  of  competition,  after  full 
hearing,  on  the  application  of  any  railroad  company  or  other  carrier.  Such  appli- 
cation may  be  filed  for  the  purpose  of  determining  whether  any  existing  service  is 
in  violation  of  this  section  and  pray  for  an  order  permitting  the  continuance  of  any 
vessel  or  vessels  already  in  operation,  or  for  the  purpose  of  asking  an  order  to  install 
new  service  not  in  conflict  with  the  provisions  of  this  paragraph.  The  Commission 
may  on  its  own  motion  or  the  application  of  any  shipper  institute  proceedings  to 
inquire  into  the  operation  of  any  vesel  in  use  by  any  railroad  or  other  carrier  which 
has  not  applied  to  the  Commission  and  had  the  question  of  competition  or  the  possi- 
bility of  competition  determined  as  herein  provided.  In  all  such  cases  the  order  of 
said  Commission  shall  be  final. 

If  the  Interstate  Commerce  Commission  shall  be  of  the  opinion  that  any  such  ex- 
isting specified  service  by  water  other  than  through  the  Panama  Canal  is  being  oper- 
ated in  the  interest  of  the  public  and  is  of  advantage  to  the  convenience  and  commerce 
of  the  people,  aud  that  such  extension  will  neither  exclude,  prevent,  nor  reduce  com- 
petition on  the  route  by  water  under  consideration,  the  Interstate  Commerce  Com- 
mission may,  by  order,  extend  the  time  during  which  such  service  by  water  may 
continue  to  be  operated  beyond  July  first,  nineteen  hundred  and  fourteen.  In  every 
Ciisc  of  such  extension  the  rates,  schedules,  and  practices  of  such  water  caiTier  shall 
be  filed  with  the  Interstate  Commerce  Commission  and  shall  be  subject  to  the  Act 
to  regulate  commerce  and  all  amendments  thereto  in  the  same  manner  and  to  the 
same  extent  as  is  the  railroad  or  other  common  cari'ier  controlling  such  water  carrier 
or  interested  in  any  manner  in  its  operation:  Provided,  Any  application  for 
extension  under  the  terms  of  this  provision  filed  with  the  Interstate  Commerce  Com- 
mission prior  to  July  first,  nineteen  hundred  and  fourteen,  but  for  any  reason  not 
heard  and  disposed  of  before  said  date,  may  be  considered  aud  granted  thereafter. 

No  vessel  permitted  to  engage  in  the  coastwise  or  foreign  trade  of  the  United  States 
shall  be  permitted  to  enter  or  piiss  through  said  canal  if  such  ship  is  owned,  chartered, 
operated,  or  controlled  by  any  person  or  company  which  is  doing  business  in  viola- 
tion of  the  provisions  of  Iho  Act  of  Congi'ess  approved  July  second,  eighteen  hundred 
and  ninety,  entitled  "An  Act  to  protect  trade  and  commerce  against  unlawful  re- 
straints and  monopolies,"  or  the  provisions  of  sections  seventy-three  to  seventy-seven, 
both  inclusive,  of  an  Act  approved  August  twenty-seventh,  eighteen  hundred  and 


128  EEPOET    OF    THE    COMMISSIONER   OF    CORPOEATIONS. 

ninety-four,  entitled  "An  Act  to  reduce  taxation  to  provide  revenue  for  the  Govern- 
ment, and  for  other  purposes,"  or  the  provisions  of  any  other  Act  of  Congress  amending 
or  supplementing  the  said  Act  of  July  second,  eighteeen  hundred  and  ninety,  com- 
monly known  as  the  Sherman  Antitrust  Act,  and  amendments  thereto,  or  said  sec- 
tions of  the  Act  of  August  twenty-seventh,  eighteen  hundred  and  ninety-four.  The 
question  of  fact  may  be  determined  by  the  judgment  of  any  court  of  the  United  States 
of  competent  jurisdiction  in  any  cause  2:)ending  before  it  to  which  the  owners  or  oper- 
ators of  such  ship  are  parties.  Suit  may  be  brought  by  any  shijjper  or  by  the  Attorney 
General  of  the  United  States. 

Section  30.  Federal  Trade  Commission  Act. 

The  Federal  Trade  Commission  Act  of  September  26,  1914,  estab- 
lished a  commission  with  administrative  and  quasi-judicial  func- 
tions. In  certain  aspects  both  of  those  functions  have  relation  to 
the  enforcement  of  the  antitrust  laws,  and  only  in  respect  to  these 
functions  is  it  necessary  to  consider  the  Federal  Trade  Commission 
Act  in  this  connection. 

Section  6  of  this  act  confers  on  the  commission  the  foUowino; 
powers,  among  others:  (1)  To  investigate  the  organization,  business, 
management,  etc.,  of  corporations  engaged  in  commerce,  excepting 
banks  and  common  carriers;  (2)  to  require  such  corporations  to  make 
annual  and  special  reports;  (.3)  to  investigate  and  report  to  the  At- 
torney General  on  the  manner  in  which  a  decree  to  prevent  or  restrain 
violations  of  the  antitrust  acts  has  been  carried  out;  (4)  to  investigate 
and  report  on  alleged  violations  of  the  antitrust  acts  upon  the  request 
of  the  President  or  either  House  of  Congress;  (5)  to  investigate  and 
make  recommendations  concerning  the  readjustment  of  the  business 
of  any  corporation  alleged  to  be  violating  the  antitrust  acts,  upon 
the  application  of  the  Attorney  General;  (6)  to  investigate  trade 
conditions  in  foreign  countries  where  combinations  or  other  condi- 
tions may  affect  the  foreign  trade  of  the  United  States,  and  to  report 
and  make  recommendations  to  Congress.  This  section  reads  as 
follows : 

Sec.  6.  That  the  c:ommission  shall  also  have  power — 

(a)  To  gather  and  compile  information  concerning,  and  to  investigate  from  time  to 
time  the  organization,  business,  conduct,  practices,  and  management  of  any  corpora- 
tion engaged  in  commerce,  excepting  banks  and  common  carriers  subject  to  the  Act 
to  regulate  commerce,  and  its  relation  to  other  corjjorations  and  to  individuals,  asso- 
ciations, and  partnerships. 

(b)  To  require,  by  general  or  special  orders,  corporations  engaged  in  commerce, 
excepting  banks,  and  common  carriers  subject  to  the  Act  to  regulate  commerce,  or 
any  class  of  them,  or  any  of  them,  respectively,  to  file  with  the  commission  in  such 
form  as  the  commission  may  prescribe  annual  or  special,  or  both  annual  and  special, 
reports  or  answers  in  writing  to  specific  questions,  furnishing  to  the  commission  such 
information  as  it  may  require  as  to  the  organization,  business,  conduct,  practices, 
management,  and  relation  to  other  corporations,  partnerships,  and  individuals  of  the  ■ 
respective  corporations  filing  such  reports  or  answers  in  writing.  Such  reports  and 
answers  shall  be  made  under  oath,  or  otherwise,  as  the  commission  may  prescribe, 
and  shall  be  filed  with  the  commission  within  such  reasonable  period  as  the  cors- 


TEUST   LAWS  AND   UNFAIR  COMPETITION.  129 

mission  may  prescribe,  unless  additional  time  be  granted  in  any  case  by  the  com- 
mission. 

(c)  Whenever  a  final  decree  has  been  entered  against  any  defendant  corporation 
in  any  suit  brought  by  the  United  States  to  prevent  and  restrain  any  violation  of  the 
antitrust  Acts,  to  make  investigation,  upon  its  own  initiative,  of  the  manner  in  which 
the  decree  has  been  or  is  being  carried  out,  and  upon  the  application  of  the  Attorney 
General  it  shall  be  its  duty  to  make  such  investigation.  It  shall  transmit  to  the 
Attorney  General  a  report  embodying  its  findings  and  recommendations  as  a  result 
of  any  such  investigation,  and  the  report  shall  be  made  public  in  the  discretion  of 
the  commission. 

(d)  Upon  the  direction  of  the  President  or  either  House  of  Congress  to  investigate 
and  report  the  facts  relating  to  any  alleged  violations  of  the  antitrust  Acts  by  any 
coiporation. 

(e)  Upon  the  application  of  the  Attorney  General  to  investigate  and  make  recom- 
mendations for  the  readjustment  of  the  business  of  any  corporation  alleged  to  be 
violating  the  antitrust  Acts  in  order  that  the  corporation  may  thereafter  maintain  its 
organization,  management,  and  conduct  of  business  in  accordance  with  law. 

(f)  To  make  public  from  time  to  time  such  portions  of  the  information  obtained  by  it 
hereunder,  except  trade  secrets  and  names  of  customers,  as  it  shall  deem  expedient 
in  the  public  interest;  and  to  make  annual  and  special  reports  to  the  Congress  and  to 
submit  therewith  recommendations  for  additional  legislation;  and  to  provide  for  the 
publication  of  its  reports  and  decisions  in  such  form  and  manner  as  may  be  best 
adapted  for  public  information  and  use. 

(g)  From  time  to  time  to  classify  corporations  and  to  make  rules  and  regulations  for 
the  purpose  of  carrying  out  the  provisions  of  this  Act. 

(h)  To  investigate,  from  time  to  time,  trade  conditions  in  and  with  foreign  coun- 
tries where  associations,  combinations,  or  practices,  of  manufacturers,  merchants,  or 
traders,  or  other  conditions,  may  affect  the  foreign  trade  of  the  United  States,  and  to 
report  to  Congress  thereon,  with  such  recommendations  as  it  deems  advisable. 

In  another  section  the  teiTas  "commerce"  and  "corporations" 
are  de&icd  for  the  purposes  of  this  act.  "Commerce"  means  com- 
merce among  the  States  or  with  foreign  nations;  "corporations" 
include  all  associations  to  carry  on  business  for  profit,  but  not  part- 
nerships. 

In  this  connection  it  should  be  noted  that  this  act  aliolishes  the 
Bureau  of  Corporations  (see  p.  13)  and  transfers  its  work  to  the 
Federal  Trade  Comnnssion  together  with  the  personnel,  records,  etc. 
The  Commissioner  of  Corporations,  whose  office  is  abolished  by  the 
act,  had  similar  though  less  extensive  powers. 

Section  7  of  tliis  act  provides  that  where  equity  suits  are  brought 
under  the  antitrust  acts  and  the  court  is  of  opinion  that  the  com- 
plainant is  entitled  to  relief,  it  may  refer  the  suit  to  the  commission 
to  act  as  a  master  in  chancery  to  report  an  appropriate  form  of  decree ; 
the  court,  however,  may  adopt  or  reject  the  commission's  report. 

Sec.  7.  That  in  any  suit  in  equity  brought  by  or  under  the  direction  of  the  Attorney 
General  as  provided  in  the  antitrust  Acts,  the  court  may,  upon  the  conclusion  of  the 
testimony  therein,  if  it  shall  be  then  of  opinion  that  the  complainant  is  entitled  to 
relief,  refer  said  suit  to  the  commission,  as  a  master  in  chancery,  to  ascertain  and 
report  an  appropriate  form  of  decree  therein.  The  commission  shall  proceed  upon 
3003.j°— 16 9 


130  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

such  notice  to  the  parties  and  under  such  rules  of  procedure  as  the  court  may  prescribe, 
and  upon  the  coming  in  of  such  report  such  exceptions  may  be  filed  and  such  pro- 
ceedings had  in  relation  thereto  as  upon  the  report  of  a  master  in  other  equity  causes, 
but  the  court  may  adopt  or  reject  such  report,  in  whole  or  in  part,  and  enter  such  a 
decree  as  the  nature  of  the  case  may  in  its  judgment  require. 

Wliile  the  foregoing  powers  of  the  commission  expressly  relate  in 
large  part  to  the  enforcement  of  the  antitrust  laws,  another  important 
power  is  conferred  on  the  commission  which  is  also  related  thereto. 
By  section  5  of  this  act  unfair  methods  of  competition  in  commerce 
are  declared  unlawful,  and  the  commission  is  empowered  to  prevent 
such  practices  by  persons,  partnerships,  or  corporations,  except 
banks  and  common  carriers.  For  this  purpose  the  commission  is 
authorized  after  due  hearing  to  issue  orders  requiring  the  cessation 
of  such  unfair  methods  of  competition.  To  secure  the  observance  of 
such  an  order,  the  commission  may  apply  to  the  Federal  courts,  sub- 
mitting the  entire  record  in  the  case,  and  the  court  may  affirm, 
modify,  or  set  aside  such  order.  In  case  it  is  sought  to  introduce  new 
evidence  before  the  court,  the  court  may  allow  it  and  may  order  that 
it  shall  be  taken  before  the  commission.  Any  party  required  by 
order  of  the  commission  to  cease  from  using  unfair  methods  of  com- 
petition may  ol)tain  a  court  review  in  a  similar  manner.  The  lan- 
guage of  this  section  is  as  follows: 

Sec.  5.  That  unfair  methods  of  competition  in  commerce  are  hereby  declared 
unla^viul. 

The  commission  is  hereby  empowered  and  directed  to  prevent  persons,  partnerships, 
or  corporations,  except  banks,  and  common  cai-riers  subject  to  the  Acts  to  regulate 
commerce,  from  using  unfair  methods  of  competition  in  commerce. 

Whenever  the  commission  shall  have  reason  to  believe  that  any  such  person,  partner- 
ship, or  corporation  has  been  or  is  using  any  unfair  method  of  competition  in  commerce, 
and  if  it  shall  appear  to  the  commission  that  a  proceeding  by  it  in  respect  .thereof 
would  be  to  the  interest  of  the  public,  it  shall  issue  and  serve  upon  such  person,  part- 
nership, or  corporation  a  complaint  stating  its  charges  in  that  respect,  and  containing 
a  notice  of  a  hearing  upon  a  day  and  at  a  place  therein  fixed  at  least  thirty  days  after 
the  service  of  said  complaint.  The  person,  partnership,  or  corporation  so  complained 
of  shall  have  the  right  to  appear  at  the  place  and  time  so  fixed  and  show  cause  why  an 
order  should  not  be  entered  by  the  commission  requiring  such  person,  partnership, 
or  corporation  to  cease  and  desist  from  the  violation  of  the  law  so  chai'ged  in  said  com- 
plaint. Any  person,  jiartnership,  or  corporation  may  make  application,  and  upon 
good  cause  shown  may  be  allowed  by  the  commission,  to  intervene  and  appear  in  said 
proceeding  by  counsel  or  in  person.  The  testimony  in  any  such  proceeding  shall  be 
reduced  to  writing  and  filed  in  the  office  of  the  commission.  If  upon  such  hearing 
the  commission  shall  be  of  the  opinion  that  the  method  of  competition  in  question  is 
prohibited  by  this  Act,  it  shall  make  a  report  in  writing  in  which  it  shall  state  its  find- 
ings as  to  the  facts,  and  shall  issue  and  cause  to  be  served  on  such  person,  partnership, 
or  corporation  an  order  requiring  such  person,  partnership,  or  corporation  to  cease 
and  desist  from  using  such  method  of  competition.  Until  a  transcript  of  the  record 
in  such  hearing  shall  have  been  filed  in  a  circuit  coint  of  appeals  of  the  United  States, 
as  hereinafter  provided,  the  commission  may  at  any  time,  upon  such  notice  and  in 
such  manner  as  it  shall  deem  proper,  modify  or  set  aside,  in  whole  or  in  part,  any  report 
or  any  order  made  or  issued  by  it  under  this  section. 


TKUST   LAWS   AND    UNFAIR    COMPETITION.  131 

If  such  person,  partnersliip,  or  corporation  fails  or  neglects  to  obey  such  order  of  the 
commission  wliile  the  same  is  in  effect,  the  commission  may  apply  to  the  circuit 
court  of  appeals  of  the  United  States,  within  any  circuit  where  the  method  of  compe- 
tition in  question  was  used  or  where  such  person,  partnership,  or  corporation  resides 
or  carries  on  business,  for  the  enforcement  of  its  order,  and  shall  certify  and  file  with 
its  application  a  transcript  of  the  entire  record  in  the  proceeding,  including  all  the 
testimony  taken  and  the  report  and  order  of  the  commission.  Upon  such  filing  of 
the  api)lication  and  transcript  the  court  shall  cause  notice  thereof  to  be  served  upon 
such  person,  partnership,  or  corporation  and  thereupon  shall  have  jurisdiction  of  the 
proceeding  and  of  the  question  determined  therein,  and  shall  have  power  to  make  and 
enter  upon  the  pleadings,  testimony,  and  proceedings  set  forth  in  such  transcript  a 
decree  affirming,  modifying,  or  setting  aside  the  order  of  the  commission.  The  find- 
ings of  the  commission  as  to  the  facts,  if  supported  by  testimony,  shall  be  conclusive. 
If  either  party  shall  apply  to  the  coiu-t  for  leave  to  adduce  additional  evidence,  and 
shall  show  to  the  satisfaction  of  the  court  that  such  additional  evidence  is  material 
and  that  there  were  reasonable  grounds  for  the  failure  to  adduce  such  evidence  in  the 
proceeding  before  the  commission,  the  court  may  order  such  additional  evidence  to 
be  taken  before  the  commission  and  to  be  adduced  upon  the  heai'ing  in  such  manner 
and  upon  such  terms  and  conditions  as  to  the  court  may  seem  proper.  The  commis- 
sion may  modify  its  findings  as  to  the  facts,  or  make  new  findings,  by  reason  of  the 
additicmal  evidence  so  taken,  and  it  shall  file  such  modified  or  new  findings,  which, 
if  supported  Vjy  testimony,  shall  be  conclusive,  and  its  recommendations,  if  any,  for 
the  modification  or  setting  aside  of  its  original  order,  with  the  return  of  such  additional 
evidence.  The  judgment  and  decree  of  the  court  shall  be  final,  except  that  the  same 
shall  be  subject  to  review  by  the  Supreme  Court  upon  certiorari  as  provided  in  sec- 
tion two  hundred  and  forty  of  the  Judicial  Code. 

Any  party  required  by  such  order  of  the  commission  to  cease  and  desist  from  using 
such  method  of  competition  may  obtain  a  review  of  such  order  in  said  circuit  court  of 
appeals  by  filing  in  the  court  a  written  petition  praying  that  the  order  of  the  commis- 
sion be  set  aside.  A  copy  of  such  petition  shall  be  forthwith  served  upon  the  com- 
mission, and  thereupon  the  commission  forthwith  shall  certify  and  file  in  the  court 
a  transcript  of  the  record  as  hereinbefore  provided.  Upon  the  filing  of  the  transcript 
the  court  shall  have  the  same  jurisdiction  to  affirm,  set  aside,  or  modify  the  order  of 
the  commission  as  in  the  case  of  an  application  l)y  the  commission  for  the  enforcement 
of  its  order,  and  the  findings  of  the  commission  as  to  the  facts,  if  supported  by  testi- 
mony, shall  in  like  manner  be  conclusive. 

The  jurisdiction  of  the  circuit  court  of  appeals  of  the  United  States  to  enforce,  set 
aside,  or  modify  orders  of  the  commission  shall  be  exclusive. 

Such  proceedings  in  the  circuit  court  of  appeals  shall  be  given  precedence  over 
other  cases  pending  therein,  and  shall  be  in  every  way  expedited.  No  order  of  the 
commission  or  judgment  of  the  court  to  enforce  the  same  shall  in  any  wise  relieve  or 
absolve  any  person,  partnership,  or  corporation  from  any  liability  under  the  anti- 
trust Acts. 

Complaints,  orders,  and  other  processes  of  the  commission  under  this  section  may 
be  served  by  anyone  duly  authorized  by  the  commission,  either  (a)  by  delivering  a 
coi)y  thereof  to  the  person  to  be  served,  or  to  a  member  of  the  partnership  to  be 
served,  or  to  the  president,  secretary,  or  other  executive  officer  or  a  director  of  the 
corporation  to  be  served;  or  (b)  by  leaving  a  copy  thereof  at  the  principal  office  or 
place  of  business  of  such  person,  partnersliip,  or  corporation;  or  (c)  by  registerii«? 
and  mailing  a  co])y  thereof  addressed  to  such  person,  partnership,  or  corporation  at 
his  or  its  principal  office  or  place  of  business.  The  verified  return  by  the  person  so 
serving  said  complaint,  order,  or  other  process  setting  forth  the  manner  of  said  service 
shall  be  proof  of  the  same,  and  the  retiu-n  post-office  receipt  for  said  complaint,  order, 


132  REPOBT    OF    THE    COMMISSIONER    OF    COKPOEATIONS. 

or  other  process  registered  and  mailed  as  aforesaid  shall  be  proof  of  the  service  of  the 
same. 

While  unfair  methods  of  competition  are  not  necessarily  practices 
forbidden  by  the  antitrust  acts,  yet  Congress,  as  indicated  by  the 
reports  of  the  committees  having  jurisdiction  in  this  legislation, 
mtended,  in  part,  by  this  provision  to  prevent  the  development  of 
monopolistic  conditions.^ 

The  last  section  of  this  act  expressly  provides  that  nothing  con- 
tained in  it  shall  be  construed  to  alter,  modify,  or  repeal  the  antitrust 
acts,  or  to  mterfere  with  the  enforcement  thereof. 

Sec.  11.  Nothing  contained  in  this  Act  shall  be  construed  to  prevent  or  interfere 
with  the  enforcement  of  the  provisions  of  the  antitrust  Acts  or  the  Acts  to  regulate 
commerce,  nor  shall  anything  contained  in  the  Act  be  construed  to  alter,  modify,  or 
repeal  the  said  antitrust  Acts  or  the  Acts  to  regulate  commerce  or  any  part  or  parte 
thereof. 

Section  31.  Clayton  Antitrust  Act. 

The  Clayton  Antitrust  Act,  which  is  entitled  "An  act  to  supple- 
ment existing  laws  against  unlawful  restraints  and  monopolies,  and 
for  other  purposes,"  was  approved  on  October  15,  1914.  As  its 
title  indicates,  it  relates  in  part  to  the  same  subject  as  the  antitrust 
acts  described  above.  Only  these  portions  of  the  law  are  considered 
below.  Other  portions  which  are  not  discussed  relate  especially  to 
the  use  of  injunctions  by  the  courts,  to  punishment  for  contempts 
with  respect  to  such  injunctions,  and  to  making  criminal  certain  dis- 
honest practices  in  the  management  of  common-carrier  corporations. 

The  chief  provisions  of  the  Clayton  Act  which  are  of  importance  in 
connection  with  the  antitrust  laws  relate  to  (1)  the  prohibition 
of  certain  trade  practices  (sees.  2  and  3) ;  (2)  the  prohibition  of  certain 
forms  of  company  organization  and  management  (sees  7  and  8) ; 
(3)  a  requirement  that  common  carriers  in  certain  cases  shall  purchase 
supplies,  etc.,  through  competitive  bids  and  prohibiting  interference 
with  free  competition  in  bidding  (sec.  10) ;  (4)  a  specific  rule  of  con- 
struction in  the  application  of  the  antitrust  laws  to  certain  kinds  of 
associations  (sec.  6) ;  (5)  various  provisions  as  to  the  remedies,  rules 
of  evidence  and  procedure  in  the  enforcement  of  the  antitrust  laws 
(sees.  4,  5,  11,  14,  15,  16,  and  20). 

Section  1  defines  certain  terms  used  in  this  act  substantially  as 
follows:  "Antitrust  laws"  includes  the  Sherman  Antitrust  Act  of 
1S90,  sections  73  to  77,  inclusive,  of  the  Wilson  Tariff  Act  of  1894,  as 
amended,  and  also  tliis  act;  "commerce"  includ-es  interstate  and  for- 
eign commerce,  but  docs  not  apply  to  the  Philippine  Islands;  "per- 
son" includes  a  corporation  or  association. 

Section  2  declares  it  unlawful  for  any  person  engaged  in  commerce  to 
discriminate  in  price  between  different  purchasers  of  commodities 

1  See  House  Report  No.  1142,  63d  Cong.,  2d.  sess. 


TRUST   LAWS  AND   UNFAIE   COMPETITION.  133 

sold  for  use,  consumption,  or  resale  within  the  jurisdiction  of  the 
United  States,  where  the  effect  of  such  discrimination  may  be  to  sub- 
stantially lessen  competition  or  tend  to  create  a  monopoly  in  any  line 
of  commerce,  with  the  proviso  that  this  shall  not  prevent  discrimina- 
tion in  prices  made  on  account  of  differences  in  quality  or  quantity 
of  the  commodity  sold,  on  account  of  differences  in  the  cost  of  selling 
or  transportation,  or  in  order  to  meet  competition,  in  good  faith,  and 
with  the  further  proviso  that  this  shall  not  prevent  persons  from  select- 
ing their  own  customers  in  bona  fide  transactions  not  in  restraint  of 
trade.     This  section  reads  as  follows: 

Sec.  2.  That  it  shall  l)e  unlawful  for  any  person  engaf.;ed  i;i  commerf-e,  in  the  course 
of  such  rommerce,  either  directly  or  indirectlj'  to  discriminate  in  price  between  differ- 
ent purchasers  of  commodities,  which  commodities  are  sold  for  use,  consumption,  or 
resale  within  the  United  States  or  any  Territory  thereof  or  the  District  of  Columbia 
or  any  insular  possession  or  other  place  under  the  jurisdiction  of  the  United  States, 
where  the  effect  of  such  discrimination  may  be  to  substantially  lessen  competition  or 
tend  to  create  a  monopoly  in  any  line  of  commerce:  Provided,  That  nothing  herein 
contained  shall  prevent  discrimination  in  price  between  purchasers  of  commodities 
on  account  of  differences  in  the  grade,  quality,  or  quantity  of  the  commodity  sold, 
or  that  makes  only  due  allowance  fo^  difference  in  the  cost  of  selling  or  transportation, 
or  discrimination  in  price  in  the  same  or  different  communities  made  in  good  faith 
to  meet  competition:  And  provided  further,  That  nothing  herein  contained  shall 
prevent  persons  engaged  in  selling  goods,  wares,  or  merchandise  in  commerce  from 
selecting  their  own  customers  in  bona  fide  transactions  and  not  in  restraint  of  trade. 

The  principal  qualification  of  this  prohibition,  apparently,  and  the 
one  wliich  indicates  its  relation  to  the  antitrust  laws,  is  that  such 
price  discrimination  is  unlawful  where  the  effect  "may  be  to  substan- 
tially lessen  competition  or  tend  to  create  a  monopoly."  It  may 
also  be  noted  that  the  prohibition  does  not  extend,  apparently,  to 
sales  in  export  trade.  Each  of  the  provisos,  moreover,  adds  further 
important  limitations  to  the  scope  of  this  prohibition. 

Section  3  declares  it  unlawful  for  any  person  engaged  in  commerce 
to  lease  or  make  a  sale  or  contract  of  sale  of  commodities,  patented  or 
unpatented,  for  use,  consumption,  or  resale  within  the  jurisdiction  of 
the  United  States,  or  to  fix  a  price  therefor  or  a  discount  from  such 
price,  on  the  condition  that  the  lessee  or  purchaser  shall  not  use  or 
deal  in  the  commodities  of  a  competitor,  where  the  effect  of  such  lease, 
sale,  or  contract  of  sale  or  of  such  condition  may  be  to  substantially 
lessen  competition  or  tend  to  create  a  monopoly  in  any  line  of  com- 
merce. 

Sec.  3.  That  it  shall  be  unlawful  for  any  person  engaged  in  commerce,  in  the  (^ourse 
of  such  commerce,  to  lease  or  make  a  sale  or  contract  for  sale  of  goods,  wares,  merchan- 
dise, machinery,  supplies  or  other  commodities,  whether  patented  or  unpatented,  for 
use,  consumption  or  resale  within  the  United  States  or  any  Territory  thereof  or  the  Dis- 
trict of  Columbia  or  any  insular  possession  or  other  place  tinder  the  jurisdiction  of  the 
United  States,  or  fix  a  price  charged  therefor,  or  discount  from,  or  rebate  upon,  such 
price,  on  the  condition,  agreement  or  understanding  that  the  lessee  or  purchaser  thereof 
shall  not  use  or  deal  in  the  goods,  wares,  merchandise,  machinery,  supplies  or  other 


134  BEPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

commodities  of  a  competitor  or  competitors  of  the  lessor  or  seller,  where  the  effect  of 
such  lease,  sale,  or  contract  for  sale  or  such  condition,  agreement  or  understanding  may 
bo  to  substantially  lessen  competition  or  tend  to  create  a  monopoly  in  any  line  of 
commerce. 

The  only  qualification  of  this  prohibition,  apparently,  is  the  same 
as  the  principal  qualification  of  the  preceding  one,  namely,  where  the 
effect  ''may  be  to  substantially  lessen  competition  or  tend  to  create  a 
monopoly  in  any  line  of  commerce."  This  proviso  connects  this  pro- 
hibition with  the  prohil)itions  of  previous  antitrust  laws. 

Section  7  declares  that  no  corporation  engaged  in  commerce  shall 
acquire  stock  in  another  corporation  where  the  efi^ect  may  be  to 
substantially  lessen  competition  between  them,  or  to  restrain  com- 
merce in  any  community,  or  tend  to  create  a  monopoly  of  any  line 
of  commerce,  and  that  no  corporation  shall  acquire  the  stock  of  two 
or  more  corporations  engaged  in  commerce  where  the  effect  of  such 
acquisition  or  the  voting  of  such  stock  may  be  to  lessen  competition 
between  the  corporations  whose  stock  is  so  acquired,  or  to  restrain 
commerce  in  any  community,  or  tend  to  create  a  monopoly  of  any  line 
of  commerce.  It  is  also  provided,  however,  tliat  these  prohibitions 
shall  not  apply  to  the  mere  investment  by  one  corporation  in  the  stock 
of  another,  or  to  the  formation  of  subsidiary  corporations  for  carrying 
on  the  immediate  lawful  business  of  a  corporation  or  the  natural 
extensions  thereof  where  the  effect  is  not  to  substantially  lessen  com- 
petition, or  to  the  acquisition  by  a  common  carrier,  subject  to  the  laws 
to  regulate  commerce,  of  the  stock  of  a  branch  line,  or  an  extension 
where  there  is  no  substantial  competition  between  them.  Finally, 
it  is  provided  that  these  prohibitions  shall  not  have  a  retroactive 
effect  or  make  lawful  anything  which  was  unlawful  under  the  anti- 
trust laws. 

Sec.  7.  That  no  corporation  engaged  in  commerce  shall  acquire,  directly  or  indi- 
rectly, the  whole  or  any  part  of  the  stock  or  other  share  capital  of  another  corporation 
engaged  also  in  commerce,  where  the  effect  of  such  acquisition  may  be  to  substantially 
lessen  competition  between  the  corporation  whose  stock  is  so  acquired  and  the  corpo- 
ration making  the  acquisition,  or  to  restrain  such  commerce  in  any  section  or  com- 
munity, or  tend  to  create  a  monopoly  of  any  line  of  commerce. 

No  corporation  shall  acquire,  directly  or  indirectly,  the  whole  or  any  part  of  the 
stock  or  other  share  capital  of  two  or  more  corporations  engaged  in  commerce  where  the 
effect  of  such  acquisition,  or  the  use  of  such  stock  by  the  voting  or  granting  of  proxies 
or  otherwise,  may  be  to  substantially  lessen  competition  between  such  corporations, 
or  any  of  them,  whose  stock  or  other  share  capital  is  so  acquired ,  or  to  restrain  such  com- 
merce in  any  section  or  community,  or  tend  to  create  a  monopoly  of  any  line  of  com- 
merce. 

This  section  shall  not  apply  to  corporations  purchasing  such  stock  solely  for  invest- 
ment and  not  using  the  same  by  voting  or  otherwise  to  bring  about,  or  in  attempting 
to  bring  about,  the  substantial  lessening  of  competition.  Nor  shall  anything  con- 
tained in  this  section  prevent  a  corporation  engaged  in  commerce  from  causing  the 
formation  of  subsidiary  corporations  for  the  actual  carrying  on  of  their  immediate 
lawful  business,  or  the  natural  and  legitimate  branches  or  extensions  thereof,  or  from 


TKUST   LAWS   AND   UNFAIR    COMPETITION.  135 

owning  and  holding  all  or  a  part  of  the  stock  of  such  subsidiary  corporations,  when 
the  effect  of  such  formation  is  not  to  substantially  lessen  competition. 

Nor  shall  anything  herein  contained  be  construed  to  prohibit  any  common  carrier 
subject  to  the  laws  to  regulate  commerce  from  aiding  in  the  construction  of  branches 
or  short  lines  so  located  as  to  become  feeders  to  the  main  line  of  the  company  so  aiding 
in  such  construction  or  from  acquiring  or  owning  all  or  any  part  of  the  stock  of  such 
branch  lines,  nor  to  prevent  any  such  common  carrier  from  acquiring  and  owning  all 
or  any  part  of  the  stock  of  a  branch  or  short  line  constructed  by  an  independent  com- 
pany where  there  is  no  substantial  competition  between  the  company  owning  the 
branch  line  so  constructed  and  the  company  owning  the  main  line  acquiring  the  prop- 
erty or  an  interest  therein,  nor  to  prevent  such  common  carrier  from  extending  any 
of  its  lines  through  the  medium  of  the  acquisition  of  stock  or  otherwise  of  any  other 
such  common  carrier  where  there  is  no  substantial  competition  between  the  company 
extending  its  lines  and  the  company  whose  stock,  property,  or  an  interest  therein  is  so 
acquired. 

Nothing  contained  in  this  section  shall  be  held  to  affect  or  impair  any  right  hereto- 
fore legally  acquired:  Provided,  That  nothing  in  this  section  shall  be  held  or  construed 
to  authorize  or  make  lawful  anything  heretofore  prohibited  or  made  illegal  by  the  anti- 
trust laws,  nor  to  exempt  any  person  from  the  penal  provisions  thereof  or  the  civil 
remedies  therein  provided. 

This  section  is  aimed  at  combinations  in  restraint  of  trade  through 
the  device  of  stock  ownership,  in  the  form  of  the  holding  company 
or  otherwise.  Neither  the  holding  company  nor  the  mvestment 
by  one  corporation  in  the  stock  of  another  is  declared  milawful 
miless  it  substantially  lessens  competition  or  tends  to  create  a  monop- 
oly. These  qualifications  form  the  connecting  link  between  the 
prohibitions  of  this  section  and  those  of  previous  antitrust  laws. 

Section  8  prohibits  all  corporations  engaged  in  commerce,  any 
one  of  which  has  capital,  surplus,  and  undivided  profits  exceeding 
$1,000,000,  except  banks  and  common  carriers  subject  to  the  Act 
to  Regulate  Commerce  of  February  4,  1887,  from  having  common 
directors  after  two  years  from  the  enactment  of  the  law,  if  such 
corporations  are  or  have  been  competitors  so  that  the  elimination 
of  competition  between  them  would  be  a  violation  of  the  antitrust 
laws.  Prohibitions  of  a  more  particular  character  are  also  made 
with  respect  to  banks,  etc. 

Sec.  8.  That  from  and  after  two  years  from  the  date  of  the  approval  of  this  Act 
no  pei-son  shall  at  the  same  time  be  a  director  or  other  officer  or  employee  of  more 
than  one  bank,  banking  association  or  trust  company,  organized  or  operating  under 
the  laws  of  the  United  States,  either  of  which  has  deposits,  capital,  surplus,  and 
undivided  profits  aggregating  more  than  $5,000,000;  and  no  private  banker  or  person 
who  is  a  director  in  any  bank  or  trust  company,  organized  and  operating  under  the 
laws  of  a  State,  ha\'ing  deposits,  capital,  surplus,  and  undivided  profits  aggregating 
more  than  $5,000,000,  shall  be  eligible  to  be  a  director  in  any  bank  or  banking  asso- 
ciation organized  or  operating  under  the  laws  of  the  United  States.  The  eligibility 
of  a  director,  officer,  or  employee  under  the  foregoing  provisions  shall  be  determined 
by  the  average  amount  of  deposits,  capital,  surplus,  and  undivided  profits  as  shown 
in  the  official  statements  of  such  l)ank,  l)anking  association,  or  trust  company  filed 
as  provided  by  law  during  the  fiscal  year  next  preceding  the  date  set  for  the  annual 
election  of  directors,  and  when  a  director,  officer,  or  employee  has  been  elected  or 


136  REPORT   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

selected  in  accordance  with  the  provisions  of  this  Act  it  shall  be  lawful  for  him  to 
continue  as  such  for  one  year  thereafter  under  said  election  or  employment. 

No  bank,  banking  association  or  trust  company,  organized  or  operating  under  the 
laws  of  the  United  States,  in  any  city  or  incorporated  town  or  ^dllage  of  more  than  two 
hundred  thousand  inhabitants,  as  shown  by  the  last  preceding  decennial  census  of  the 
United  States,  shall  have  as  a  director  or  other  officer  or  employee  any  private  banker 
or  any  director  or  other  officer  or  employee  of  any  other  bank,  banking  association  or 
trust  company  located  in  the  same  place:  Provided,  That  nothing  in  this  section  shall 
apply  to  mutual  savings  banks  not  ha\ang  a  capital  stock  represented  by  shares: 
Provided  further,  That  a  director  or  other  officer  or  employee  of  such  bank,  banking 
association,  or  trust  company  may  be  a  director  or  other  officer  or  employee  of  not 
more  than  one  other  bank  or  trust  company  organized  under  the  laws  of  the  United 
States  or  any  State  where  the  entire  capital  stock  of  one  is  owned  by  stockholders  in 
the  other:  And  'provided  further ,  That  nothing  contained  in  this  section  shall  forbid  a 
director  of  class  A-of  a  Federal  reserve  bank,  as  defined  in  the  Federal  Reserve  Act, 
from  being  an  officer  or  director  or  both  an  officer  and  director  in  one  member  bank. 

That  from  and  after  two  years  from  the  date  of  the  approval  of  this  Act  no  person 
at  "(he  same  time  shall  be  a  director  in  any  two  or  more  corporations,  any  one  of  which 
has  capital,  surplus,  and  undi\ided  profits  aggi'egating  more  than  $1,000,000,  engaged 
in  whole  or  in  part  in  commerce,  other  than  banks,  banking  associations,  trust  com- 
panies and  common  carriers  subject  to  the  Act  to  regulate  commerce,  approved  Febru- 
ary fourth,  eighteen  hundred  and  eighty-seven,  if  such  corporations  are  or  shall  have 
been  theretofore,  by  \drtue  of  their  business  and  location  of  operation,  competitors, 
BO  that  the  elimination  of  competition  by  agreement  between  them  Avould  constitute 
a  violation  of  any  of  the  provisions  of  any  of  the  antitrust  laws.  The  eligibility  of  a 
director  under  the  foregoing  provision  shall  be  determined  by  the  aggregate  amount 
of  the  capital,  surplus,  and  undivided  profits,  exclusive  of  dividends  declared  but  not 
paid  to  stockholders,  at  the  end  of  the  fiscal  year  of  said  corporation  next  preceding 
the  election  of  directors,  and  when  a  director  has  been  elected  in  accordance  with 
the  provisions  of  tliis  Act  it  shall  be  lawful  for  him  to  continue  as  such  for  one  year 
thereafter. 

When  any  person  elected  or  chosen  as  a  director  or  officer  or  selected  as  an  employee 
of  any  bank  or  other  corporation  subject  to  the  provisions  of  this  Act  is  eligible  at  the 
time  of  his  election  or  selection  to  act  for  such  bank  or  other  corporation  in  such  capac- 
ity his  eligibility  to  act  in  such  capacity  shall  not  be  affected  and  he  shall  not  become 
or  be  deemed  amenable  to  any  of  the  provisions  hereof  by  reason  of  any  change  in 
the  affairs  of  such  bank  or  other  corporation  from  whatsoever  cause,  whether  specifically 
excepted  by  any  of  the  provisions  hereof  or  not,  until  the  expiration  of  one  year  from 
the  date  of  his  election  or  employment. 

Considering  only  the  prohibitions  respecting  corporations  other 
than  banks,  it  may  be  noted  that  a  provision  is  made  as  to  tlie  effect 
in  lessening  competition  similar  in  general  intent  to  the  provisions 
made  in  connection  with  the  prohibitions  in  sections  2,  3,  and  7. 
It  should  also  be  noted  that  common  carrier  corporations  subject 
to  the  Interstate  Commerce  Act  are  not  affected  at  all  by  this 
section.  The  reason  is  found  apparently  in  the  fact,  noted  in  the 
debates  in  Congress,  that  it  was  planned  to  enact  an  additional  law 
regarding  the  issuance  of  securities  by  common  carriers,  and  it  was 
contended  that  any  prohibitions  regarding  common  directors  or 
officers    could   be   more    advantageously    incorporated    therein.     A 


TKUST  LAWS   AND   UNFAIR   COMPETITION,  137 

bill  for  this  general  purpose  was  passed  by  the  House  but  was  not 
enacted  into  law  by  the  Sixty-thu'd  Congress.^ 

Section  10  provides  in  substance  that  common  carriers,  after 
two  years  from  the  approval  of  this  law,  shall  not  have  certain 
dealings  with  regard  to  securities  or  supplies,  with  another  firm  or 
company  where  they  have  common  directors,  ofhcers,  or  agents,  or 
where  a  person  havmg  such  relation  to  a  common  carrier  is  fmancially 
interested  in  such  other  firm  or  company,  unless  such  dealings  are 
conducted  on  the  basis  of  giving  the  business  to  the  lowest  bidder. 
Any  person  who  directly  or  indirectly  prevents  or  attempts  to  pre- 
vent anyone  from  bidding  or  free  and  fair  competition  among  the 
bidders  is  made  pmiishable.  Provision  is  made  for  reports  on  such 
dealings  to  the  Interstate  Commerce  Commission,  and  penalties  are 
provided  for  common  carriers  or  their  directors,  officers,  or  agents 
who  aid  or  abet  in  violating  the  prohibitions  of  this  section. 

Sec.  10.  That  after  two  years  from  the  approval  of  this  Act  no  common  carrier 
engaged  in  commerce  shall  have  any  dealings  in  securities,  supplies  or  other  articles 
of  commerce,  or  shall  make  or  have  any  contracts  for  construction  or  maintenance 
of  any  kind,  to  the  amount  of  more  than  $50,000,  in  the  aggregate,  in  any  one  year, 
with  another  corporation,  firm,  partnership  or  association  when  the  said  common 
carrier  shall  have  upon  its  board  of  directors  or  as  its  president,  manager  or  as  its 
purchasing  or  selling  officer,  or  agent  in  the  particular  transaction,  any  person  who 
is  at  the  same  time  a  director,  manager,  or  purchasing  or  selling  officer  of,  or  who  has 
any  substantial  interest  in,  such  other  corporation,  firm,  partnership  or  association, 
unless  and  except  such  purchases  shall  be  made  from,  or  such  dealings  shall  be  with, 
the  bidder  whose  bid  is  the  most  favorable  to  such  common  carrier,  to  be  ascertained 
by  competitive  bidding  under  regulations  to  be  prescribed  by  rule  or  otherwise  l)y 
the  Interstate  Commerce  Commission.  No  bid  shall  be  received  unless  the  name 
and  address  of  the  bidder  or  the  names  and  addresses  of  the  officers,  directors  and 
general  managers  thereof,  if  the  bidder  be  a  corporation,  or  of  the  members,  if  it  be 
a  partnership  or  firm,  be  given  with  the  bid. 

Any  person  who  shall,  directly  or  indirectly,  do  or  attempt  to  do  anything  to  prevent 
anyone  from  bidding  or  shall  do  any  act  to  prevent  free  and  fair  competition  among 
the  bidders  or  those  desiring  to  bid  shall  be  punished  as  prescribed  in  this  section  in 
the  case  of  an  officer  or  director. 

Every  such  common  carrier  having  any  such  transactions  or  making  any  such  pur- 
chases shall  within  thirty  days  after  making  the  same  file  with  the  Interstate  Com- 
merce Commission  a  full  and  detailed  statement  of  the  transaction  showing  the  manner 
of  the  competitive  bidding,  who  were  the  bidders,  and  the  names  and  addresses  of  the 
directors  and  officers  of  the  corporations  and  the  members  of  the  firm  or  jjartnership 
bidding;  and  whenever  the  said  commission  shall,  after  investigation  or  hearing,  have 
reason  to  believe  that  the  law  has  been  violated  in  and  about  the  said  purchases  or 
transactions  it  shall  transmit  all  papers  and  documents  and  its  own  views  or  findings 
regarding  the  transaction  to  the  Attorney  General. 

If  any  common  can-ier  shall  \'iolate  this  section  it  shall  be  fined  not  exceeding 
$25,000;  and  every  such  director,  agent,  manager  or  officc^r  thereof  who  shall  have 
knowingly  voted  for  or  directed  the  act  constituting  such  violation  or  who  shall  have 
aided  or  abetted  in  such  violation  shall  be  deemed  guilty  of  a  misdemeanor  and  shall 
be  fined  not  exceeding  §5,000,  or  confined  in  jail  not  exceeding  one  year,  or  both,  in 
the  discretion  of  the  court. 

'  n.  K.  16586. 


138  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

Section  6  declares  that  labor  is  not  a  commodity  or  an  article  of 
commerce;  tliat  nothing  contamcd  m  the  antitrust  laws  shall  be 
construed  to  forbid  the  existence  of  labor,  agricultural,  or  horticultural 
organizations,  not  havmg  capital  stock  or  conducted  for  profit,  or  to 
forbid  the  members  from  lawfully  carry mg  out  the  legitimate  objects 
thereof,  and  that  such  organizations  or  their  members  shall  not  be 
construed  to  be  illegal  combmations. 

Sec.  6.  That  the  labor  of  a  human  being  is  not  a  commodity  or  article  of  commerce. 
Nothing  contained  in  the  antitrust  laws  shall  be  construed  to  forbid  the  existence  and 
operation  of  labor,  agricultural,  or  horticultural  organizations,  instituted  for  the  jjur- 
poses  of  mutual  help,  and  not  having  capital  stock  or  conducted  for  profit,  or  to  forbid 
or  restrain  individual  members  of  such  organizations  from  lawfully  carrying  out  the 
legitimate  objects  thereof;  nor  shall  such  organizations,  or  the  members  thereof,  be 
held  or  construed  to  be  illegal  combinations  or  conspiracies  in  restraint  of  trade,  under 
the  antitrust  laws. 

Wliile  the  five  of  the  preceding  sections  considered  (2,  3,  7,  8  and 
10)  may  be  considered  as  having  increased  the  legal  limitations  placed 
on  individual  or  associational  activities,  this  section  decreases  the 
legal  limitations  with  respect  to  labor  unions,  agricultural  associa- 
tions, and  the  members  thereof.  In  this  connection  reference  should 
also  be  made  to  section  20  (see  p.  141),  which  makes  lawful  certain 
practices  which  are  sometimes  employed  by  labor  unions. 

Section  4  provides  that  any  person  injured  in  his  property  by  an 
act  forbidden  by  the  antitrust  laws  may  sue  m  the  United  States 
courts  and  recover  threefold  damages. 

This  provision  is  the  same  as  section  7  of  the  Sherman  Antitrust 
Act  (see  p.  72),  except  that  the  word  "that"  is  placed  at  the  begin- 
ning, and  is  identical,  therefore,  with  section  77  of  the  Wilson  Tariff 
Act  (see  p.  126),  and  need  not  be  repeated  here.  By  this  section, 
however,  this  particular  form  of  remedy  is  extended  to  apply  to  acts 
forbidden  in  this  law  also. 

Section  5  provides  that  a  final  decree  in  a  proceeding  in  equity 
brought  by  tlie  United  States  under  the  antitrust  laws  shall  be  prima 
facie  evidence  against  the  defendant  in  any  suit  brought  by  any 
other  party  under  those  laws,  with  respect  to  all  matters  in  which 
the  decree  would  be  an  estoppel  between  the  parties.  It  is  provided, 
however,  that  this  shall  not  apply  to  consent  decrees  which  are 
entered  without  taking  testimony  or  to  such  decrees  in  certain  other 
cases. 

Another  paragraph  of  this  section  provides  in  substance  that  when 
the  United  States  institutes  a  proceedmg  under  the  antitrust  laws 
the  statutory  limitations  with  respect  to  the  period  in  which  a  private 
suit  may  be  brought  which  is  based  in  whole  or  in  part  on  the  matter 
complained  of  shall  be  suspended  duruig  the  pendency  of  such 
proceeding. 


TRUST    LAWS   AND   UNFAIE    COMPETITION.  139 

Sec.  5.  That  a  final  judgment  or  decree  hereafter  rendered  in  any  criminal  prosecu- 
tion or  in  any  suit  or  proceeding  in  equity  brought  by  or  on  belialf  of  the  United  States 
under  the  antitrust  laws  to  the  effect  that  a  defendant  has  violated  said  laws  shall  be 
prima  facie  evidence  against  such  defendant  in  any  suit  or  proceeding  brought  by 
any  other  party  against  such  defendant  under  said  laws  as  to  all  matters  respecting 
which  said  judgment  or  decree  would  be  an  estoppel  as  between  the  parties  thereto: 
Provided,  This  section  shall  not  apply  to  consent  judgments  or  decrees  entered  before 
any  testimony  has  been  taken:  Provided  further,  This  section  shall  not  apply  to  con- 
sent judgments  or  decrees  rendered  in  criminal  proceedings  or  suits  in  equity,  now 
pending,  in  which  the  taking  of  testimony  has  been  commenced  but  has  not  been 
concluded,  provided  such  judgments  or  decrees  are  rendered  before  any  further 
testimony  is  taken. 

Whenever  any  suit  or  proceeding  in  equity  or  criminal  prosecution  is  instituted  by 
the  United  States  to  prevent,  restrain  or  punish  violations  of  any  of  the  antitrust  laws, 
the  running  of  the  statute  of  limitations  in  respect  of  each  and  every  private  right  of 
action  arising  under  said  laws  and  based  in  whole  or  in  part  on  any  matter  complained 
of  in  said  suit  or  proceeding  shall  be  suspended  during  the  pendency  thereof. 

The  provisions  of  this  section  mcrease  the  protection  afforded  by 
the  antitrust  laws  by  a  new  rule  of  evidence  and  by  extendmg  in 
certam  cases  the  period  of  prescription  for  private  suits. 

Section  11  gives  to  the  Interstate  Commission  Commission,  the 
Federal  Reserve  Board,  and  the  Federal  Trade  Commission,  respect- 
ively, the  authority  to  enforce  the  provisions  of  sections  2,  3,  7,  and 
8  in  so  far  as  they  affect  persons  or  corporations  subject  to  their 
jurisdiction.  The  form  of  procedure  is  substantially  the  same  in 
each  case  as  that  prescribed  for  the  Federal  Trade  Commission  with 
respect  to  unfair  methods  of  competition,  which  has  been  quoted 
above.  (See  p.  130.)  The  text  of  this  provision  is  given,  therefore, 
only  for  the  introductory  paragraph  which  defines  the  jurisdiction  of 
the  several  administrative  boards  or  commissions. 

Sec.  11.  That  authority  to  enforce  compliance  with  sections  two,  three,  seven,  and 
eight  of  this  Act  by  the  persons  respectively  subject  thereto  is  hereby  vested:  in  the 
Interstate  Commerce  Commission  where  applicable  to  common  earners,  in  the  Federal 
Reserve  Board  where  applicable  to  banks,  banking  associations  and  trust  companies, 
and  in  the  Federal  Trade  Commission  where  applicable  to  all  other  character  of  com- 
merce, to  be  exercised  as  follows:    *    *    * 

This  paragraph  is  found  in  place  of  the  first  and  second  paragraphs 
of  section  5  of  the  Federal  Trade  Commission  Act.  Otherwise  section 
5  and  this  section  are  identical,  except  that  a  clause  in  the  first 
sentence  of  the  third  paragraph  in  section  5,  namely,  "and  if  it  sliall 
appear  to  the  commission  that  a  proceedmg  by  it  in  respect  thereof 
would  be  to  the  interest  of  the  public,"  is  not  found  in  section  11  of 
this  law. 

In  this  connection  it  may  be  noted  that  sections  2,  3,  7,  and  8, 
while  they  forbid  certain  practices  or  forms  of  busmess  organization, 
do  not  prescribe  any  penalties.  Section  11  furnishes  one  means  of 
enforcing  these  proliibitions,  namely,  in  the  last  resort  a  court  injunc- 


140  REPORT   OF   THE   COMMISSIONER    OF   CORPORATIONS. 

tion;  others  are  found  insection  15  (see  below) ,  which  gives  the  district 
attorneys  a  right  to  bring  suits  in  equity  to  restraui  violations  of  the 
law;  in  section  4,  which  gives  persons  mjured  thereby  the  right  to  sue 
for  triple  damages;  and  m section  16  (see  below) ,  which  gives  persons, 
associations,  etc.,  the  right  to  injunctive  relief  in  certain  cases. 

Section  14  provides  that  when  a  corporation  has  violated  penal 
provisions  of  the  antitrust  laws  the  directors,  officers,  or  agents  who 
authorized,  ordered,  or  committed  any  of  the  acts  constituting  in 
whole  or  in  part  such  violation  shall  be  held  guilty  of  a  misdemeanor 
and  upon  conviction  punished  by  fine  or  imprisonment,  or  both.. 

Sec.  14.  That  whenever  a  corporation  shall  violate  any  of  the  penal  i)rovisions  of 
the  antitrust  laws,  such  violation  sliall  be  deemed  to  be  also  that  of  the  individual 
directors,  officers,  or  agents  of  such  corporation  who  shall  have  authorized,  ordered, 
or  done  any  of  the  acts  constituting  in  whole  or  in  part  such  violation,  and  such  vio- 
lation shall  be  deemed  a  misdemeanor,  and  upon  conviction  therefor  of  any  such 
director,  officer,  or  agent  he  shall  be  punished  by  a  fine  of  not  exceeding  $5,000  or 
by  imprisonment  for  not  exceeding  one  year,  or  by  both,  in  the  discretion  of  the 
court. 

This  provision  applies  apparently  to  sections  1,  2,  and  3  of  the 
Sherman  Antitrust  Act,  to  section  73  of  the  Wilson  Tariff  Act,  and 
to  sections  9  and  10  of  this  law,  which  prohibit  certain  practices  by 
common  carriers  engaged  in  commerce.  Sections  2,  3,  7,  and  8  of 
this  act  contain  prohibitions,  but  no  penal  provisions. 

Section  15  gives  to  the  several  district  attorneys  of  the  United 
States  the  duty  to  institute  proceedings  to  prevent  violations  of  this 
act  and  the  duty,  under  the  direction  of  the  Attorney  General,  to 
bring  suits  in  equity  for  that  purpose,  and  prescribes  the  form  of  pro- 
cedure. This  section  is  identical  with  sections  4  and  5  of  the  Sher- 
man Antitrust  Act  (see  p.  71),  except  that  the  word  "that"  is  placed 
at  the  beginning  of  the  section.  It  is  not  necessary,  therefore,  to  re- 
peat the  language  of  this  section.  It  should  be  noted,  however,  that 
this  section  gives  the  district  courts  a  jurisdiction  concurrent  with 
that  of  the  Federal  Trade  Commission,  the  Federal  Reserve  Board, 
and  the  Interstate  Commerce  Commission,  respectively,  in  the  en- 
forcement of  sections  2,  3,  7,  and  8  of  this  law. 

Section  16  gives  to  any  person,  firm,  corporation,  or  association  the 
right  to  relief  by  injunction  for  threatened  loss  or  damage  by  a  vio- 
lation of  the  antitrust  laws,  including  sections  2,  3,  7,  and  8  of  this 
act  under  the  same  conditions  as  such  relief  would  be  gi-anted  by  a 
court  of  equity,  except  with  respect  to  matters  subject  to  the  juris- 
diction of  the  Interstate  Commerce  Commission  regarding  common 
carriers. 

Sec.  16.  That  any  person,  firm,  corporation,  or  association  shall  be  entitled  to  sue 
for  and  have  injunctive  relief,  in  any  court  of  the  United  States  having  jurisdiction 
over  the  parties,  against  threatened  loss  or  damage  by  a  violation  of  the  antitrust 
laws,  including  sections  two,  three,  seven  and  eight  of  this  Act,  when  and  under  the 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  141 

same  conditions  and  principles  as  injunctive  relief  against  threatened  conduct  that 
will  cause  loss  or  damage  is  granted  by  courts  of  equity,  under  the  rules  governing 
such  proceedings,  and  upon  the  execution  of  proper  bond  against  damages  for  an 
injunction  improvidently  granted  and  a  showing  that  the  danger  of  irreparable  loss 
or  damage  is  immediate,  a  preliminary  injunction  may  issue:  Proinded,  That  nothing 
herein  contained  shall  be  construed  to  entitle  any  person,  fii-m,  corporation,  or  asso- 
ciation, except  the  United  States,  to  bring  suit  in  equity  for  injunctive  relief  against 
any  common  carrier  subject  to  the  provisions  of  the  Act  to  regulate  commerce, 
approved  February  foiui;h,  eighteen  hundred  and  eighty-seven,  in  respect  of  any 
matter  subject  to  the  regulation,  Buper\'ision,  or  other  jurisdiction  of  the  Interstate 
Commerce  Commission. 

Section  20  provides  that  in  any  case  between  an  employer  and 
employees,  etc.,  relating  to  or  gi'owing  out  of  a  dispute  as  to  the 
terms  of  employment,  the  United  States  courts  shall  not  issue  injunc- 
tions unless  necessary  to  prevent  irreparable  injury  to  the  property 
rights  of  the  apphcant. 

This  section  provides  further  that  an  injunction  shall  not  prohibit 
any  person  or  persons,  whether  singly  or  in  concert,  from  ceasing  to 
work  or  persuading  others  to  do  so  by  peaceful  means,  or  from  attend- 
ing at  any  place  where  he  may  lawfully  be  in  order  peacefully  to 
communicate  information  or  to  persuade  any  pei"son  to  abstain  from 
working,  or  from  ceasing  to  patronize  or  employ  any  party  to  such 
dispute,  or  persuading  others  thereto  by  peaceful  and  la^v^ul  means, 
or  from  paying  or  withholding  strike  benefits,  or  from  peaceably 
assembling  in  a  lawful  manner  and  for  lawful  purposes.  Finally,  it 
is  declared  that  the  acts  specified  in  this  paragraph  shall  not  be  held 
to  be  violations  of  any  law  of  the  United  States. 

Sec.  20.  That  no  restraining  order  or  injunction  shall  be  granted  by  any  court  of 
the  United  States,  or  a  judge  or  the  judges  thereof,  in  any  case  between  an  employer 
and  employees,  or  between  employers  and  employees,  or  between  employees,  or 
between  persons  employed  and  persons  seeking  employment,  involving,  or  growing 
out  of,  a  dispute  concerning  terms  or  conditions  of  employment,  unless  necessary  to 
prevent  irreparable  injury  to  property,  or  to  a  property  right,  of  the  party  making 
the  application,  for  which  injury  there  is  no  adequate  remedy  at  law,  and  such 
property  or  property  right  must  be  described  with  particularity  in  the  application, 
which  must  be  in  writing  and  s^vorn  to  by  the  applicant  or  by  his  agent  or  attorney. 

And  no  such  restraining  order  or  injunction  shall  prohibit  any  person  or  persons, 
whether  singly  or  in  concert,  from  terminating  any  relation  of  employment,  or  from 
ceasing  to  perform  any  work  or  labor,  or  from  recommending,  advising,  or  persuading 
others  by  peaceful  means  so  to  do;  or  from  attending  at  any  place  where  any  such 
person  or  persons  may  lawfully  be,  for  the  purpose  of  peacefully  obtaining  or  com- 
municating information,  or  from  peacefully  persuading  any  person  to  work  or  to 
abstain  from  working;  or  from  ceasing  to  patronize  or  to  employ  any  party  to  such 
dispute,  or  from  recommending,  advising,  or  persuading  others  by  peaceful  and 
lawful  means  so  to  do;  or  from  paying  or  gi\T.ng  to,  or  withholding  from,  any  i>erson 
engaged  in  such  dispute,  any  strike  benefits  or  other  moneys  or  things  of  value;  or 
from  peaceably  assembling  in  a  lawful  manner,  and  for  lawful  purposes;  or  from 
doing  any  act  or  thing  which  might  lawfully  be  done  in  the  absence  of  such  dispute 
by  any  party  thereto;  nor  shall  any  of  the  acts  specified  in  this  paragrajjh  be  con- 
sidered or  held  to  be  violations  of  any  law  of  the  United  States. 


142  EEPORT  OF   THE   COMMISSIONER   OF   COEPORATlONSo 

This  section  aims  primarily  to  limit  the  use  of  injunctions  in  labor 
disputes,  especially  with  respect  to  such  practices  as  "picketing"  and 
"boycotting."  It  should  bo  noted,  however,  that  the  last  clause  of 
the  section  is  practically  declaratory  law  and  appears  to  make  lawful 
certain  practices  of  labor  combinations  which  have  sometimes  been 
held  to  be  unlawful  by  the  courts. 

This  law  contains  also  several  other  sections  relating  to  the  use  of 
injunctions  and  to  punishment  for  contempts,  but  they  have  no 
peculiar  relation  to  the  enforcement  of  the  antitrust  laws,  and  there- 
fore do  not  need  to  be  considered  here. 


CHAPTER    IV. 
IMPORTANT  PROVISIONS  OF  STATE  ANTITRUST  LAWS. 

Section  1.  Introductory. 

Since  Federal  antitrust  laws  do  not  reach  pui'ely  intrastate  trans- 
actions, there  has  been  left  to  the  States  themselves  an  important  field 
of  activity  in  regulating  trade  and  business  practices.  In  recent  years, 
especially  in  the  past  decade,  various  States  have  passed  a  large  num- 
ber of  laws  relatuig  to  trusts,  monopolies,  and  restraint  of  trade.  It 
seems  deshable,  therefore,  Jn  order  that  the  entire  field  of  antitrust 
legislation  may  be  covered,  to  present  a  digest  of  State  constitutional 
and  statutory  provisions  relating  to  this  subject.  The  object  of  these 
statutes,  speaking  broadly,  has  been  twofold — first,  to  make  crhninal 
many  contracts  and  agreements  which  at  the  common  law  were  prob- 
ably void  only;  second,  to  specify  many  practices  which  may  m  some 
cases  have  been  held  to  be  contrary  to  the  prmciples  of  the  common 
law,  or  to  be  mcluded  in  the  general  terms  "monopoly"  or  ''restraint 
of  trade,"  thus  meetmg,  as  far  as  practicable,  the  demand  for  more 
defhiiteness  m  the  laws  relating  to  this  subject.  In  addition,  a  number 
of  States  have  prohibited  certain  practices,  such  as  local  price  cutting 
and  demands  by  manufacturers  for  exclusive  dealing,  which  the  legis- 
lative bodies  apparently  considered  would,  if  permitted,  inevitably 
result  in  restramt  of  trade  or  tend  to  monopoly. 

The  plan  of  this  chapter  is  to  group  by  subjects  the  more  important 
provisions  of  these  laws  to  show  the  extent  to  which  they  have  been 
adopted  tlu-oughout  the  States  and  the  differences  in  the  terms 
emi)loyed  in  statutes  apparently  designed  to  apply  to  the  same 
conditions  or  practices.  The  broad  subjects  covered  m  this  presenta- 
tion are:  (1)  Monopoly,  (2)  restramt  of  trade,  (3)  restraint  of  compe- 
tition, (4)  pooUng,  (5)  price  control,  (6)  limitation  of  output,  (7)  divi- 
sion of  territory,  (8)  restraints  on  resales,  (9)  competitive  methods, 
(10)  provisions  alfectmg  agricultural  interests,  (11)  provisions  afi'cct- 
ing  labor,  (12)  holdmg  companies,  (13)  provisions  affecting  business 
of  a  public  nature,  (14)  recognition  of  common  law  principles,  (15) 
administration  of  the  law,  (16)  evidence,  burden  of  proof,  indict- 
ments, etc.,  (17)  penalties,  (18)  stock  watermg.  Wherever  possible, 
a  law  which  is  fairly  typical  has  been  chosen  as  a  model  or  basis  of 
comparison  for  a  particular  group  or  subject,  followed  by  a  state- 

143 


144  r.EPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

ment  of  the  differences,  if  any,  between  this  and  sunilar  laws  of  other 
States.  This  is  followed  by  further  laws  touchmg  the  same  subject 
matter  but  so  dissunilar  that  they  do  not  admit  of  bemg  compared 
in  detail.  This  method  of  treatment  has  frequently  necessitated 
separating  closely  related  portions  of  a  statute  dealing  with  a  number 
of  specific  offenses,  and  presenting  them  under  separate  titles. 

An  attempt  has  been  made  to  give  the  substance  of  the  statutes, 
but  where  the  use  of  particular  terms  appeared  to  be  important  the 
exact  wording  has  been  preserved. 

In  addition  to  the  statutory  provisions,  the  more  important  deci- 
sions construing  them,  or  showing  conditions  or  practices  which  the 
courts  have  declared  to  be  in  violation  thereof,  have  been  digested 
and  inserted. 

With  very  few  exceptions,  the  chapter  includes  only  provisions 
clearly  directed  at  the  prevention  of  monopoly  and  restraint  of 
trade.  A  section  on  stock  watering,  properly  a  part  of  the  corpora- 
tion laws,  has  been  inserted  because  of  the  fact  that  this  subject  is 
very  generally  discussed  in  connection  with  antitrust  legislation.^ 

Section  2.  Monopoly. 

Constitutional  prohibitions. — Monopolies  are  prohibited  but 
not  defined  in  the  constitutions  of  many  States.  They  are  prohibited 
in  the  constitutions  of  five  of  the  States  ^  (Oklahoma,  Arkansas, 
Tennessee,  Texas,  and  Wyoming)  in  substantially  the  foUomng 
language:  Perjtetuities  and  monopolies  are  contrary  to  the  genius 
of  a  free  government  and  shall  never  be  allowed.  In  North  Caro- 
lina it  is  declared  that  they  "ought  not  to  be  allowed"  (Const., 
Art.  I,  sec.  31). 

The  constitutions  of  three  States  ^  (Arizona,  South  Dakota,  and 
Washington)  declare  that  monopolies  "shall  never  be  allowed." 

The  Maryland  constitution  (art.  41)  declares  that  they  are  "odious, 
contrary  to  the  spirit  of  a  free  government  and  the  principles  of  com- 
merce and  ought  not  to  be  suffered." 

A  section  of  the  constitution  of  Connecticut  (art.  1,  sec.  1)  declares 
that  "no  man  or  set  of  men  are  entitled  to  exclusive  public  emolu- 
ments or  privileges  from  the  community." 

The  New  Mexico  constitution  (art.  4,  sec.  38)  directs  the  legisla- 
ture to  "enact  laws  to  prevent  *  *  *  monopolies  *  *  *"; 
and  the  constitution  of  Virginia  (sec.  165)  commands  the  legislature 
to  prevent  "monopolies  inimical  to  the  public  welfare." 

1  The  publication  of  the  House  Committee  on  the  Judiciary  entitled  "Laws  on  Trusts  and  Monopolies" 
(Dec.  1, 1913),  which  contains  reprints  of  most  of  the  State  antitrust  laws,  has  been  largely  used  in  the 
preparation  of  this  chapter,  supplemented  by  extensive  reference  to  the  original  statutes  and  reported 
cases. 

2  Oklahoma,  Art.  II,  sec.  32;  Arkansas,  Art.  II,  sec.  19;  Tennessee,  Art.  I,  sec.  22;  Texas,  Art.  I,  sec.  2(5; 
and  Wyoming,  Art.  I,  sec.  30. 

'Arizona,  Constitution,  Art.  XIV,  sec.  15;  South  Dakota,  Art.  XVIl,  sec.  20,  and  Washmgton,  Art. 
Xll,  sec.  22,  ^ 


TRUST   LAWS   AND  UNFAIE   COMPETITION.  145 

Section  103  of  the  constitution  of  Alabama  is  as  follows: 

The  legislature  shall  provide  by  law  for  the  regulation,  prohibition,  or  reasonable 
restraint  of  common  carriers,  partnerships,  associations,  trusts,  monopolies,  and 
combinations  of  capital,  so  as  to  prevent  them  or  any  of  them  from  making  scarce 
articles  of  necessity,  trade,  or  commerce,  or  from  increasing  unreasonably  the  cost 
thereof  to  the  consumer,  or  preventing  reasonable  competition  in  any  calling,  trade,  or 
business.^ 

In  the  constitution  of  Minnesota  (Art.  IV,  sec.  35),  combinations 
to  monopolize  the  markets  for  food  products  in  the  State,  or  to 
interfere  with  or  restrict  the  freedom  of  such  markets,  are  declared 
criminal  conspiracies. 

The  constitution  of  Louisiana  (art.  190,  adopted  Nov.  22,  1913) 
prohibits  all  monopolies  or  combinations  to  monopolize  trade  or 
commerce. 

The  constitution  of  Georoia  (Art.  IV,  sec.  2)  declares  that  the 
general  assembly  shall  have  no  power  to  authorize  any  corporation 
to  buy  stock  in  any  other  corporation  or  to  make  any  contract  or 
agreement  with  any  corporation,  which  may  have  the  effect,  or  be 
m tended  to  have  the  effect,  to  defeat  or  lessen  competition  or  to 
encourage  monopoly. 

The  constitution  of  New  Hampshire  (art.  82)  declares  that  ''free 
and  fair  competition  in  the  trades  and  industries  is  an  inherent  and 
essential  right  of  the  people  and  should  be  protected  against  all 
monopolies  and  conspiracies  which  tend  to  hinder  or  destroy  it," 
and  grants  to  the  general  court  the  power  to  enact  laws  ' '  to  prevent 
the  operations  within  the  State  of  all  persons  and  associations,  and 
all  trusts  and  corporations,  foreign  or  domastic,  and  the  officers 
thereof,  who  endeavor  to  raise  the  price  of  any  article  of  commerce 
or  to  destroy  free  and  fair  competition  in  the  trades  and  industries 
through  combination,  conspiracy,  monopoly,  or  any  other  unfair 
means." 

Statutory  definitions. — The  statutes  of  four  of  the  States  defuie 

monopoly.     The  laws  of  Arkansas  and  of  South  Carolina  define  it  as 

follows : 

A  monopoly  is  any  union  or  combination  or  consolidation  or  affiliation  of  capital, 
credit,  property,  assets,  trade,  customs,  skill  or  acts  of /or  any  other  valuable  thing  or 

iCitizcm  Light,  Heal  &  Power  Co.  v.  Montgomery  Light  &  Water  Power  Co.  (171  Fed.,  553  (1909)).— Cora- 
plainanl  prayed,  among  other  things,  that  defendant  be  enjoined  and  restrained  from  any  elTort  to  induce 
any  of  the  customers  of  complainant  to  violate  any  subsisting  contract  to  furnish  cleclricity  either  for  a 
definite  or  indefinite  term,  or  from  agreeing  to  indemnify  and  hold  harmless  cu-stomers  of  the  complainant 
from  liability  for  damages  for  breaches  of  contract;  and  further  asked  general  relief  from  such  acts  as  taking 
business  at  less  than  cost  to  induce  customess  not  to  contract  with  complainant  and  thus  securing  a  monop- 
oly of  business  for  itself.  Held,  that  the  Alabama  Constitution  of  1901,  section  103,  had  not  narrowed  com- 
petition as  defined  at  the  common  law;  that  under  this  section  one  man  could  take  over  all  of  another's 
customers,  and  thus  control  a  business  if  it  resulted  from  competition  within  legal  limits;  that  the  court 
could  not  restrain  the  defendant  from  inducing  a  breach  of  complainant's  contracts  by  mere  solicitation, 
forthat  would  be  ollensivo  to  the  policy  of  the  law  which  was  to  foster  competition,  and  would  be  building 
up  rather  than  destroying  monopoly;  but  that  the  court  could  enjoin  the  defendant  from  agreeing  to  in- 
demnify the  complainant's  customers  for  breaking  their  contracts. 

30035°— IG- 10 


146  REPORT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

possession,  by  or  between  persons,  firms  or  corporations,  or  association  of  persons, 
firms  or  corporations,  whereby  any  one  of  the  purposes  or  objects  mentioned  in  this 
act '  is  accomplished  or  sought  to  be  accomplished,  or  whereby  any  one  or  more  of  said 
purposes  are  promoted  or  attempted  to  be  executed  or  carried  out,  or  whereby  the 
several  results  described  herein  are  reasonably  calculated  to  be  produced;  and  a 
monopoly,  as  thus  defined  and  contemplated,  includes  not  merely  such  combination 
by  and  between  two  or  more  persons,  firms  and  corporations,  acting  for  themselves, 
but  is  especially  defined  and  intended  to  include  all  aggi-egations,  amalgamations, 
affiliations,  consolidations  or  incorporations  of  capital,  skill,  credit,  assets,  property, 
custom,  trade  or  other  valuable  thing  on/or  p<jssession  whether  effected  by  the 
ordinary  methods  of  partnership  or  by  actual  union  under  the  legal  form  of  a  corpora- 
tion, or  any  incorporated  body  resulting  from  the  union  of  one  or  more  distinct  firms 
or  corporations,  or  by  the  purchase,  acquisition  or  control  of  shares  or  certificates  of 
stocks  or  bonds,  or  other  corporate  property  or  franchises,  and  all  partnerships  and 
corporations  that  have  been  or  may  be,  created  by  the  consolidation  or  amalgamation 
of  the  separate  capital,  stock,  bonds,  assets,  credit,  property,  customs,  trade,  corporate 
or  firm  belongings  of  two  or  more  firms  or  corporations  or  companies,  are  especially 
declared  to  constitute  monopolies  within  the  meaning  of  this  act,  if  so  created  or 
entered  into  for  any  one  or  more  of  the  purposes  named  in  this  act.^  *  *  * 
The  statutes  of  Texas  define  a  monopoly  as  follows: 

A  monopoly  is  a  combination  or  consolidation  of  two  or  more  corporations  when 
effected  in  either  of  the  following  methods: 

1.  Wlien  the  direction  of  the  affairs  of  two  or  more  corporations  is  in  any  manner 
brought  under  the  same  management  or  control  for  the  purpose  of  producing,  or  where 
Buch  common  management  or  control  tends  to  create  a  trust  as  defined  in  the  first 
section  of  this  act.^ 

2.  Where  any  corporation  acquires  the  shares  or  certificates  of  stock  or  bonds,  fran- 
chise or  other  rights,  or  the  physical  properties,  or  any  jiart  thereof,  of  any  other  cor- 
poration or  corporations,  for  the  purpose  of  preventing  or  lessening,  or  where  the  effect 
of  such  acquisition  tends  to  affect  or  lessen  competition,  whether  such  acquisition  is 
accomplished  directly  or  through  the  instrumentality  of  trustees  or  otherwise.* 

South  Dakota  defines  a  monopoly  as  a  combination  of  capital  or 
skill,  by  two  or  more  persons,  firms,  cc^rporations,  or  associations  of 
persons — 

First.  To  create  or  carry  out  restrictions  in  trade. 

Second.  To  limit  the  production  or  to  increase  or  reduce  the  price  of  commodities. 
Third.  To  prevent  competition  in  the  manufacture,  transportation,  sale  or  purchase 
of  merchandise,  produce  or  commodities. 

'  Briefly,  the  Arkansas  act  prohibits  agrcpments  to  regulate  prices  or  insurance  premiums,  or  to  limit 
output,  selling  at  less  than  cost  of  manufacture  or  giving  away  products  for  the  purpose  of  financially 
injuring  competitors,  and  the  law  of  South  Carolina  in  addition  prohibits  refusals  to  buy  from  or  sell  to 
another  under  certain  conditions. 

2  Arkansas,  Laws  190.5,  Act  1,  as  amended  Mar.  12, 1913;  South  Carolina,  Laws  1902,  No.  .'574,  sec.  2. 

3  Briefly,  a  trust  is  defined  under  the  law  to  l)e  a  combination  to  (1)  create  or  carry  out  restrictions  of 
trade;  (2)  regulate  prices  of  commodities  or  insurance;  (3)  prevent  or  lessen  competition;  (4)  fix  any  standard 
to  control  the  price  of  any  commodity;  (5)  enter  into  any  agreement  (a)  not  to  sell  or  transport,  or  lo  prepare 
for  market  any  commodity,  or  make  any  contract  of  insiu-ance  at  a  price  below  a  common  standard,  or  (6) 
to  keep  the  price  of  such  commodity,  service,  transportation  or  insurance  at  a  fixed  or  graded  figure,  or  (c) 
to  preclude  free  competition  in  the  sale,  etc.,  of  such  commodity,  transportation,  service  or  insurance,  or 
(d)  to  pool  any  interest  they  may  have  in  the  sale  or  purchase  of  any  such  commodity,  service,  transpor- 
tation or  insurance  whereby  its  price  or  the  charge  therefor  is  affected;  (6)  to  regulate  the  output  of  any 
article,  the  amount  of  insurance  to  be  imdertaken,or  the  amount  of  work  which  may  be  done  in  the  prep- 
aration of  any  product  for  market  or  transportation;  (7)  to  abstain  from  doing  business  in  the  State  or 
any  part  thereof. 

*  Texas,  Laws  1903,  Chap.  XCIV,  sec.  2. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  147 

Fourth.  To  fix  any  standard  or  figure  whereby  the  price  to  the  public  shall  be  in 
any  manner  established  or  controlled.' 

Statutory  prohibitions. — The  statutes  of  21  States  prohibit 
monopoly,  and  in  one  of  these  (Okhihoma)  the  prohibition  extends  to 
"virtual  monopolies." 

In  New  Mexico  the  legislature  has  declared  that  "perpetuities  and 
monopolies  are  contrary  to  the  genius  of  a  free  government  and  shall 
never  be  allowed."  ^ 

In  New  York,  under  certain  conditions,  corporations  are  authorized 
to  purchase  and  hold  stock  of  other  corporations,  but  are  proliibited 
from  combining  for  the  creation  of  a  monopoly.^  This  State  also  pro- 
hibits all  arrangements,  combinations,  etc.,  whereby  a  monopoly  in  the 
manufacture,  production,  or  sale  in  the  State  of  any  article  or  com- 
modity of  common  use  may  be  created,  or  whereby,  for  the  purpose 
of  creating  such  monopoly,  the  free  pursuit  in  the  State  of  any  lawful 
business,  trade,  or  occupation  is  restricted  or  prevented.* 

The  laws  of  Montana  prohibit  any  person,  corporation,  or  associa- 
tion of  persons  in  the  State,  directly  or  indirectly,  from  combining  or 
making  any  contract  in  any  manner  whatever  to  create  a  monopoly 
in  the  manufacture,  sale,  or  transportation  of  any  article  of  commerce 
(including  gas,  water,  water  power,  electric  light,  and  electric  power, 
for  whatever  purpose  used  or  employed).^ 

»  South  Dakota,  Laws  1900,  chap.  224,  sec.  1. 

State  V.  FuUcrton  Lumber  Co.,  et  al.,  l'>2  N.  W.,  708  (S.  Dak.,  1915).— The  defendants  who  were  engaged 
in  selling  lumber,  coal,  and  building  material,  at  Geddes,  S.  Dak.,  were  charged  with  a  conspiracy  in  re- 
straint of  trade  in  violation  of  the  laws  of  1900,  chap.  221.  It  was  alleged  that  the  defendants  agreed  upon 
and  adopted  a  maximum  and  minimum  price  list,  the  former,  which  afforded  a  large  profit,  to  be  followed 
wliere  tlie  partio.s  liad  no  outside  competition,  and  the  latter,  which  represented  the  actual  cost  of  the  com- 
modities, to  be  followed  in  communities  where  there  was  such  competition.  Certain  of  the  defendants  were 
found  guilty  and,  on  appeal,  the  conviction  was  affirmed,  the  appellate  court  holding  that  the  oflense  was 
complete  upon  entering  into  the  agreement  and  that  it  was  not  necessary  to  prove  an  overt  act  under  the 
agreement. 

■■i  New  Mexico  Stats.,  1915,  sec.  4770. 

3  New  York,  Cons.  Laws,  S.  C.  L.,  sees.  14,  52. 

Burrows  v.  Intcrborough  Metropolitan  Co.,  156  Fed.,  S89  {1907). — In  statutes  prohibiting  contracts  or 
combiiiations  creating  monopolies,  the  word  "  monopoly  "  is  not  used  in  a  strict  legal  sense,  as  including  the 
power  to  legally  exclude  all  others  from  the  field  monopolized,  but  means  the  obtaining  of  a  substantially 
complete  control  of  a  particular  iiusiness  or  article.  The  acquisition  by  a  corporation  of  a  controlling 
interest  in  the  stock  of  corporations  owning  or  controlling  and  operating  all  street  railway  lines  in  Man- 
hattan and  the  Bronx,  including  underground,  elevated,  and  surface  lines,  is  unlawful  as  creating  a 
monopoly  of  the  means  of  transportation  of  passengers  in  the  city  in  violation  of  S.  C.  L.,  sec.  14. 

Attorney  General  \.  Consolidated  GasGo.,  W,N.  Y.App.Div.,401  (190S). — The  consolida'tion  of  six  New 
York  gas  companies  under  the  name  of  tlie  Consolidated  Gas  Co. ,  and  the  subsequent  acquisition  by  the  lat- 
ter of  the  whole  or  the  majority  of  the  capital  stock  of  other  gas  and  electric-lighting  companies  under  8.  C.  !>., 
sec.  52,  did  not  olfend  S.  C.  L.,  sec.  14,  because,  even  though  designed  to  prevent  competition,  it  did  not 
constitute  a  monopoly  under  the  statute,  as  no  exclusive  right  was  obtained.  Nor  could  the  price  of  gas 
or  electricity  be  arbitrarily  fixed  by  the  corporation,  both  of  these  matters  being  within  the  control  of 
the  legislature,  which  may  fix  the  maximum  rate  and  compel  the  production  and  sale  of  gas  to  consumers. 
Such  companies  are  distinguished  from  a  corporation  or  combination  dealing  in  ice,  milk,  coal,  etc.,  organ- 
ized to  control  output  or  fix  prices. 

Continental  Securities  Co.  v.  Interborough  Rapid  Transit  Co.,  165  Fed.,  945  (/90S).— Competing  street  rail- 
ways in  New  York  City  combined  through  transfer  of  their  stock  to  a  holding  company.  The  combination 
resulted  in  a  monopoly  held  illegal  under  S.  C.  L.  14,  which  limits  S.  C.  L.  52,  and  this  although  it  is  within 
the  power  of  the  legislature,  by  enactment  or  the  operations  of  some  commission  created  by  it,  to  remedy 
the  evQs  that  might  result  from  the  monopoly  if  left  undisturbed. 

*  New  York,  Cons.  Laws,  Gen.  Business  Law,  sec.  -340. 

6  Montana,  Laws  1909,  chap.  97,  sec.  1. 


148  REPORT  OF    THE   COMMISSIONER   OF   CORPORATIONS. 

New  Jersey  prohibits  combinations  or  agreements  to  acquire  a  mo- 
nopoly in  intrastate  or  interstate  business  or  commerce.*  This  State 
also  prohibits  the  purchase  by  a  corporation  of  the  stock  of  any  other 
corporation,  or  any  property,  for  the  purpose  of  acquiring  a  monopoly.^ 
It  is  also  a  misdemeanor  for  any  person  or  persons  to  organize  any 
corporation  in  New  Jersey  to  be  used  in  acquiring  a  monopoly,  or 
for  any  officer,  director,  manager,  or  employee  of  any  corporation 
organized  under  the  laws  of  New  Jersey  to  use  the  corporation,  or 
permit  it  to  be  used,  in  acquiring  a  monopoly,  when  such  corporation 
ensfaofcs  in  interstate  or  intrastate  commerce.^ 

Kansas  prohibits  conspiracies  and  combinations  "for  the  purpose 
of  monopolizing  any  lino  of  business."^ 

Utah  proMbits  any  corporation,  its  officers,  stockholders,  agents, 
or  employees,  from  entering  into  a  combination  or  agreement  the  pur- 
pose of  wliich  is  to  monopohze  any  part  of  the  trade  or  commerce 
within  the  State.^ 

Mchigan  provides  that^ — 

Any  corporation  organized  under  the  laws  of  this  State  for  the  purpose  of  establish- 
ing and  maintaining,  or  attempting  to  establish  or  maintain,  any  combination  of  per- 
sons, copartnerships  or  corporations  with  intent  to  establish  and  maintain  or  of  attempt- 
ing to  establish  and  maintain  a  monopoly  of  any  trade,  pursuit,  avocation,  profession, 
or  business,  is  hereby  declared  to  be  against  public  policy  and  illegal  and  void. 

Foreign  corporations  organized  with  the  intent  of  establishing  such 
a  monopoly  are  prohibited  from  doing  business  in  the  State,  and 
another  section  of  the  law  prohibits  all  combinations  for  such 
purposes.*' 

Vermont  prohibits  the  filing  of  articles  of  association  or  certificates 
of  increase  of  capital  stock  of  any  corporation  to  an  amount  exceeding 

I  New  Jersey,  Laws  1913,  chap.  13,  sec.  1. 

-  Idem,  1913,  chap.  15,  sec.  1. 

3  Idem,  1913,  chap.  16,  sees.  1,  2. 

«  Kansas,  Laws  1S99,  chap.  293,  sec.  2;  G.  S.,  sec.  5178. 

6  Utah,  Stats.,  sec.  1754. 

6  Michigan,  P.  A.  1905,  No.  329,  sees.  2,  3,  4. 

Attorney  General  v.  National  Cash  Register  Co.,  I48  N.  W.,  420,  421  (  Mich.,  1.914).— This  was  an  informa- 
tion in  the  nature  of  quo  warranto  on  the  relation  of  the  Attorney  General,  charging  tliat  the  respondent 
was  violating  the  antitrust  laws  of  Michigan  in  establishing  and  maintaining  a  monopoly  and  conspiring 
to  maintain  a  monopoly  and  to  suppress  all  competition.  It  was  also  alleged  that  the  respondent  had  u.sed, 
among  others,  the  following  methods:  "Interference  with  competing  companies;  interference  with  com- 
peting salesmen;  interference  with  sales  made  by  competing  salesmen,  and  interfering  with  the  contracts 
of  competing  companies;  following  and  interfering  with  the  business  of  competing  salesmen;  interfering 
with  the  mechanism  of  competing  machines;  watching  and  spying  out  the  shipments  of  competing  com- 
panies; watching  the  factories  of  competing  manufacturers;  circulating  damaging  statements  relating  to 
the  standing  and  business  of  competing  companies;  maintaining  a  display  window  of  competitive  machines 
and  advertising  to  sell  them  at  30  cents  on  the  dollar;  manufacturing  and  using  knockout  machmes;  em- 
ploying secret  agents,  detectives,  spies,  and  knockout  men;  the  use  of  knockout  credit  cards;  placing  its 
employees  in  offices  of  competing  companies  without  the  latters'  knowledge;  blocking  sales  of  competitors; 
instituting  many  suits  and  threatening  to  bring  others  against  manufacturers  and  competing  companies, 
and  against  their  customers;  bringing  infringement  suits  without  intention  of  prosecuting  them;  and,  in 
-  many  other  ways  too  numerous  to  mention,  endeavoring  to  establish  a  monopoly  in  the  business.^'  The 
court  found  the  respondent  guilty  of  a  violation  of  sec.  4  of  Act  No.  329  of  the  Public  Acts  of  1905,  and 
ordered,  in  case  the  respondent  failed  to  pay  a  fine  of  $10,000  and  costs,  that  it  be  ousted  of  all  rights  and 
forever  prohibited  from  doing  lousiness  in  the  State. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  149 

$10,000,000  until  the  same  have  been  submitted  to  a  judge  of  the 
supreme  court,  who  shall  not  permit  the  organization  or  increase  if  in 
his  opinion  it  is  liable  to  create  a  monopoly  (or  result  in  restraining 
competition  in  trade).* 

Idaho,  Intliana,  Louisiana,  and  Nebraska  prohibit  monopoUes  by 
adopting  section  2  of  the  Sherman  Law,  but  limiting  its  appUcation 
to  commerce  within  the  State,  and  the  substance  of  this  section 
limiting  it  to  intrastate  commerce  has  been  incorporated  in  the 
laws  of  Maine  and  Wisconsin.^ 

Porto  Rico  prohibits  monopolizing  or  attempts  to  monopolize, 
and  combinations  or  attempts  to  combine  with  any  other  person  or 
persons  to  monopolize  any  part  of  the  trade  or  commerce  in  any 
town  of  Porto  Rico  or  between  the  towTis  thereof.^ 

Alabama  and  Mississippi  prohilnt  monopolizing  and  attempts  to 
monopolize  the  production,  control,  or  sale  of  any  commodity,  or  the 
prosecution,  management,  or  control  of  any  kind,  class,  or  descrip- 
tion of  business.* 

Hawaii  prohibits  conspiracies  ' '  to  estabhsh,  create,  manage,  or  con- 
duct a  trust  or  monopoly  in  the  purchase  or  sale  of  any  commodity."  ^ 

Arizona  prohibits  the  creation  or  maintenance  of  a  monopoly.^ 

Oklahoma  prohibits  monopolies  and  ''virtual  monopolies."'' 

Arkansas,  South  Carolina,  South  Dakota,  and  Texas  prohibit 
monopolies  as  above  defined.^     (See  pp.  145-147.) 

1  Vermont,  Pub.  Stats.,  1906,  sec.  4311,  as  amended  by  Laws  1910,  No.  143,  sec.  4. 

2  Idaho,  Laws  1911,  chap.  21.5,  sec.  2:  Indiana,  Laws  1007,  chap.  243,  sec.  2;  Louisiana,  Laws  1890,  Act  86, 
sec.  3;  Maine,  Laws  1913,  chap.  106,  sec.  2;  Nebraska,  Laws  1905,  cliap.  162,  sec.  2;  Wisconsin,  Stats.  1913, 
sec.  1747e. 

'  Revi.sed  Statutes  and  Codes  of  Porto  Rico,  1911,  sec.  2374. 

*  Alabama,  Code  1907,  sec.  7581;  Mississippi,  Code  1900,  sec.  5002,  as  amended,  Laws  1908,  chap.  119,  sec.  1. 

5  Hawaii,  Revised  Laws  (1915),  sec.  4085. 

6  Arizona,  Laws  1912,  chap.  73,  sec.  7. 

'  Oklahoma,  Laws  1908,  p.  750,  sees.  2,  5, 13;  see  also  New  Jersey,  Laws  1913,  chap.  14. 

State  V.  Coyle,  ISO  Pac,  316  (1913).— The  antitrust  law  of  1908  (Comp.  Laws  1909,  sees.  8800-8819)  is 
not  void  for  uncertainty,  and  tlie  definitions  of  "trust,"  "monopolies,"  and  "unlawful  combinations  in 
restraint  of  trade  and  against  public  policy"  therein  contained  are  sufficient  to  define  the  offenses  as  being 
a  virtual  monopoly  in  restraint  of  trade. 

8  Arkansas,  Laws  1905,  Act  I,  as  amended  by  act  Mar.  12, 1913;  South  Carolina,  Laws  1902,  No.  574,  sec.  2; 
South  Dakota,  Laws  1909,  chap.  224,  sec.  6;  Texas,  Laws  1903,  Chap.  XCIV,  sees.  2,  4. 

Sullivan  v.  Rime,  150  N.  W.,  556  (S.  D.,  1915). — Action  to  reco\T3r  the  purchase  jirice  of  certain  patterns 
sold  to  defendant,  as  licensee  and  agent,  under  a  contract  by  which  defendant  agreed  not  to  offer  for  sale 
any  other  make  of  ])at terns.  Defendant  demurred  on  the  ground  that  the  contract  was  in  violation  of 
chapter  224,  I>aws  of  1909,  prohibiting  monopolies  and  was  thoroforo  unenforceable.  Held,  whether  the 
contract  was  one  of  agency  or  .sale,  it  was  not  within  the  statute  referred  to,  and  this  regardless  of  wliether 
the  patterns  in  question  were  patented  or  copyrighted.  (Citing  Wood  Mowing  Co.  v.  Greenwood  Hard- 
ware Co.,  75  S.  C.,378.) 

Houek  &  Dieter  v.  Anheuser-Busch  Brewing  Association,  8S  Tex.,  184  (/S.95).— ITouck  &  Dieter,  partners, 
and  two  others  formed  the  Kl  Paso  Lager  Beer  Co.  for  the  purpose  of  selling  beer  in  El  Paso  and  tributary 
markets,  providing  that  the  firm  was  to  handle  no  beer  except  through  the  members,  each  of  whom  was 
to  funii.sh  a  certain  proportion  of  the  whole  at  an  agreed  price.  By  contract  with  the  .\nhcuser-Buseh 
Brewing  .\ssociation,  Ilouck  and  Dieter  were  to  have  the  exclusive  i)rivilege  of  selling  at  wholesale  in  KI 
Paso  the  keg  beer  manufactured  by  said  association.  In  a  suit  by  the  brewing  association  to  recover  for 
beer  sold  on  account,  Ilouck  ^  Dieter  by  cross  action  .set  up  the  exclusive  contract,  alleged  a  breach,  and 
recovered  a  sum  over  and  abo\-e  the  plaintiff's  demand.  On  appeal,  held  that  the  contract  creating  the 
Lager  Beer  Co.  showed  upon  its  face  a  combination  prohibited  by  the  antitrust  law  of  1889,  that  the  law 
was  constitutional,  and  that  Ilouck  &  Dieter  could  not  recover  on  their  cross  action  for  a  breach  of  contract 
the  performance  of  which  would  have  aided  them  in  carrying  out  the  unlawful  enterprise.  Held  further, 
that  if  the  brewing  as.sociat ion's  agent  at  the  time  the  exclusive  sale  contract  was  renewed  knew  of  the 
unlawful  combination  it  should  not  recover,  but  if  the  agent  had  no  authority  to  make  such  a  contract, 
and  if  the  association,  with  a  knowledge  of  the  facts,  did  not  ratify  the  act  of  its  agent  it  should  recover. 
(.\ct  of  1889  somewhat  similar  to  that  of  1903  above  cited.) 


150  REPOKT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

Massachusetts  proliibits  every  contract,  agreement,  etc.,  in  viola- 
tion of  the  common  law  in  that  thereby  a  monopoly  in  the  manufac- 
ture, production,  or  sale  of  any  article  or  commodity  in  common  use 
may  be  created  or  maintained.^ 

In  California  the  legislature  declares  that  the  purpose  of  the  anti- 
discrimination law  is  "to  safeguard  the  public  against  the  creation 
or  perpetuation  of  monopolies  and  to  foster  and  encourage  compe- 
tition, by  prohibitmg  unfair  and  discriminatory  practices  by  which 
fair  and  honest  competition  is  destroyed  or  prevented."  ^ 

Section  3.  Restraint  of  trade. 

Constitutional  prohibitions. — Three  States  have  constitutional 
provisions  regarding  restraint  of  trade,  viz,  Louisiana,  Oklahoma,  and 
New  Mexico.  The  constitution  of  Louisiana  (art.  190,  adopted 
Nov.  22,  1913)  prohibits  all  combinations,  trusts,  or  conspiracies  in 
restraint  of  trade.  Tlie  constitution  of  Oklahoma  (Ai't.  V,  sec.  44) 
directs  the  legislature  to  define  an  unlawful  combination,  monopoly, 
trust,  act,  or  agreement  in  restraint  of  trade,  and  to  enact  laws  to 
punish  persons  engaged  in  any  such  combination,  etc.,  in  restraint  of 
trade.  The  constitution  of  New  Mexico  (art.  4,  sec.  38)  directs  the 
legislature  to  enact  laws  to  prevent  combinations  in  restraint  of 
trade. 

Statutory  prohibitions. — North  Dakota  proliibits  combinations 
of  capital,  skill,  or  acts,  by  two  oi  more  persons,  corporations,  etc.,  to 
create  or  carry  out  restrictions  in  trade.^  South  Dakota  has  a  similar 
prohibition,  except  that  the  words  "or  acts"  are  omitted.^  Cali- 
fornia^ and  Ohio  have  in  their  statutes  the  same  provisions  found  in 
the  North  Dakota  law,  with  the  addition  of  the  words  ''or  commerce," 
reading,  "restrictions  in  trade  or  commerce. ""^     Michigan  substitutes 

1  Massachusetts,  Laws  1908,  chap.  454,  sec.  1. 

Merchants'  Legal  Stamp  Co.  v.  Murphy  el  ah,  107  N.  E.,  968  ( Mass.,  191 5). —Plaint iS  was  engaged  in  the 
business  of  issuing  trading  stamps  to  merchants,  and  controlled  nearly  90  per  cent  of  the  busine.s.s  conducted 
in  this  form  by  merchants  of  Boston  and  vicinity.  PlaintifT  retained  title  to  stamp  books  and  stamps 
and  merchants  agreed  not  to  part  with  them  except  in  the  course  of  trade  and  to  return  books  with  stamps 
attached  wJien  presented  by  purchasers;  otherwise  forfeiting  all  rights  under  the  contract.  Plaintiff  also 
declined  to  sujiply  stamps  to  merdiants  imless  they  stipulated  not  to  use  stamps  issued  by  other  compa- 
nies or  individuals.  An  action  based  on  this  contract  was  dismi.ssed,  the  court  holding  that  the  direct 
and  intended  effect  of  the  methods  employed  being  to  restrain  or  pre\ent  the  pursuit  by  the  defendants  or 
of  others  of  a  similar  enterprise  in  a  lawful  manner,  the  plaintifi  is  w  ilhin  the  prohibition  of  section  1,  chap- 
ter 154,  Laws  of  1908.    (See  also  Merchants'  Legal  Stamp  Co.  v.  Scott,  107  N.  E.,  909.) 

2  California,  Laws  1913,  chap.  276,  see.  7.    See  also  local  price  discrimination  (p.  187). 

3  North  Dakota,  Laws  1907,  chap.  259,  sec.  2. 
*  South  Dakota,  Laws  1909,  chap.  224,  sec.  1. 

6  In  th("  laws  of  California  and  Colorado  it  Ls  provided  that  "no  agreement  or  a.ssoeiation  shall  be  deemed 
to  be  unlawful  or  within  the  provisions  of  this  act,  the  object  and  business  of  which  are  to  conduct  opera- 
tions at  a  reasonable  profit  or  to  market  at  a  reasonable  profit  those  products  wliich  can  not  otherwise 
be  so  marketed;  provided  further,  that  it  shall  not  be  deemed  to  te  unlawful,  or  within  the  provisions 
of  this  act,  for  persons,  firms,  or  corporations  engaged  in  the  business  of  .selling  or  manufacturing  com- 
modities of  a  similar  or  like  character  to  employ,  form,  organize  or  own  any  interest  in  any  association, 
firm  or  corporation  having  as  its  object  or  purpose  the  transportation,  marketing  or  delivering  of  such  com- 
modities." (California,  Laws  1907,  chap.  530,  sec.  1,  as  amended  by  Laws  1909,  chap.  362,  sec.  1;  Colo- 
rado, Laws  1913,  chap.  161,  sec.  1.) 

6 California,  Laws  1907,  chap.  530,  sec.  1;  Ohio,  G.  C,  sec.  6391. 


TRUST    LAWS   AND   UNFAIE    COMPETITION.  151 

the  word  "arts"  for  "acts"  and  adds  "or  commerce"  after  "restric- 
tions in  trade."  ^  Arizona,  Colorado/  and  Kansas  have  prohibitions 
simihxr  to  those  in  the  CaHforiiia  law,  but  adding  after  "restrictions  in 
trade  or  commerce,"  the  words,  "or  aids  to  commerce,  or  to  carry  out 
restrictions  in  the  full  and  free  pursuit  of  any  business  authorized  or 
permitted  by  the  laws  of  this  State."  ^ 

Texas  further  adds  the  words  "or  in  the  preparation  of  any  product 
for  market  or  transportation,"  readmg,  ''restrictions  in  trade  or 
commerce  or  aids  to  commerce  or  m  the  preparation  of  any  product 
for  market  or  transportation,  or  to  create  or  carry  out  restrictions  in 
the  free  pursuit  of  any  bushiess  authorized  or  permitted  by  the  laws 
of  this  State."  " 


1  Michigan,  P.  A.  1899,  No.  255,  sec.  1. 

2  See  note  5,  p.  150. 

3  Arizona,  Laws  1912,  chap.  73,  sec.  1;  Colorado,  Acts  1913,  chap.  161,  sec.  1;  Kansa.s,  Laws  1897,  chap. 
265,  sec.  1,  G.  S.,  sec.  5142. 

<  Texas,  Laws  1903,  Chap.  XdFV,  sec.  1. 

S.  S.  White  Dental  Mfg.  Co.  v.  Hertzberg,  SI  S.  W.,  355  (Texas  Court  of  Civ.  App.,  /S,99).— Plaintifl 
made  a  contract  with  defendant  by  which  the  latter  was  to  have  the  exclusive  agency  and  right  to  sell 
any  and  all  dental  goods  manufactured  or  kept  in  stock  by  plaintiff,  and  was  not  to  sell  any  other  line 
of  dental  goods.  Plaintiff  sued  on  account  for  balance  due  by  defendant.  A  judgment  for  defendant, 
on  the  ground  that  the  contract  was  in  restraint  of  trade  under  the  laws  of  Texas  was  afhrmed,  and  a  motion 
for  rehearing  overruled,  the  court  holding  that  although  the  sale  and  delivery  to  defendant  was  an  interstate 
transaction,  it  was  nevertheless  subject  to  the  trust  laws  of  the  State. 

Fort  Worth  &  Denver  City  Ry.  Co.  v.  State,  99  Tex.,  34  (.'905).— Held,  that  a  contract  between  a  railway 
and  the  Pullman  Co.  for  the  exclusive  operation  of  the  sleeping  cars  of  the  latter  upon  trains  over  the  lines 
of  the  former  was  not  a  violation  of  section  1  of  the  antitrust  law  of  1903,  where  it  did  not  fix  the  cost  of 
transportation  on  such  cars,  leaving  same  to  be  fixed  and  changed  by  the  sleeping-car  company  with  the 
restriction  only  that  it  should  not  exceed  the  charges  for  such  services  on  competing  roads,  and  where 
there  was  no  pooling  or  combination  of  rates.  Such  contract  did  not  restrict  the  free  pursuit  of  a  business 
authorized  or  permitted  by  the  laws  of  the  State  as  the  railway  could  discharge  its  duties  to  the  public 
by  furnishing  its  own  coaches  or  contracting  with  another  to  furnish  them  and  could  make  such  contract 
e';clusive  because  no  other  corporation  had  a  right  to  demand  that  its  cars  be  attached  to  the  trains  of 
the  railway  company.  Such  exclusive  contract  did  not  constitute  a  monopoly  under  the  law  of  1903, 
as  it  neither  brought  the  direction  of  the  adairs  3f  the  two  corporations  under  one  management  or  control 
nor  did  one  acquire  thereby  the  shares,  etc.,  or  physical  properties  of  the  other. 

Forrest  Photographic  Co.  v.  Hutchinson  Grocery  Co.,  108  S.  W.,  768  (Texas  Court  of  Civil  Appeals,  1908).— 
The  Forrast  Photographic  Co.  contracted  to  furnish  the  Hutchinson  Grocery  Co.  with  trading  tickets, 
each  entitling  its  holder  to  an  art  calendar  at  the  photographic  company's  studio  when  countersigned  by 
the  grocery  company,  and  it  was  further  agreed  that  from  the  date  of  the  contract  the  photographic  company 
should  not,  without  the  consent  of  the  grocery  company,  or  until  the  disposal  of  the  tickets  furnished, 
sell  any  other  local  grocery  company  any  of  such  tickets.  The  ph;,tographic  company  su(d  to  recover 
money  due  under  terms  of  the  contract.  A  judgment  for  defendant  was  reversed  on  appeal  and  the  case 
remanded,  the  court  holding  that  such  a  contract  would  not  be  void  at  common  law  as  in  restraint  of  trade 
nor  was  it  within  the  act  of  1903  prohibiting  trusts,  monopolies,  and  conspiracies  in  restraint  of  trade, 
because  the  contract  was  essentially  one  of  services  to  the  grocery  company  rather  than  for  the  sale  of  an 
article  of  merchandise,  produce,  or  commodity. 

Gust  Feist  Co.  v.  Albertype  Co.,  109  S.  IF.,  1139  (Tex.,  1908).— The  Albertype  Co.  made  a  written  con- 
tract with  the  Gust  Feist  Co.  for  tho  manufacture  and  sale  of  albums  containing  views  of  the  city  of 
(ialvcston,  in  which  it  was  stipulated  that  the  latter  should  have  the  exclusive  control  and  resale  of  the 
albums.  Suit  was  brought  for  the  purchase  price  of  albums  sold  under  the  agreement.  On  appeal  a 
judgment  for  tho  plaintilT  was  reversed  and  the  action  dismissed,  the  court  holding  that  the  contract  was 
within  the  Antitrust  Law  of  1903  prohibiting  combinations  in  restraint  of  trade,  that  the  parties  were 
in  pari  delicto,  and  that  neither  could,  therefore,  invoke  the  aid  of  the  courts. 

Jersey-Creme  Co.  v.  McDaniel  Bros.  Bottling  Co.,  152  S.  W.,  1187  (Tex.,  1913).— \  contract  givmg  the 
bottling  company  the  exclusive  right  to  bottle  "  Jersey-Creme, "  a  drink,  in  certain  territory,  by  which 
said  company  agreed  to  use  appellant's  copyrighted  labels  and  bottles  and  to  buy  the  sirup  for  making 
such  a  drink  from  appellant,  was  a  conspiracy  in  restraint  of  trade  within  the  autilnist  law  of  1903  defining 
such  conspiracy  as  an  agreement  between  two  or  more  engaged  in  selling  or  buying  any  article  of  mer- 
chandise, produce,  or  commodity  to  refuse  to  buy  or  sell  to  any  other  person;  the  bottles  and  labels  being 
only  incidentals,  and  "Jersey-Creme"  being  a  "commodity"  or  "article  of  merchandise,"  and  since  it 
indirectly  conferred  upon  appellee  the  exclusive  right  to  jiurchase  and  resell  the  sirup. 


152  REPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

Montana  prolnbits  any  combination  or  contract  to  create  or  carry 
out  any  restriction  in  trade. ^ 

I^Iinnesota  prohibits  pools,  trust  agreements,  combinations,  or 
understandings  in  restraint  of  trade  within  the  State  or  between  the 
people  of  this  or  of  any  other  State  or  country.^ 

Alabama  prohibits  any  person  or  corporation,  domestic  or  foreign, 
from  restraining,  or  attempting  to  restram,  the  freedom  of  trade  or 
production.^ 

South  Carolina  prohibits  persons  or  corporations  engaged  in 
buying  or  selling  any  article  or  thmg  from  entermg  into  "  any  *  *  * 
agi-eement  *  *  *  or  understanding  to  control  or  limit  the  trade 
in  any  such  article  or  thing."  ^ 

In  addition  to  the  provisions  noted  al:)Ove,  Texas  also  prohibits  as 
conspiracies  in  restraint  of  trade — 

1 .  An  agreement  or  understanding  between  two  or  more  persons, 
corporations,  etc.,  engaged  in  buying  or  selling*  any  article  of  mer- 
chandise, produce,  or  commodity  to  refuse  to  buy  from,  or  sell  to,  any 
other  person,  corporation,  etc. 

2.  An  agreement  between  two  or  more  persons,  firms,  etc.,  to  boy- 
cott, or  threaten  to  refuse  to  buy  from,  or  sell  to,  any  person,  firm, 
etc.,  for  buying  from,  or  selling  to,  any  other  person,  fiiTn,  etc.'' 

Mississippi  prohibits  combinations,  contracts,  or  agreements,  ex- 
pressed or  implied,  in  restramt  of  trade. ^  The  same  section  also 
prohibits  any  corporation,  individual,  etc.,  from  restrainmg  or  at- 
temptmg  to  restrain  the  freedom  of  trade  or  production. 

Missouri  prohibits  any  pool,  trust,  agreement,  combination,  or 
understandmg  in  restraint  of  trade  in  the  importation,  transporta- 

1  Montana,  Laws  1900,  chap.  97,  sec.  1. 

2  Minnesota,  Stats.  \m,  sec.  8973. 

3  Alabama,  Code  1907,  sec.  7581. 

Doherty  &  Co.  v.  Rice  ct  al.,  1S6  Fed.,  201f  (1910). — Defendant,  Rice,  contracted  with  complainant, 
Doherty  &  Co.,  of  New  York,  to  sell  and  deliver  to  them  SfX)  out  of  1,000  outstanding  shares  of  the 
capital  stock  of  the  Citizens'  Light,  Heat  &  Power  Co.,  of  Montgomery,  Ala,  which  were  controlled  by  him. 
He  further  agreed  to  endeavor  to  secure  and  deliver  the  remaining  200  shares.  Doherty  &  Co.  also  owned  the 
majority  of  the  stock  and  controlled  the  operations  of  the  Montgomery  Light  &  Water  Power  Co.,  a  com- 
petitor of  the  first-mentioned  light  company.  On  suit  bemg  brought  for  specific  performance  of  the  con- 
tract, defendants  contended  that  it  was  contrary  to  public  policy  and  void,  as  tending  to  create  an 
unlawful  monopoly  and  stifle  competition,  and  was  therefore  forbidden  by  the  laws  of  Alabama.  Held, 
that  the  contract  was  not  void  under  the  State  constilution  or  the  Code  of  Alabama,  1907,  sections  3481, 
3640,  7579,  75S0,  and  7581  (affirmed  in  Circuit  Court  of  Appeals,  184  Fed.,  878  [1911]). 

*  South  Carolina,  Laws  1902,  No.  574,  sec.  6. 

f'  Texas,  Laws  190.3,  Chap.  XCIV,  sec.  3. 

6  Mississippi,  Code  1900,  sec.  .5002,  as  amended  Ity  Laws  1908,  chap.  119,  sec.  1. 

Grenada  Luwher  Co.  v.  Mississippi,  317  U.  S.,  433  (1910).— A  majority  of  the  retail  lumber  dealers  in 
Missi.ssippi  and  Louisiana  organized  an  association  and  pledged  themselves  to  buy  only  from  manufactm-ers 
and  wholesalers  who  did  not  sell  direct  to  consumers  in  communities  where  there  were  retail  lumber 
dealers  who  caixied  stock  commensm-ato  with  the  demands  of  theii'  communitias,  and  not  to  buy  from 
commission  merchants,  agents,  and  brokers,  who  sold  to  consumers  but  did  not  carry  stocks,  nor  from  a 
manufacturer  who  sold  to  such  commission  merchants,  etc.,  and  to  inform  each  other  of  any  sales  made  by 
manufacturers  or  wholesalers  who  sold  to  consumers.  In  a  proceeding  in  equity  under  section  5002  Missis- 
sippi Code,  this  was  hold  a  combination  in  restraint  of  trade  and  intended  to  hinder  competition  in  the  sale 
and  purchase  of  a  commodity.  The  association  was  dissolved  and  injunction  gi-anted  against  further 
operations.  The  decree  was  affirmed  by  the  State  .supremo  court.  On  appeal  to  the  Supreme  Court  of 
the  United  States,  it  was  held  that  the  statute  as  applied  in  this  case  was  constitutional,  not  being  in 
conflict  with  the  fourteenth  amendment  to  tho  Constitution  of  the  United  States. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  153 

tion,  manufacture,  purchase,  or  sale,  in  the  State,  of  any  product, 
commodity,  article,  or  thing  whatsoever.^ 

1  Missouri,  U.  S.,  chap.  9S,  sec.  1029S,  as  amended  in  1913. 

Heim  Brewing  Co.  v.  Belinder,  71  S.  W.,  691  {Mo.,  iflOS).— Plaintiff  and  the  other  brewery  corporations 
of  Kansas  City,  Mo., agreed  not  to  sell  to  any  one  who  was  in  debt  for  beer  to  any  of  the  others.  Plaintiff 
sued  the  defendant  for  beer  sold  on  account.  Defendant  urged  that  the  agreement  was  in  violation  of  the 
Antitrust  Law.  A  judgment  for  plaintiff  was  reversed  on  appeal,  the  court  holding  that  the  agreement 
was  in  conflict  with  the  Missouri  statute  relating  to  pools  and  trusts. 

Finch  et  al.,  Trustees,  Appellants,  v.  Schneider  Granite  Co.,  187  Mo., 244  {1905). — Five  concerns  manu- 
facturing practically  all  the  crushed  granite  sold  in  St.  Louis  for  concrete  sidewalk  uses,  organized  a  cor- 
poration, with  a  nominal  capital  and  with  their  oflicers  as  sole  stockholders,  to  purchase  and  sell  crushed 
granite  at  a  time  when  there  was  an  unusual  demand.  The  five  concerns  entered  into  separate  agree- 
ments with  this  corporation  to  sell  to  it  at  a  stipulated  price  all  their  product  with  a  fixed  penalty  per 
ton  for  any  sold  to  outsiders.  Thereafter  all  sales  were  made  to  the  public  in  the  name  of  the  nominal 
company  which  kept  a  record  of  sales,  received  the  money ,  and  distributed  the  profit.s.  The  price  of  crushed 
granite  was  Increased  80  cents  per  ton  when  these  agreements  went  into  efl'ect  and  maintained  until  one 
of  the  parties  refused  to  be  bound  longer,  when  the  price  fell  to  the  old  level.  On  suit  being  brought  to 
recover  the  penalty  from  a  company  which  violated  the  agreement,  it  was  held  that  the  agreements  were 
void,  being  nece.ssary  links  in  a  combination  in  restraint  of  trade,  which  was  illegal  under  the  statutes  of 
1889  and  1891;  and  that  a  corporation,  ostensibly  organized  for  a  legal  purpose,  may  be  attacked  collaterally 
to  show  that  it  is  used  to  cover  unlawful  conspiracy. 

State  V.  Kansas  City  Live  Stock  Exchange  et  al.  and  Traders'  Live  Stock  Exchange  et  al.,  109  S.  W.,  675  {  Mo., 
190S). — Defendants  were  voluntary  associations,  the  members  of  which  were  engaged  in  and  practically 
controlled  the  live-stock  trade  at  Kansas  City,  Mo.  The  members  of  the  Kan.sas  City  E.xchange  were 
chiefly  commission  merchants,  while  those  of  the  Traders'  Exchange  were  buyers  and  speculators.  The 
rules  of  the  Traders'  Exchange  provided  in  effect  that  no  one  should  deal  in  live  stock  in  the  Kansas  City 
market  unless  a  member  of  said  exchange.  It  was  alleged  that  in  conformity  with  said  rules  the  members 
of  the  Traders'  Exchange  refused  to  deal  with  persons  or  corporations  not  members,  and  by  boycotts  and 
threats  of  boycotts  so  intimidated  members  of  the  Kansas  City  Live  Stock  Exchange  that  they  would 
not  deal  with  those  not  members  of  the  Traders'  Exchange.  Violations  of  sections  8978  and  8979,  Revised 
Statutes,  1899,  and  the  common  law  were  charged  and  an  injunction  to  restrain  such  practices  prayed  for. 
The  lower  court  sustained  a  demurrer  on  the  part  of  defendants.  On  appeal  the  State  supreme  court 
affirmed  the  judgment  as  to  the  Kansas  City  Exchange,  but  overruled  it  as  to  the  Traders'  Exchange. 
The  court  expressed  the  opmion  that  the  conditions  complained  of  would  be  corrected  if  an  injunction 
issued  against  the  members  of  the  Traders'  Exchange  onlj',  since  the  refusal  of  the  members  of  the  Kansas 
City  Exchange  to  trade  with  others  than  members  of  the  Traders'  Exchange  was  due  to  fear  of  boycott 
by  members  of  the  latter. 

State  V.  Standard  Oil  Co.  et  al.,  116  S.  11'.,  902  {Mo.,  1909).— The  respondents,  the  Standard  Oil  Co.  of 
Indiana,  Waters-Pierce  Oil  Co.,  and  Republic  Oil  Co.,  which  companies  controlled  more  than  85  per  cent  of 
tlie  oil  business  of  Missouri,  acquired  a  knowledge  of  all  sales  by  independent  oil  dealers  through  a  system 
of  espionage.  They  then  limited  the  independents'  share  of  the  aggregate  business  of  the  State  to  10  or 
15  percent  by  offering  rebates  to  customers  of  the  independents  and  cutting  prices.  Prices  were  published 
by  the  Waters- Pierce  Co.  which  were  followed  by  all  the  respondents  and  also  the  independents  generally. 
Two  of  the  respondents,  the  Standard  Oil  Co.  of  Indiana  and  the  Waters-Pierce  Co.,  divided  the  State 
into  two  districts  and  agreed  not  to  sell  in  each  other's  territory.  The  Standard  Oil  Co.  of  Indiana  was 
both  a  dealer  and  a  manufacturer,  and  in  its  capacity  as  a  manufacturer  it  agreed  not  to  sell  to  any  dealer 
but  the  Waters-Pierce  Co.  in  said  Waters-Pierce  territory;  it  agreeing  in  rettirn  not  to  purchase  from  any 
other  refiner,  and  both  agreeing  not  to  sell  to  any  other  dealer  except  at  retail  prices.  The  Republic  Oil 
Co.  had  no  fixed  territory,  posed  as  an  independent  and  sold  anywhere.  It  was  used  largely  as  the  last  ru- 
ment  by  which  the  fight  was  waged  against  the  independents.  The  Republic  Oil  Co.  was  a  subsidiary 
of  the  Standard  Oil  Co.  of  New  Jersey,  and  was  organized  as  a  successor  to  the  largest  competitor  of  the 
other  respondents,  this  competitor  having  been  taken  over  by  the  New  Jersey  company.  The  New  Jersey 
company  also  owned  practically  all  the  stock  of  the  Standard  Oil  Co.  of  Indiana,  and  60  per  cent  of  the 
stock  of  the  Waters-Pierce  Co.  In  proceedings  on  information  in  the  nature  of  quo  warranto  it  was  held 
that  the  respondents  had  violated  the  State  statutes  and  a  judgment  of  ouster  was  entered  as  to  all  three 
corporations,  but  this  was  later  suspended  as  to  the  Waters-Pierce  Co.,  a  domestic  corporation,  upon  proof 
of  their  compliance  with  c-,>rtain  requirements  of  the  judgment. 

Pope-  Turnbo  v.  Bedford,  127  S.  W.,  426  (  Mo.,  St.  Louis  Court  of  Appeals,  1910).— The  parties  to  this  suit 
entered  into  a  contract  by  which  plaintiff  was  to  te;ich  defendant  her  method  of  treatment  of  the  scalp 
and  hair  and  the  use  of  certain  hair  remedies,  in  consideration  of  which  defendant  agreed  (1)  not  to  use 
any  hair  remedies  but  plaintiff's  in  connection  with  said  treatment,  (2)  not  to  mention  having  learned 
plaintiff's  method  of  treatment  except  in  connection  with  use  of  her  remedies,  (3)  if  defendant  taught  such 
method  to  any  other  party  it  was  only  to  be  after  obligating  said  part}*  to  a  similar  contract.  After  making 
this  contract,  defendant  used  some  of  her  own  remedies  instead  of  plaintiff's  in  connection  with  the  treat- 
ment and  advertised  both  verbally  and  in  the  press  as  a  pupil  of  plaintiff  after  she  had  ceased  to  use  plain- 
tiff's remedies.  It  developed  that  the  only  part  of  the  process  of  treatment  not  a  common  method  wasthe 
use  of  plaintiff's  remedies.  Held,  that  the  agreement  not  to  use  any  but  plaintiff's  remedies  was  in  restraint 
of  trade  and  fostered  monopoly,  and  that  it  was  unreasonable  at  common  law  and  in  contraventi(3n  of 


154  REPORT   or    THE    COMMISSIONER   OF    CORPORATIONS. 

Nebraska  and  Idaho  prohibit  restraint  of  trade  by  adopting  section 
1  of  the  Sherman  Antitrust  Law,  but  Umiting  its  application  to  com- 

the  statute.  (Sec.  8966,  Mo.  Ann.  St.,  1906,  p.  4152.)  An  injunction  was  granted,  however,  restraining 
the  defendant  from  advertising  herself  as  a  pupil  of  the  plaintiff  unless  she  used  the  plaintiff's  preparations 
and  also  from  mentioning  to  her  patients  the  fact  that  she  had  learned  the  plaintiff's  method  of  treatment. 

Stalcv.  Arkansas  Lumber  Co.  et  al.,  169  S.  W.,  145  (  Mo.,  1914).— This  was  a  proceeding  in  quo  warranto 
to  oust  the  defendants,  members  of  the  Yellow  Pine  Manufacturers'  Association,  from  doing  business  in 
the  State  of  Missouri.  The  court  found  that  the  association  fixed,  maintained,  and  advanced  prices  of 
yellow  pine,  mainly  by  the  issuing  of  market  reports  and  a  so-called  "price  current, "cuitailed  production 
by  agreementsand  concerted  movements,  and  that  it  was  in  alliance  with  the  Southwestern  Lumbermens' 
Retail  Association,  the  Lumber  Secretaries'  Bureau  of  Information,  and  the  National  Lumber  Manu- 
facturers' Association,  by  which  alliance  said  defendants  either  themselves  (1)  divided  territory  among 
retail  dealers,  (2)  agreed  not  to  sell  so-called  "poachers,"  farmers'  cooperative  yards,  and  consumers,  or 
(3)  agreed  to  sell  only  to  so-called  legitimate  retail  dealers,  who  were  members  of  or  under  the  protection 
of  the  said  Southwestern  Association,  or  consorted,  with  knowledge  of  the  fact,  with  those  wlio  did  these 
things.  A  number  of  the  defendants  were  found  tohave  violated  the  State  antitrust  law,  fines  wcreimposed, 
and  a  conditional  ouster  decreed  dependent  upon  good  behavior,  the  payment  of  the  fines,  and  the  making 
of  adidavits  to  discontinue  all  practices  held  to  be  in  violation  of  the  antitrust  laws  of  the  State.  As  to  cer- 
tain defendants,  additional  fines  were  to  be  imposed  upon  any  failure  to  comply  with  any  of  these  condi- 
tions, or  upon  the  infraction  of  any  law  of  the  State.  The  final  judgment  was  in  part  as  follows:  "The 
writ  of  ouster  from  corporate  rights  and  franchises  will  be  suspended  as  to  all  of  the  respondents,  who 
within  thirty  days  from  this  date  shall  have  paid  to  the  clerk  of  this  court  one-half  of  the  fine  or  portion 
of  the  fine  it  is  required  to  pay,  and  who  within  sixty  days  from  date  shall  have  paid  the  remaining  one- 
half,  and  the  costs  of  this  proceeding,  and  who  shall  have,  at  the  end  of  such  sixty  days,  complied  with 
the  following  conditions:  (1)  That  they  have  paid  the  fine  and  costs  as  above  stated  and  (2)  that  such 
respondents  show  by  competent  evidence,  by  way  of  affidavits  from  its  managing  ofiicers  the  following 
things:  (a)  that  such  respondents  or  respondent  has  withdrawn  from  the  Yellow  Pine  Manufacturers' 
Association,  and  from  all  associations  of  a  like  character;  (b)  that  such  respondents  or  respondent  have 
no  officer, agent,  director,  stockholder,  or  employee  which  is  a  member  of  such  Yellow  Pine  Manufacturers' 
Association,  or  one  of  similar  import  or  character;  (c)  that  such  respondents  or  respondent  will  not  in  the 
future  become  a  member  of  such  association  or  any  similar  association,  or  permit  any  ofilcer,  agent, 
director,  stockholder,  or  employee  to  become  a  member  thereof;  (d)  that  such  respondents  cr  respondent 
will  in  the  future  sell  lumber  in  Missouri  iu  open  and  honest  competition  with  all  other  wholesale  dealers 
in  lumber;  (e)  that  such  respondents  or  respondent  will  not  discrimmate  between  buyers  of  lumber  and 
other  material  sold  by  them,  and  will  treat  all  purchasers  alike,  and  such  respondents  will  not  agree  in 
any  way  to  discriminate  against  purchasers;  (f)  that  such  respondents  or  respondent  have  and  will  dis- 
continue the  practice  of  blacklisting  any  retail  dealer  who  selis  or  undertakes  to  sell  within  the  territory 
of  another  retail  dealer,  and  to  this  end  will  discontinue  the  publication  of  any  credit  report  based  upon 
the  idea  that  any  retail  dealer  is  one  who  has  been  selling  in  the  territory  of  another  retail  dealer;  (g)  that 
such  respondents  or  respondent  will  give  no  recognition  to  the  demands  of  any  organization  of  retail 
dealers,  but  will  treat  all  retail  dealers  alike  in  making  sales  to  them,  whether  such  purchaser  is  a  member 
of  a  retail  dealers'  association  or  not;  (h)  that  such  respondents  cr  respondent  will  not  be  a  party  to  any 
agreement  or  understanding  to  control  the  amount  of  the  production  of  lumber;  (i)  that  if  any  retail 
dealers'  association  or  one  or  more  retail  dealers  undertake,  with  respondents  or  any  respondent,  to 
inaugurate  any  system  or  systems  by  which  honest  and  real  competition  in  the  sale  of  lumber,  by  retail 
or  wholesale,  in  the  State,  is  or  will  be  restricted,  such  respondent  or  respondents  will  promptly  lay  all 
such  facts  before  the  Attorney  General  of  this  State;  (j)  that  such  respondents  or  respondent  will  not  be 
a  party  to  the  publication  or  circulation  of  any  price  current,  except  such  a  price  current  as  gives  actual 
and  bona  fide  sales  of  such  products  and  the  prices  paid  therefor,  for  the  honest  information  of  dealers 
therein;  (k)  that  such  respondents  or  respondent  are  not  now  engaged  in,  and  will  not  in  the  future  engage 
in  any  practice  or  practices  which  violate  either  the  letter  or  spirit  of  the  antitrust  laws  of  this  State." 

International  Harvester  Co.  of  America  v.  State  of  Missouri,  2S7  Mo.,  369;  2^4  U.  S.,  199  (1914).— -In  a  pro- 
ceeding in  the  nature  of  ([uo  warranto,  in  the  State  supreme  court,  charging  a  violation  of  the  statutes 
of  isOOand  1909  (sec.  8966,  II.  S.,  1899,  andsec.  10301,  R.  S.,  1909),  it  was  alleged  that  in  1902  and  1903  the  prin- 
cipal companies  engaged  in  the  harvesting  machinery  business  in  the  United  States  were  merged  into 
one  company,  the  International  Hai-vestcr  Co.  (of  New  Jersey).  This  company  limited  its  operations 
to  manufacturing  and  made  the  Milwaukee  Harvester  Co.,  one  of  the  principal  companies  merged,  its 
selling  agent  under  the  name  of  the  International  Harvester  Co.  of  America.  It  was  alleged  further  that 
the  combination  was  designed  to  lessen,  and  tended  to  lessen,  free  competition  in  the  manufacture  and 
sale  of  agricultural  implements  and  that  the  soiling  company  compelled  the  retail  dealers  of  Missouri  who 
desired  to  act  as  agents  to  refrain  from  selling  implements  of  competitors,  and  thus  secured  from  85  to  90 
percent  of  the  basiness.  It  was  held  that  the  International  Harvester  Co.  (of  New  Jersey)  was  an  unlaw- 
ful comliination  to  suppress  competition  and  regulate  prices  within  the  meaning  of  the  statute,  but  as  it 
was  not  a  party  to  the  suit,  the  selling  company  only  could  be  reached,  and  its  license  to  do  Ijusiness  in  the 
State  was  revoked  and  a  fine  i  mposod.  On  writ  of  error  from  the  United  States  Supreme  Court  the  Missouri 
antitrust  statutes  were  held  to  be  constitutional  and  judgment  affirmed,  the  court  declaring  that  it  was 
not  a  violation  of  the  fourteenth  amendment  to  the  Federal  Constitution  for  a  State  to  forbid  combina- 
tions of  competing  dealers,  including  those  formed  with  good  intentions  and  having  some  good  effects 
or  to  pass  legislation  embracing  vendors  of  commodities  and  not  vendors  of  labor  and  services,  such  a 
classification  not  being  unreasonable  and  arbitrary. 


TKUST   LAWS   AND   UNFAIR   COMPETITION.  155 

merce  within  the  State;  and  the  substance  of  this  section,  limiting 
it  to  intrastate  commerce,  has  been  adopted  in  Maine  and  Wisconsin.^ 

The  Louisiana  statutes  contain  substantially  the  same  provision 
regarding  restraint  of  trade  as  is  found  in  the  laws  of  Nebraska  and 
Idaho,  the  only  difference  being  that  the  words  "or  otherwise"  are 
omitted.^  The  laws  of  this  State  also  prohibit  any  combination, 
agreement,  or  arrangement  to  create  or  carry  out  restrictions  of 
trade.  ^ 

Oklahoma  prohibits  "every  act,  agreement,  contract  or  combina- 
tion in  the  form  of  trust,  or  otherwise,  or  conspiracy  in  restraint  of 
trade  or  commerce  within  this  State  wliich  is  against  public  policy."  * 

Porto  Rico  prohibits  "every  contract,  combination  in  the  form  of 
trust  or  otherwise,  or  conspiracy  in  restraint  of  trade,  commerce, 
business  transactions,  and  lawful  and  free  competition  in  a  town,  or 
among  the  several  towns  of  Porto  Rico."  ^ 

Indiana  prohi])its  "every  scheme,  design,  understanding,  contract, 
combination  in  the  form  of  tiust  or  otherwise,  or  conspiracy  in 
restraint  of  trade  or  commerce,  or  to  create  or  carry  out  restrictions 
in  trade  or  commerce."" 

New  Mexico  prohibits  every  contract  or  coml^ination  having  for 
its  object,  or  which  shall  operate,  to  restrict  trade  or  commerce.'' 

New  York  prohibits  any  corporation  from  combining  with  any 
other  corporation  or  person  for  the  unlawful  restraint  of  trade.* 

1  Nebraska,  Laws  190"),  ohap.  1(52,  see.  1;  Idaho,  Laws  1911,  chap.  215,  see.  1;  Maine,  Laws  1913,  chap. 
106,  sec.  1;  AVisconsin,  Slats.  1913,  sec.  1747e. 

State  v.  Adams  Lumber  Co.,  81  Ncbr.,  35?  (/90S).— Defendants  were  members  of  the  Nebraska  I-iimber 
Dealers'  Association,  the  articles  of  which  provided,  among  other  things,  tliat  members  "may"  notifj-  the 
secretary  of  any  sale  by  a  manufacturer  or  wholesaler  to  any  consumer  within  the  territory  of  such  member. 
On  being  so  notified,  it  was  the  practice  of  the  secretary  to  write  such  wholesaler,  etc.,  for  an  explanation 
of  the  sale.  The  association,  its  olRcers  and  directors  were  enjoined  from  this  practice  or  any  others  wliich 
tend  to  i)rovent  or  preclude  full  and  free  competition  in  the  sale  of  lumber  and  building  materials  in  the 
State  or  to  stifle  competition  or  restrain  commerce  in  such  articles. 

Bratt  V.  Swift  et  al.,  99  Wis.,  570  (/S9S).— Action  for  damages,  founded  on  chapter  219,  Laws  1893  (similar 
to  Stats.  1913,  sec.  1747e).  Plaintiff  alleged  that  he  was  a  retail  butcher  at  Superior;  that  on  account  of  the 
interference  of  defendants  he  was  forced  to  sell  out  and  abandon  his  business;  that  defendants  had  entered 
into  an  agreement  and  conspiracy  in  restraint  of  trade,  to  menace,  hinder,  and  control  plaintiff's  business, 
which  combination  was  called  the  "Ketail  Butchers'  Association,"  .sonic  of  llie  purposes  of  wliich  were  to 
monopolize  the  sale  of  meats  in  Superior  at  the  expense  of  the  people  and  to  control  and  manage  that  trade 
solely  in  their  own  interests  and  in  the  interests  of  others  united  with  them,  and  to  coerce  plaintiff  into 
joining  said  combination  or  to  drive  him  from  business  in  case  he  refused  to  join;  and  to  that  end  cer- 
tain defendants  reported  that  he  had  been  guilty  of  immercantile  conduct,  promoting  excessive  com- 
petition, house-to-house  peddling,  selling  adulterated  goods,  etc.,  in  consequence  of  which  the  defendant 
packing  companies  refused  to  sell  to  plaintiff  meats  or  other  goods  except  for  prices  far  above  those  at 
which  they  sold  to  other  defendants,  and  in  excess  of  the  market  price,  and  in  pursuance  of  said  scheme 
the  retail  butchers  refu.sed  to  sell  plaintiff  except  at  excessive  prices,  etc.,  inconsequence  of  which  plaintiff 
became  unable  to  purchase  meats  and  other  necessary  goods,  was  forced  to  sell  out  at  a  loss  and  was 
prevented  from  engaging  in  the  retail  butcher  business  and  from  earning  a  living.  There  wiis  evidence 
tending  to  sustain  the  allegations  and  the  jury  found  for  plaintiff.  The  case  was  reversed  on  a  question 
of  damages. 

2  Louisiana,  Laws  1S90,  act  86,  sees.  1,  2. 

3  Louisiana,  Laws  1892,  act  90,  sec.  1. 
*  Oklahoma,  Laws  1908,  p.  750,  sec.  1. 

'>  Revised  Statutes  antl  Codes  of  Porto  Rico,  1911,  sec.  2373. 
0  Indiana,  Laws  1907,  chap.  243,  .sec.  1. 
'  New  Mexico,  C.  L.  1897,  sec.  1292. 
8  New  York,  S.  C.  L.,  sec.  14. 


156  EEPORT   OF    THE   COMMISSIONEE    OF   COEPORATIONS. 

North  Carolina  prohibits  (1)  every  contract,  combination  in  the 
form  of  trust  or  otherwdse,  or  conspiracy  in  restraint  of  trade  or 
commerce,  in  the  State;  and  (2)  every  such  contract,  etc.,  in  re- 
straint of  trade  or  commerce  which  violates  the  principles  of  the 
common  law.  Every  such  contract  is  declared  to  be  unreasonable 
unless  the  parties  can  show  affirmatively  that  it  does  not  injure  the 
business  of  any  competitors  or  prevent  any  one  from  becoming  a 
competitor  because  his  or  its  business  will  be  unfairly  injured  by 
reason  of  any  such  contract,  etc.^ 

New  Jersey  proliibits  combinations  or  agreements  to  create  or 
carry  out  restrictions  in  trade  (or  to  acquire  monopoly)  either  in 
intrastate  or  interstate  business  or  commerce  ;2  and  prohibits  any 
corporation  from  purchasing  the  stock  of  any  other  corporation,  or 
any  property,  for  the  purpose  of  restraining  trade  or  commerce.^ 
This  State  prohibits  also  the  organization  of  any  domestic  corporation 
to  be  used  in  restraint  of  trade  (or  in  creating  a  monopoly),  or  any 
officer,  director,  manager,  or  employee  of  any  corporation  organized 
under  its  laws  from  using  such  corporation,  directly  or  indirectly,  to 
restrain  trade  (or  acquire  a  monopoty),  when  such  corporation 
engages  in  interstate  or  intrastate  commerce.* 

Massachusetts  requires  the  attorney  general  to  take  cognizance  of 
all  violations  of  law  or  orders  of  courts,  tribunals,  or  commissions 
affecting  the  general  welfare  of  the  people,  including  combinations, 
agreements,  and  unlawful  practices  in  restraint  of  trade. ^ 

A  Vermont  statute  provides  that  no  corporation  shall  be  organized 
with  a  capital  stock  of  over  $10,000,000,  nor  shall  the  capital  stock  of 
any  corporation  be  increased  to  over  this  amount,  until  there  has  been 
a  determination  by  a  judge  of  the  supreme  court  that  such  organiza- 
tion, or  increase  in  capital  stock,  is  not  liable  to  result  in  restraming 
competition  in  trade.^ 

A  Kansas  statute  proliibits  and  declares  to  be  in  restraint  of  trade 

(a)  any  agreement,  expressed  or  implied,  or  combination  by  which 
any  shipper  of  seeds,  grain,  hay,  or  live  stock  is  defrauded  out  of  any 
portion  of  the  net  weight  of  any  consignment  of  grain,  seeds,  etc. ; ' 

(b)  any  agreement,  expressed  or  implied,  made  by  any  person  as  agent 
for  any  person,  firm,  or  corporation,  stipulating  that  grain,  seeds,  or 
hay  shall  not  be  sliipped  by  the  producer  or  local  buyer  unless  ac- 
companied  by  warehouse  receipts,  or  that   the  same  shall  in  any 

>  North  Carolina,  Laws  1913,  chap.  41,  sees.  1,  2,  3. 

2  New  Jersey,  Laws  1913,  chap.  13,  sec.  1. 

3  New  Jersey,  Laws  1913,  chap.  15,  sec.  1.    See  also  New  Jersey,  Laws  1913,  chap.  18,  as  amended  by 
Laws  1915,  chap.  114,  noted  under  "Holding  companies,"  p.  200. 

^  New  Jersey,  Laws  1913,  chap.  16. 

=  Massachusetts,  Laws  1913,  chap.  709,  sec.  1. 

«  V'ermont,  Pub.  Stats.,  1906,  sec.  4311,  as  amended  by  Laws  1910,  No.  143,  sec.  4. 

'  Kansas,  Laws  1899,  chap.  293,  sec.  1;  G.  S.,  see.  5177. 


TRUST   LAWS  AND  Ui^^FAIR  COMPETITION.  157 

manner  be  under  the  control  of  any  warehouseman  or  agent  as  a 
condition  precedent  to  the  marketing  of  such  grain,  etc> 

The  Georgia  Code  declares  "  contracts  in  general  in  restraint  of 
trade"  to  be  unenforceable.^ 

A  Michigan  statute  declares  all  agreements  and  contracts  by  which 
any  person,  corporation,  etc.,  agrees  not  to  engage  in  any  avocation, 
employment,  pursuit,  trade,  profession,  or  business,  whether  reason- 
able or  unreasonable,  partial  or  general,  limited  or  unlimited,  to  be 
against  public  policy  and  illegal  and  void.  It  is  provided,  however, 
that  the  statute  shall  not  apply  to  contracts  where  the  only  object 
of  the  restraint  is  to  protect  the  vendee  or  transferee  of  a  trade,  pro- 
fession, business,  etc.,  or  the  good  will  thereof,  sold  and  transferred 
for  a  valuable  consideration,  in  good  faith,  and  without  any  intent 
to  create  or  maintain  a  monopoly.^ 

California,  Oklahoma,  and  South  Dakota  declare  void  contracts 
restraining  anyone  from  exercising  a  lawful  profession,  trade,  or 
business,  except  that  one  who  sells  the  good  will  of  a  business  may 
agree  with  the  buyer  not  to  carry  on  a  similar  business  within  a 
specified  county,  city,  or  a  part  thereof,  so  long  as  the  buyer,  or  any 
person  deriving  title  to  the  good  will  from  him  carries  on  a  like  busi- 
ness therein,  and  partners  may,  before  dissolution,  agree  that  none 
of  them  will  carry  on  a  similar  business  within  the  same  city  or  town 
where  the  partnership  business  has  been  transacted,  or  within  a  speci- 
fied part  thereof.^ 

1  Kansas,  Laws  1899,  chap.  293,  sec.  3;  G.  S.,  sec.  5179. 

2  Georgia,  Code  1911,  sec.  4253. 

3  Michigan,  P.  A.,  1905,  No.  329,  sees.  1,  6. 

Grand  Union  Tea  Co.  v.  Lcwilsky,  116  N.  W.,  1090  {Micli.,  ;50S).— Defendant  was  emploj-ed  by  com- 
plainants to  solicit  orders  for  and  deliver  its  goods  over  a  certain  route  in  Detroit,  Mich.,  agreeing  that  if  he 
left  complainant's  employ  he  would  not  engage  in  similar  work  in  the  city  of  Detroit  or  in  any  other  place 
where  he  might  have  worked  during  his  employment  with  the  plaintiff,  for  one  year  after  leaving  its  service. 
After  leaving  complainant's  ser\iee,  defendant  entered  the  employ  of  a  rival  concern,  whereupon  com- 
plainants prayed  an  injunction.  Defendant  demurred,  contending  among  other  things,  that  the  above 
agreement  was  against  public  policy,  void,  and  illegal.  A  judgment  sustaining  the  demurrer  was  affirmed, 
the  court  holding  that  such  contracts  were  invalid  under  the  provision  of  act  No.  329,  public  acts  of  1905, 
and  that  the  statute  was  not  in  conflict  with  the  fourteenth  amendment  of  the  Federal  Constitution. 

i  California  Civ.  Code,  sees.  1673  to  1675;  Revised  Laws,  Oklahoma,  sees.  978  to  980;  South  Dakota  Civ. 
Code,  sees.  1277  to  1279. 

Vulcan  Powder  Co.  v.  Hercules  Powder  Co.  el  al.,  96  Cat.,  510  (^S9-^).— Several  California  powder  com- 
panies entered  into  a  contract,  for  a  term  of  three  years,  which  provided  that  neither  of  the  parties  thereto 
should  ship  dynamite  to  any  part  of  the  United  States  east  of  a  certain  line  and  regulated  the  manufacture 
and  sale  of  it  in  the  territory  west  of  this  line  as  follows:  (1)  Each  parly  was  to  sell  only  a  certain  per  cent 
of  the  aggregate  quantity  sold  by  all;  (2)  where  any  party  e.xceeded  this  proportion  he  was  to  pay  to  the 
other  parties  the  profits  on  the  excess;  (3)  a  standing  committee  was  given  power  to  fix  price.s,  regulate 
the  manufacturing  cost,  impose  fines  for  violations  of  the  contract,  etc.  The  contract  was  to  terminate 
at  any  time,  if  any  outside  party  should  begin  to  manufacture  and  sell  dynamite  in  competition  with  the 
contracting  parties.    Held,  to  be  in  violation  of  section  1673  of  the  Civil  Code  and  therefore  void. 

Merchants'  Ad-Sign  Co.  v.  Sterling,  67  Pac,  468  (Cat,  ;S99).— Plaintiff  corporation  was  engaged  in  the 
business  of  bill  posting  and  other  methods  of  advertising  in  Los  Angeles.  Defendant,  who  o^\Tied  a  num- 
ber of  shares  of  stock  in  the  plaintiff  corporation,  sold  his  stock  to  one  WiLshire,  together  with  all  his  interest 
and  good  will  in  the  corporation  and  agreed  that  he  would  not  conduct,  or  assist  in  conducting,  any  bill- 
posting  business  in  Los  Angeles  so  long  as  Wilshire,  or  any  person  deriving  title  to  the  good  wUl  from  him, 
shoidd  carry  on  a  like  business  there.  Wilshire  then  transferred  the  agreement  to  plainlilT.  Some  time 
after  making  the  agreement  plaintilf  alleged  that  defendant  helped  to  form  the  1-os  Angeles  Bill  Posting 
Co.,  became  a  stockholder  therein,  and  conducted  its  business.    In  a  suit  to  enjoin  defendant  from  conduct- 


158  REPORT   OF   THE   COMMISSIONER  OF   CORPORATIONS. 

A  California  statute  provides  that  no  person,  corporation,  etc., 
appropriating  water  for  power  purposes,  shall  enter  into  any  agree- 
ment, combination,  or  trust  in  restraint  of  trade  contrary  to  law, 
and  if  any  works  owned  or  operated  by  any  licensee  under  this  act 
shall  be  owned,  leased,  trusteed,  possessed,  or  controlled  by  any 
device,  permanently,  temporarily,  directly  or  indirectly,  tacitly,  or 
in  any  manner  whatsoever,  so  that  it  or  they  form  a  part  of  or  in 
any  way  effect  any  combination,  or  if  it  or  they  are  in  any  wise 
controlled  by  any  combination  or  conspiracy  to  limit  the  output  of 
electricity  or  electrical  or  other  power,  or  to  increase  or  prevent  the 
lowering  of  the  price  at  which  such  electricity  or  power  is  sold,  rented, 
or  distributed,  or  in  restraint  of  interstate  or  foreign  trade  in  the 
generation,  sale,  or  distribution  of  electricity  or  power,  all  rights  to 
the  appropriation  of  water  shall  be  forfeited.* 

In  Wisconsin  if  any  improvement  maintained  under  any  franchise 
granted  pursuant  to  chapter  755,  Laws  of  1913,  shall  be  o^vned, 
leased,  trusteed,  possessed,  or  controlled  by  any  device  permanently, 
temporarily,  directly,  indirectly,  tacitly,  or  in  any  manner  whatso- 
ever, so  that  the  same  form  part  of,  or  in  any  way  effect  any  com- 
bination, or  shall  be  in  any  wise  controlled  by  an  unlawful  trust, 
or  form  the  subject  of  any  contract  or  conspiracy  to  limit  the  output 

ing  the  business,  it  was  held  that  a  vendor  of  stock  in  a  trading  corporation  has  no  vendible  interest  in  the 
good  will  of  the  business  and  can  not  transfer  such  good  will;  and  that  the  agreement  was  void,  being  in 
violation  of  the  Civil  Code,  sections  1673,  1674,  and  1675. 

Hulcn  V.  Earcl,  73  Pac,  927  (Okla.,  1903). — Plaintiff  and  defendant,  who  were  physicians,  practicing  at 
Pond  Creek,  as  copartners,  entered  into  a  written  contract  to  dissolve  the  partnership,  plaintiff  purchasing 
the  property  of  the  partnership,  and  defendant  agreeing  not  to  practice  medicine  in  the  viciaity  of  Pond 
Creek.  Held,  that  the  contract  was  invalid,  and  in  violation  of  sections  819, 820,  and  821  of  Wilson's  Revised 
Statutes  (now  sees.  978  to  980,  Revised  Laws  of  Oklahoma). 

Prescott  V.  Bidwdl,  99  N.  W.,  93  (S.  Dale,  1904).— VTescott  &  Bidwell  were  engaged  in  the  land,  loan, 
abstract,  and  insurance  business  in  Mitchell,  S.  Dak.  They  dissolved  partnership  July  23,  1900,  Bidwell 
buying  the  entire  interest  in  the  business,  together  with  the  good  will  and  clientele.  August  1,  1900,  they 
made  another  agreement  by  which  plaintiff  bought  the  abstract  books  of  the  records  of  Davison  County 
and  other  matter  from  the  defendant  for  a  certain  sum,  and  it  was  further  agreed  that  plaint  iff  should  give 
defendant  the  use  of  the  books  and  keep  them  in  defendant's  office;  that  defendant  should  not  compile 
abstracts  or  engage  in  the  abstract  business  in  Davison  County;  and  that  plaintiff  should  not  engage  in 
the  land,  loan,  or  insurance  business  in  said  coimty.  Soon  after  defendant  engaged  in  the  abstract  business 
in  violation  of  his  agreement  and  suit  was  brought  by  plaint  iff  to  recover  damages.  A  judgment  for  plaintiff 
was  reversed,  the  court  holding  that,  as  the  parties  were  not  partners  at  the  time  of  the  agreement  of  August 
1,  and  as  the  good  will  had  been  sold  under  the  first  agreement,  the  restraint  on  defendant  from  engaging 
in  the  abstract  business  was  in  violation  of  Revised  Civil  Code,  sections  1277,  1278,  and  1279. 

Public  Opinion  Publishing  Co.  v.  Ransom,  US  N.  11'.,  SSS  (S.  Dak.,  ^fl/4).— Defendant  and  one  C.  held 
a  majority  of  the  stock  and  were  the  active  managers  of  a  corporation  carrying  on  a  publishing  and  printing 
business  in  Watertown,  Codington  County,  S.  Dak.  These  parties  with  the  authority  of  the  corporation 
sold  its  business,  good  will,  etc.,  to  one  B.,  and  as  part  of  the  consideration  personally  agreed  not  to  enter 
into  similar  business  in  Codington  County  for  a  period  of  10  years.  A  forfeit  of  So,000  as  liquidated  damages 
was  to  be  paid  if  the  agreement  was  violated.  At  the  time  of  the  sale  it  was  understood  that  the  plamtiU 
corporation  was  to  be  organized  to  take  over  the  business  piu-chased  by  B.  Defendant  having  violated  the 
agreement,  suit  was  brought  to  recover  the  stipulated  damages.  A  judgment  overruling  defendant's 
demurrer  was  sustained,  the  State  supreme  court  holding  that  the  agreement  complied  with  the 
statute  (S.  Dak.  Civil  Code,  sec.  1278)  so  far  as  territory  was  concerned,  and  that  though  the  time  was 
"  10  years,"  instead  of  "so  long  as  the  buyer,  or  any  person  deriving  title  to  the  good  will  from  him,  carries 
on  a  like  business  therein,"  the  statute  was  not  violated  and  the  condition  was  reasonable. 

1  California,  Laws  1911,  chap.  406,  sec.  28. 


TEUST   LAWS  AND  UNFAIR   COMPETITION.  159 

of  any  hydraulic  or  hydroelectric  power  derived  therefrom  or  in  any 
manner  or  in  any  degree  in  restraint  of  trade  in  the  generation,  sale,  or 
distribution  of  hydrauhc  or  hydroelectric  power  derived  therefrom, 
the  State  may  take  possession  as  in  cases  of  receivership,  and  the 
members  of  the  Railroad  Commission  shall  act  as  receivers  during 
such  period  as  the  court  may  determine.^ 

In  Washington,  corporations  not  formed  for  profit  are  prohibited 
from  entering  into  any  agreement  or  combination  in  restraint  of 
trade  or  which  shall  attempt  to  restrain  trade.^ 

Section  4.  Kestraint  of  competition. 

Restraint  of  competition  as  distinguished  from  restraint  of  trade  is 
prohibited  in  27  States. 

Constitutional  provisions. — The  constitution  of  Alabama  (sec. 
103)  requires,  in  substance,  that  the  legislature  provide  for  the  regu- 
lation, proliibition,  or  reasonable  restraint  of  common  carriers,  part- 
nerships, associations,  trusts,  monopolies,  and  combinations  of  cap- 
ital, that  they  may  not  prevent  reasonable  competition  in  any  caUing, 
trade,  or  business. 

The  constitution  of  Georgia  (Art.  IV,  sec.  2)  provides  that  the  gen- 
eral assembly  shall  have  no  power  to  authorize  any  corporation  to 
buy  shares  or  stock  in  any  other  corporation,  or  to  make  any  contract 
or  agreement  whatever  with  any  such  corporation,  wliich  may  have 
the  effect,  or  be  intended  to  have  the  effect,  to  defeat  or  lessen 
competition  in  their  respective  businesses. 

The  constitution  of  Wyoming  (Art.  X,  sec.  8)  prohibits  the  con- 
soUdation  or  combinatiim  of  corporations  to  prevent  competition. 

The  constitution  of  New  Hampshire  (art.  82)  declares  that  ''free 
and  fair  competition  in  the  trades  and  industries  is  an  inherent  and 
essential  right  of  the  people  and  should  be  protected  agamst  aU 
monopohes  and  conspiracies  which  tend  to  hinder  or  destroy  it," 
and  grants  to  the  general  court  the  power  to  enact  laws  ''to  prevent 
the  operations  within  the  State  of  all  persons  and  associations,  and  all 
trusts  and  corporations,  foreign  or  domestic,  and  the  officers  thereof, 
who  endeavor  to  raise  the  price  of  any  article  of  commerce  or  to 
destroy  free  and  fair  competition  in  the  trades  and  industries  through 
combmation,  conspiracy,  monopoly,  or  any  other  unfair  means." 

Statutory  prohibitions.^ — Kansas,  South  Carolina,  and  Teimes- 
see  prohibit  aU  arrangements  made  with  a  view  to  lessen,  or  which 
tend  to  lessen,  full  and  free  competition  in  the  importation  or  sale 
of  articles  imported  into  the  State,  or  in  the  manufacture  or  sale  of 
articles  of  domestic  growth  or  of  domestic  raw  material.     Kansas  in- 

>  Wisconsin  Stats.,  1913,  sec.  1590-72. 

2  Washington,  Remington  &  Ballinger's  Code  (1910),  sec.  3762. 


160  KEPOET  OF    THE   COMMISSIONER  OF   COKPOEATIONS. 

eludes  also  competition  in  transportation  of  articles  and  for  the  loan 
or  use  of  money.* 

Missouri  has  a  substantially  similar  provision,  including  competi- 
tion in  transportation,  in  fire  and  storm  insurance,  and  in  the  manu- 
facture or  sale  in  the  State  of  anything  bought  and  sold.^ 

CaUfornia  prohibits  combmations  of  capital,  skill,  or  acts  (1)  to 
prevent  competition  in  manufacturing,  making,  transportation,  sale 
or  purchase  of  merchandise,  produce,  or  any  commodity;  or  (2)  to 
make  any  agreement  by  which  they  shall  establish  or  settle  the  price 
of  any  article,  commodity,  or  transportation  between  them  or  them- 
selves and  others,  so  as  to  preclude  a  free  and  unrestricted  competi- 
tion among  themselves,  or  any  purchasers  or  consumers  in  the  sale  or 
transportation  of  any  such  article  or  commodity.^ 

Twelve  States  (Arizona,  Kansas,  Colorado,  Louisiana,  Michigan, 
Mississippi,  New  Jersey,  North  Dakota,  Ohio,  South  Dakota,  Nebraska, 
and  Texas)  have  substantially  similar  laws. 

Arizona  and  Kansas  extend  clause  1  so  as  to  include  competition 
in  "aids  to  commerce."  Clause  2  is  Ukewise  extended  to  mclude 
competition  in  "manufacture"  as  well  as  sale  or  transportation.^ 

1  Kansas,  Laws  1SS9,  chap.  257,  sec.  1;  South  Carolina,  CivilCode  (1912),  sec.  2437;  Tennessee,  Laws  1903, 
chap.  140,  see.  1. 

Waller  A.  Wood  Mowing  <&  Reaping  Co.  v.  Greenwood  Hdw.  Co.,  55  S.  E.,  973  (S.  C,  /SOe).— Plaintiff 
agreed  to  manufacture  and  sell  to  defendant  certain  farm  machinery  and  to  use  reasonable  diligence  to  pre- 
vent other  agents  from  making  sales  of  such  maehmery  in  Greenwood,  S.  C,  and  vicinity,  and  defendant 
agreed  to  canvass  the  ten-itory  thoroughly,  not  to  accept  the  agency  for  or  sell  any  other  machines  during 
the  term  of  the  contract,  and  to  sell  the  machines  for  use  only  in  said  territory.  Held,  that  the  contract 
was  not  mjurious  to  the  public  as  tending  to  create  a  monopoly,  nor  a  violation  of  the  South  Carolina  Civil 
Code,  1902, section  2845  (same  as  CivO  Code  (1912,;  sec.  2437),  since  competition  and  prices  were  not  affected 
to  an  unreasonable  extent.    It  was  further  held  that  the  contract  was  valid  under  the  common  law. 

Standard  OH  Co.  v.  State  (  Tenn.),  100  S.  W.,  705  (1007).— \n  agent  of  the  Standard  Oil  Co.  gave  a  mer- 
chant 100  gallons  of  oil  to  countermand  an  order  to  a  competitor.  Held  a  violation  of  act  of  1903.  Coniora- 
tion  not  indictable  under  statute,  but  may  be  counted  as  party  to  conspiracy  and  is  su))ject  to  loss  of  right 
to  do  business  in  the  State.    Judgment  against  coriwration  reversed  and  agent  fined. 

Standard  Oil  Co.  of  Kentucky  v.  Tennessee,  217  U.  S.,  413  (1910).— The  plaintiff  in  error  sought  to  reverse 
a  decree  of  the  Supreme  Court  of  Tennessee  forbiddmg  it  to  do  business,  other  than  interstate  commerce, 
in  that  State.  The  groimd  of  the  decree  was  that  the  corporation  and  certain  named  agents  en-tered  into  an 
agreement  for  the  purpose  and  with  the  effect  of  lessening  competition  in  the  sale  of  oil  at  Gallatin,  and  with 
the  further  result  of  advancing  the  price  of  oil  there.  The  transaction  complained  of  was  inducing  mer- 
chants in  Gallatin  to  revoke  orders  to  a  rival  company  for  oil  to  be  shipped  from  Pennsylvania,  by  an  agree- 
ment to  give  them  300  gallons  of  oil.    The  decree  was  affirmed. 

Baird  v.  Smith,  12S  Tenn.,  410  (/P^S).— Defendant  sold  to  plaintiff  the  stock  and  fixtures  of  a  store  in 
Jellico,  Tenn. ,  and  as  part  of  the  contract  of  sale  bound  him.self  to  pay  the  plaintiff  $1,000  should  he  (defend- 
ant) within  five  years  enter  any  competing  business  in  Jellico,  other  than  that  with  which  he  was  then 
connected.  On  suit  being  brought  for  breach  of  the  agreement,  the  defendant  urged  that  the  contract  was 
void  as  tending  to  lessen  full  and  free  competition  in  the  sale  of  merchandise,  within  the  meaning  of  chapter 
140,  Acts  of  1903.    Held,  that  the  contract  was  not  a  violation  of  this  act. 

2  Missouri,  R.  S.,  chap.  98,  sec.  10301,  as  amended  in  1913. 

3  California,  Laws  1907,  chap.  530,  sec.  1. 

*  Arizona,  Laws  1912,  chap.  73,  sec.  1;  Kansas,  Laws  1897,  chap.  2G5,  see.  1. 

State  V.  Smiley,  65  Kans.,240  (/50^).— Proceeding  under  Kansas  law  of  1897.  Defendant  made  an  agree- 
men  t  with  other  grain  dealers  whereby  the  amount  of  grain  to  be  bought  by  each  party  was  limited.  If  any 
party  purchased  more  than  his  allotted  share,  he  agreed  to  pay  to  the  others  3  cents  a  bushel  for  such  excess. 
The  contract  was  held  to  bo  in  restraint  of  competition,  and  therefore  illegal.  Held,  further,  that  the  law 
did  not  violate  fourteenth  amendment  of  United  States  Constitution.  On  appeal  the  constitutionality  of 
the  law  under  the  Federal  Constitution  was  affirmed  by  United  States  Supreme  Court  (196  U.  S.,  447). 

Stale  V.  International  Harvester  Co.  of  America,  106  Pac,  1053  {Kans.,  1910).— Xciion  by  attorney  general 
under  acts  of  1889, 1897,  and  1899,  to  forfeit  rights,  privileges,  etc.,  within  the  State.  It  was  found  that  the 
company  formerly  used  exclusive  contracts  but  had  ceased  making  them;  that  since  then  defendant  tried 
by  argument,  persuasion,  and  in  a  few  instances  by  threats,  to  prevent  dealers  from  handling  competitive 
goods.  Ordered  that  defendant  be  prohibited  from  using  exclusive  contracts  with  its  agents  or  dealers 
restraining  them  from  handling  competitive  goods,  and  from  making  any  unfair  discrimination  in  the 
sale  of  its  goods,  against  any  section  or  between  persons  for  the  purposes  of  destroying  competition. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  161 

Colorado,  like  Arizona,  has  extended  clauses  (1)  and  (2),  and  in 
addition  has  included  "ores"  in  clause  (1).^ 

The  Louisiana  law  is  substantially  similar  to  that  of  California, 
except  that  the  words  "capital,  skill,  or  acts"  are  omitted.^ 

The  law  of  Mississij^pi  varies  from  that  of  California  in  that  it  omits 
the  words  "capital,  skill  or  acts,"  and  clause  (1)  refers  to  "hindering 
competition"  in  the  "production,  importation,"  manufacture,  trans- 
portation, sale,  or  purchase  of  a  commodity.  Clause  (2)  is  omitted.^ 
Mississippi  provides  that  this  chapter  shall  be  liberally  construed  to 
the  end  that  trusts  and  combines  may  be  suppressed  and  the  benefits 
arising  from  competition  in  business  preserved  to  the  people  oi  this 
State." 

The  New  Jersey  act  resembles  the  California  law  in  that  clause  (1) 
is  substantially  the  same.     Clause  (2),  however,  is  as  follows: 

To  make  any  agreement  by  which  they  directly  or  indirectly  preclude  a  free  and 
unrestricted  competition  among  themselves,  or  any  purchasers  or  consumers,  in  the 
sale  or  transportation  of  any  article  or  commodity,  either  by  pooling,  withholding 
from  the  market  or  selling  at  a  fixed  price,  or  in  any  other  manner  by  which  the  price 
might  be  affected.^ 

North  Dakota  omits  clause  (1).  Clause  (2)  is  substantially  the 
same.® 

The  law  of  South  Dakota  varies  from  that  of  Cahfornia  in  that  it 
omits  the  word  "acts"  after  "sldll,"  and  omits  clause  (2).  It  pro- 
hibits, however,  persons,  corporations,  etc.,  from  fixing  prices, 
limiting  production,  or  regulating  the  transportation  of  any  produce 
or  commodity  so  as  to  "obstruct"  or  prevent  competition.^ 

In  Nebraska  clause  (1)  includes  "constructing"  as  well  as  manu- 
facturing, making,  etc.  In  Nebraska  and  Texas  clauses  (1)  and  (2) 
are  extended  to  include  the  business  of  "insurance,"  and  the  law 
of  Texas  also  includes  aids  to  commerce  and  the  preparation  of 
products  for  market  or  transportation.' 

The  laws  of  Alichigan  and  Ohio  are  substantially  the  same  as  in 
Cahfornia,  but  Micliigan  substitutes  the  word  "arts'"'  for  "acts. 


"8 


1  Colorado,  Laws  1913,  chap.  161,  sec.  1. 

«  Louisiana,  Laws  1892,  act  90,  sec.  1. 

3  Mississippi,  Code  1900,  sec.  5002,  as  amended  bj^  Laws  1908,  chap.  119,  sec.  1. 

<  Idem,  chap.  5021. 

6  New  Jersey,  Laws  1913,  chap.  13,  seel;  see  also,  New  Jersey,  Laws  1913,  chap.  18,  as  amended  by  Laws 
1915,  chap.  114,  noted  under  "Holding  companies,"  p.  200. 

6  North  Dakota,  Laws  1907,  chap.  259,  sec.  2. 

'  South  Dakota,  Laws  1909,  chap.  224,  sees.  1-5. 

8  Nebraska,  Stats.,  sec.  6281;  Texas,  Laws  1903,  Chap.  XCIV,  sec.  1. 

•  Ohio,  G.  C,  sec.  6391:  Michigan,  P.  A.  1899,  No.  255,  sec.  1. 

McCall  Co.  V.  O'  Neil,  17  Ohio  N.  P.  ( N.  S.),  17  ( Nov.  12,  J5J.^).— Plaintiff  entered  into  a  contract  with  the 
Davis  Pennell  Co.  under  which  the  latter  was  to  take  and  sell  for  a  certain  period  plamtifl's  patterns,  etc. 
It  was  further  agreed  that  the  Davis  Pennell  Co.  would  not  sell  the  patterns  at  retail  for  less  than  catalogue 
price.  The  rights  and  intere.sts  of  the  Davis  Pennell  Co.  in  the  contract  were  taken  over  by  the  defendant. 
On  breach  of  the  contract,  plaintiffs  sued  to  recover  certain  amounts  alleged  to  be  due.  Held,  that  plaintiff 
could  not  recover,  as  the  contract  was  void  under  section  6391  of  the  General  Code.  The  coiu-t  further 
expressed  the  opinion  that  the  rule  would  be  the  same  even  if  the  goods  so  sold  were  covered  by  patent. 

30035°— 16 11 


1G2  REPORT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

While  the  above  are  the  most  usual  types  of  statutes  directed  at 
restraint  of  competition,  other  laws  have  been  adopted  in  various 
States,  in  some  cases  in  addition  to  provisions  above  noted. 

^Uabama  prohibits  any  person  or  corporation  from  destroying  or 
attempting  to  destroy  competition  in  the  manufacture  or  sale  of  a 
commodity.^ 

Georgia  proliibits  insurance  companies  or  their  agents  from 
making  arrangements  to  j^revent  or  lessen  competition  in  the  business 
of  insurance  transacted  in  that  State. ^ 

Michigan  prohibits  foreign  insurance  companies  from  directly  or 
indirectly  entermg  into  any  contract,  undertaking,  etc.,  the  object 
or  effect  of  which  is  to  prevent  open  and  free  competition.^ 

Indiana  prohibits  contracts,  combinations,  etc.,  to  prevent  com- 
petition in  manufacturing,  mthin  or  without  the  State,*  and  con- 
tracts, combinations,  etc.,  to  stifle  or  restrict  free  competition  for 
the  letting  of  any  contract  for  private  or  public  work."^  This  State 
also  prohibits  all  arrangements,  etc.,  between  persons  or  corporations 
who  control  the  output  of  any  article  of  merchandise,  made  with  a 
view  to  lessen,  or  which  tend  to  lessen,  full  and  free  competition  in 
the  importation  or  sale  of  articles  imported  into  the  State.® 

Iowa  j)rohibits  any  person,  corporation,  etc.,  operating  any  busi- 
ness of  buying,  selhng,  handling,  consigning,  or  transporting  any 
commodity  or  article  of  commerce  from  forming,  maintaining,  or 
contributing  to  any  pool,  association,  etc.,  for  the  prevention  of  full 
and  free  competition  among  buyers,  sellers,  or  dealers  in  any  com- 
modity or  any  article  of  commerce.'' 

Massachusetts  prohibits  arrangements,  combinations,  etc.,  in  vio- 
lation of  the  common  law  in  that  thereby  competition  in  that  State 
in  the  supply  or  price  of  any  article  or  commodity  in  common  use  is 
or  may  be  restrained  or  prevented.* 

Michigan  prohibits  contracts,  understandings,  etc.,  to  restrict,  limit, 
regulate,  or  destroy  free  and  unlimited  competition  in  the  sale  of  any 
article  of  machinery,  tools,  implements,  vehicles,  or  appliances 
designed  to  be  used  in  any  branch  of  productive  industry.^ 

Minnesota  proliibits  combinations,  understandings,  etc.,  which  pre- 
vent or  limit  competition  in  the  purchase  and  sale  of  any  article  of 
trade,  manufacture,  or  use,  or  which  tend  or  are  designed  so  to  do.*" 

'  Alabama,  Code,  sec.  7581. 

2  Georgia,  Code,  sec.  2466. 

»  Michigan,  Howell's  Stats.  (1913),  sees.  8233,  8234. 

*  Indiana,  Laws  1907,  chap.  213,  sco.  1. 

6  Ibid.,  sec.  3.    See  also  Laws  of  Mississippi  and  Oklalioma  under  "I'ooliTf:,"  pp.  106, 168. 

6  Indiana,  Stats.,  sec.  3878. 

'  Iowa,  Laws  1909,  chap.  225,  sec.  1. 

8  Massachusetts,  Laws  190S,  chap.  454,  sec.  1. 

»  Michigan,  P.  A.  1905,  No.  229,  sec.  1. 

i»  Minnesota,  Stats.  (1913),  sec.  8973. 


TRUST    LAWS   AND   UNFAIR    COMPETITION.  163 

Missouri  prohibits  agreements,  combinations,  etc.,  in  restraint  of 
trade  or  competition  in  the  importation,  transportation,  manufacture, 
purchase,  or  sale  of  any  product  or  commodity  in  the  State,  or  any 
article  or  thing  bought  or  sold.^ 

Missouri  and  South  Carolina  proliibit  agreements,  pools,  combina- 
tions, etc.,  to  control  or  limit  the  trade  in  any  article  or  thing  or  to 
limit  competition  in  such  trade  by  refusing  to  buy  from  or  sell  to 
an}^  other  person,  etc.,  for  the  reason  that  such  i)erson  is  not  a 
member  of  such  pool,  etc.^ 

Montana  prohibits  combinations,  contracts,  etc.,  "to  prevent  com- 
petition in  merchandise  or  commodities,"  or  by  which  the  parties 
settle  the  price  of  any  article  of  merchandise,  commerce,  or  products 
so  as  to  preclude  unrestricted  competition.^ 

A  Nebraska  statute  in  substance  prohiliits  persons,  etc.,  dealing  in, 
handling,  or  consigning  grain,  from  forming,  maintaining,  or  con- 
tributing to  any  pool,  combination,  etc.,  to  prevent  competition 
among  buyers,  seUers,  or  dealers  in  grain,  or  which  hinders  or  pre- 
vents the  fullest  competition  in  the  purchase,  sale,  or  dealing  in  grain 
by  persons,  etc.,  not  members  of,  or  doing  business  through,  such  com- 
binations, or  to  prevent  competition  by  requiring  members  not  to 
deal  with  shippers  or  dealers  in  grain  not  members  of  such  pool,  com- 
bination, etc.^ 

New  York  prohibits  corporations  combining  with  any  other  cor- 
poration or  person  for  the  prevention  of  competition  in  any  necessary 
of  life.'^  This  State  also  prohibits  agreements,  comlnnations,  etc., 
whereby  competition  in  the  State  in  the  supply  or  price  of  any  article 
or  commodity  of  common  use  is  or  may  be  restrained  or  prevented.^ 

North  CaroHna  in  substance  prohibits  any  person,  corporation,  etc., 
engaged  in  buying  or  selling  in  the  State  from  having  any  agreement 
or  understanding  with  any  other  person,  etc.,  not  to  buy  or  sell  within 
certain  territorial  limits  within  the  State,  with  the  intention  of  pre- 
venting competition  in  selling  or  to  fix  prices  or  prevent  competi- 
tion in  buying  within  these  limits.  Agents  are  permitted  to  repre- 
sent more  than  one  principal,  but  two  or  more  persons  are  not  author- 


1  Missouri,  R.  S.,  chap.  98,  sec.  1029S,  as  amended  in  1913. 

2  Idem,  sec.  10300,  as  amended  in  1913;  South  Carolina,  Laws  1902,  No.  .'574,  sec.  5. 

3  Montana,  Laws  1909,  chap.  97,  sec.  1. 
*  Nebraska,  Laws  1897,  chap.  80,  sec.  1. 

5  New  York,  S.  C.  L.,  sec.  14. 

6  Now  York,  Cons.  Laws,  Gen.  lUisinpss  Law,  sec.  340. 

Brooklyn  Distilling  Co.  v.  Standard  Distilling  &  Distributing  Co.,  ISO  N.  Y.  App.  Dii.,  337  (1907).— 
Plaintiff  leased  distillery  to  defendant  company,  and  in  defense  of  a  suit  to  recover  rent  it.  was  alleged  that 
the  lease  was  illegal  and  void,  as  it  was  made  in  violation  of  Laws  1897,  chapter  3S:i  (now  Gen.  Business 
Laws,  sec.  310).  From  a  judgment  for  plaintifT  defendant  appealed.  Held,  that  the  corporation  could  not 
escape  li.ibility  for  rent  when  there  was  no  evidence  that  the  landlord  was  a  party  to  the  combination. 
The  statute  does  not  prevent  one  from  .selling  or  leasing  property,  nor  does  it  prevent  one  from  buying  or 
leasing  property  to  prevent  competition.  It  is  designed  to  prevent  the  owners  or  controllers  of  property 
entering  into  a  combination  to  regulate  production  and  maintain  prices  for  their  mutual  benefit  according 
to  their  respective  interests. 


164  EEPOKT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

ized  to  employ  a  common  agent  ^or  the  purpose  of  suppressing 
competition  or  lowering  prices.^ 

Texas  also  prohibits  corporations  from  acquiring  the  shares,  bonds, 
franchises,  or  other  rights  or  properties  of  other  corporations  for  the 
purpose  of  preventing  or  lessening,  or  where  the  effect  of  such  acquisi- 
tion tends  to  affect  or  lessen,  competition.^ 

Wisconsin  prohibits  corporations  from  entering  into  any  combina- 
tion, agreement,  etc.,  intended  to  restrain  or  prevent  competition 
in  the  supply  or  price  of  any  article  or  commodity  in  general  use  in  the 
State  or  constituting  a  subject  of  trade  or  commerce  therein.^ 

Mississippi  requires  the  charter  or  articles  of  association  or  the 
law  under  which  a  clearing  house  association  is  organized  to  prohibit 
it  and  its  officers  and  managers  from  attempting  to  make  or  enforce 
any  rule,  regulation,  agreement,  or  understanding  in  respect  to  "the 
restriction  or  regulation  of  competition  between  the  members  of  the 
association  or  any  of  them  in  any  matter  or  thing  connected  with 
the  business  conducted  by  such  members  or  authorized  to  be  done 
by  them  under  their  respective  charters."  * 

Porto  Rico  prohibits  "every  contract,  combination  in  the  form  of 
trust  or  otherwise,  or  conspiracy,  in  restraint  of  trade,  commerce, 
business  transactions,  and  lawful  and  free  competition  in  a  town,  or 
among  the  several  towns  of  Porto  Rico."  ^ 

Section  5.  Pooling. 

Definitions. — Pools  are  prohibited  in  many  States,  and  are  de- 
fined by  the  laws  of  one,  namely,  North  Dakota,  where  the  term  is 
a  synonym  of  "  trust."" 

Constitutional  prohibitions. — The  constitution  of  Kentucky 
(sec.  198)  requires  the  legislature  to  enact  laws  to  prevent  pools  and 
other  organizations  "from  combining  to  depreciate  below  its  real 
value  any  article,  or  to  enhance  the  cost  of  any  article  above  its 
real  value."' 

'  North  Carolina,  Laws  1913,  chap.  41,  sec.  5. 

2  Texas,  Laws  1903,  Chap.  XCIV,  sec.  2. 

8  Wisconsin,  Laws  1907,  p.  432,  sec.  1791j. 

*  Mississippi,  Laws  1914,  chap.  124,  sec.  65. 

">  Revised  Statutes  and  Codes  of  Porto  Rico,  1911,  sec.  2373. 

6  North  Dakota,  Laws  1907,  chap.  259,  sec.  2. 

7  In  1890  Kentucky  passed  an  antitrust  statute  (act  of  May  20, 1890,  Carroll's  Kentucky  Stats.,  sees.  3915 
to  3921 )  prohil^itint;  agreements  or  combinations  for  tlie  purpose  of  controlling  tlie  price  or  output  of  any 
article  of  commerce.  A  new  State  constitution ,  adopted  in  ISOI ,  provided  that  the  general  assembly  should 
enact  such  laws  as  necessary  to  prevent  combinations  for  tlie  purpose  of  depreciating  below  or  enhancing 
the  cost  of  any  article  above  its  real  value  (Const.,  sec.  19.s).  In  Commonwealth  v.  Grinstead  (108  Ken- 
tucky, 59, 76)  it  was  held  that  the  constitutional  provision  did  not  repeal  the  act  of  1890,  as  they  were  not  in- 
consistent; on  the  contrary,  the  court  was  of  the  opinion  that,  in  the  absence  of  any  other  law,  the  legis- 
lature evidently  considered  the  act  of  1890  the  law  best  calculated  to  enforce  this  provision  of  the  consti- 
tution. In  1906  a  statute  authorized  any  number  of  persons  to  combine  or  pool  crops  of  wheat,  tobacco, 
corn,  oats,  hay,  or  other  farm  products  raised  by  them  for  the  purpose  of  obtaining  a  higher  price  than  they 
could  obtain  by  selling  them  separately  (Laws,  1906,  ch.  117,  p.  429).  In  1908  a  statute  reaffirmed  the 
legality  of  such  combinations,  provided  that  the  breach  of  such  combination  agreements  might  be  re- 


TRUST   LAWS  AJSTD   UNFAIR  COMPETITION.  l65 

The  constitution  of  liouisiana  (art.  190,  adopted  Nov.  22,  1913) 
provides  that  it  shall  be  unlawful  for  persons  or  corporations,  or  their 
legal  representatives,  "  to  unite  or  pool  their  interests  for  the  purpose 
of  forcing  up  or  down  the  price  of  any  agricultural  product  or  article 
of  necessity,  for  speculative  purposes." 

Statutory  prohibitions. — Alabama  prohibits  any  person  or 
corporation  from  entering  into  any  pool  to  regulate  or  fix  the  price 
of  any  article  or  commodity  to  be  sold  or  produced  within  the  State, 
or  to  fix  or  limit  the  quantity  of  any  article  or  commodity  to  be  pro- 
duced, manufactured,  mined,  or  sold  in  the  State. ^ 

Nme  other  States  (Ai'kansas,  Illinois,  Iowa,  Minnesota,  Mississippi, 
Missouri,  North  Dakota,  South  Carolina,  and  Utah)  have  substantially 
similar  laws." 

strained  by  injunction,  and  made  unlawful  the  sale  by  or  purchase  from  an  owner  contrary  to  his  agree- 
ment (Laws,  1908,  ch.  S,  p.  38). 

In  cases  arising  after  the  passage  of  the  act  of  1906  the  State  courts  held  that  the  act  of  1S90,  the  constitu- 
tion of  1S91,  and  the  act  of  1906  must  be  taken  together,  and  by  interaction  and  to  avoid  questions  of  con- 
stitutionality, were  construed  to  make  any  combination  for  the  purpose  of  controlling  prices  lawful  unless 
for  the  purpose  or  with  the  ert'ect  of  fixing  a  price  that  was  greater  or  less  than  the  real  value  of  the  article 
[Owen  Coimty  Burley  Tobacco  Society  v.  Brumback,  128  Kentucky,  137  (190S);  Commonwealth  v.  Inter- 
national Harvester  Co.  of  America,  131  Ky.,551  (1909);  Commonwealth  v.  Hodges,  137,  Ky.,  233  (1910);  In- 
ternational Harvester  Co.  of  America  v.  Commonwealth,  137  Ky.,  668  (1910);  Collins  v.  Commonwealth, 
141  Ky.,  564  (1911);  International  Harvester  Co.  of  America  v.  Commonwealth,  144  Ky.,  403  (1911);  Ameri- 
can Seeding  Machine  Co.  v.  Commonwealth,  152  Ky.,  5S9  (1913)].  The  State  courts  held  the  act  of  1906  not 
to  be  in  violation  of  sections  of  the  Billof  Rights  or  of  the  fourteenth  amendment  to  the  Federal  Consti- 
tution, as  being  class  legislation,  inasmuch  as  it  did  not  expressly  forbid  persons  other  than  producers  of 
farm  products  from  also  combining  for  the  pm-pose  of  obtaining  higher  prices  [Owen  County  Burley  To- 
bacco Society  v.  Brumback,  128  Ky.,  137  (190S);  Commonwealth  v.  International  Harvester  Co.  of  America, 
131  Ky.,  551  (1909)].  The  State  coui'ts,  in  order  to  meet  the  contention  that  the  term  "real  value"  was  not 
definite,  declared  that  obviously  the  real  value  of  any  commodity  was  "  its  market  value  under  fair  compe- 
tition and  under  normal  market  conditions"  [Commonwealth  v.  International  Harvester  Co.  of  America, 
131  Ky.,551  (1909);  Commonwealth  v.  Hodges,  137  Ky.,233  (1910);  International  Harvester  Co.  of  America 
V.  Commonwealth,  137  Ky.,  668  (1910);  International  Harvester  Co.  of  America  v.  Commonwealth,  147 
Ky.,  564  (1912)]. 

Subsequently,  however,  the  Supreme  Court  of  the  United  States,  in  International  Harvester  Co.  of 
America  v.  Commonwealth  of  Kentucky,  234  U.  S.,  216  (1914),  held  the  antitrust  provisions  of  the  constitu- 
tion and  laws  of  Kentucky,  as  construed  together  by  the  highest  court  of  the  State,  to  be  unconstitutional 
vmder  the  fourteenth  amendment  to  the  Federal  Constitution,  declaring  that  the  "elements  necessary  to 
determine  the  imaginary  ideal,"  "real  value"  as  used  in  the  statute,  "are  uncertain  both  in  nature  and 
degree  of  effect  to  theacutest  commercial  mind."  InCollinsf.  Commonwealth  of  Kentucky,  234  U.S.,  634 
(1914),  (seealso  Malone  v.  Commonwealth  of  Kentucky  ,234  U.  S.  ,639(1914)  the  court  said  "  that  the  statute  in 
its  reference  to  '  real  value '  prescribed  no  standard  of  conduct  that  it  was  possilile  to  know;  that  it  violated 
the  fundamental  prmciples  of  justice  embraced  in  the  conception  of  due  proce.ss  of  law  in  compelling  men 
on  peril  of  Indictment  to  guass  what  their  goods  would  have  brought  imder  other  conditions  not  ascer- 
tainable." These  decisions  render  null  and  void  Laws  1906,  ch.  117,  and  apparently  also  section  198  of 
the  State  constitution,  but  perhaps  do  not  alTect  the  validity  of  Ky.  Stats.,  sees.  3915-3921. 

'  Alabama,  Stats.,  sec.  7579. 

2  Arkansas,  Laws  1905,  Act  1,  as  amended  1913,  Act  161;  Illinois,  Laws  1891,  p.  206,  as  amended 
in  1893  and  1907;  Iowa,  Stats.,  sec.  .5060;  Minnesota,  Stats.,  sec.  S973;  Mississippi,  Code  1906,  sec.  5002,  as 
amended  by  Laws  190S,  chap.  119,  sec.  1;  Missouri,  R.  S.,  chap.  98,  as  amended  in  1913,  sec.  10299;  North 
Dakota,  Laws  1907,  chap.  259,  sec.  1;  South  Carolina,  Laws  1902,  No.  574,  sec.  1;  Utah,  Stats.,  sec.  1753. 

Chicago,  Wilmington  &  Vermilion  Coal  Co.  et  al.  v.  People,  2H  III.,  J,Z1  (/905).— The  soft-coal  operators 
of  northern  Illinois  formed  an  association,  one  of  the  objects  of  which  was  to  regulate  and  fix  the  price  at 
which  coal  should  be  sold  by  its  members.  In  a  criminal  action  in  the  Cook  County  (111.)  courts  this  was 
hold  a  violation  of  section  46  of  th;^  Criminal  Code  and  the  Antitrust  Act  of  1891 ,  and  conspiracy  under  the 
common  law.    The  decision  was  aUhmod  in  botli  the  appellate  and  supreme  courts  of  the  State. 

State  V.  Minneapolis  Milk  Co.,  1J4  N.  H'.,  4/7  (  Minn.,  /9/J).— Minneapolis  milk  dealers  who  controlled 
a  large  percentage  of  the  trade  of  the  city  formed  a  milk  dealers'  association  and  agreed  to  raise  prices.  It 
was  charged  that  the  agreement  was  a  violation  of  section  5168,  revised  laws,  1905.  The  Minneapolis  MUk 
Co.,  a  corporation,  and  another  defendant,  one  Ruhnke,  demanded  a  separate  trial.  Both  were  convicted 
and  lined.  On  appeal  the  judgment  was  sustained  as  to  Ruhnke  but  modifi.  d  as  to  the  corporation  by 
remittmg  the  fine,  on  the  ground  that  the  statute  provides  specifieally  for  forfeiture  of  the  charter  of  a 
corporation  convicted  under  the  act  and  that  it  was  not  intended  that  both  fine  and  forfeiture  should  be 
visited  on  a  corporation. 


166  BEPOKT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

Minnesota  prohibits  pools  in  restraint  of  trade  or  which  regulate  the 
price  of  any  article  "of  trade,  manufacture  or  use,  bought  and  sold 
within  the  State,"  and  further,  prohibits  pools,  etc.,  which  "prevent 
or  limit  competition"  in  the  purchase  and  sale  thereof. 

The  laws  of  Arkansas,  IVIississippi,  Missouri,  and  South  Carolina 
vary  from  that  of  Alabama  in  that  they  prohibit  the  regulation  or  the 
maintenance  of  the  price  of  any  article  of  manufacture,  mechanism, 
merchandise,  commodity,  convenience,  repair,  auy  product  of  mining 
or  any  article  or  tiling  whatsoever,  and  apply  also  to  the  regulation  of 
property  insurance  premiums. 

The  law  of  North  Dakota  differs  from  the  Alabama  statute  princi- 
pally in  that  it  also  proliibits  fixing  or  limiting  the  amount  or  quantity 
of  any  article,  commodity,  etc.,  to  be  manufactured,  mined,  produced, 
"exchanged,"  or  sold  in  the  State. 

Arizona  proliibits  combinations  to  pool  any  interests  in  connection 
with  the  manufacture,  sale,  or  transportation  of  any  article  or  com- 
modity, that  its  price  may  in  any  way  be  affected.^ 

Nine  other  States  (California,  Kansas,  Louisiana,  Micliigan,  Ne- 
braska, Ohio,  Mississippi,  North  Dakota,  and  Texas)  have  substan- 
tially similar  laws.^ 

The  California,  Louisiana,  Michigan,  North  Dakota,  and  Ohio  laws 
omit  the  word  ''manufacture." 

In  Nebraska  the  word  "manufacture"  is  omitted  and  "produc- 
tion" substituted. 

Mississippi  extends  the  proliibition  to  interests  in  connection  wnth 
the  "importation,  production  or  price"  of  a  commodity. 

In  Texas  the  word  "manufacture"  is  omitted,  but  the  law  extends 
the  prohibitions  to  the  pooling  of  interests  in  connection  with  the 
"purchase"  of  any  article  or  commodity  or  the  charge  for  insurance 
or  for  the  preparation  of  any  product  for  market,  or  transportation. 

Wliile  the  above  are  the  commonest  types  of  State  laws  against 
poolmg,  other  forms  have  been  adopted  in  various  States,  in  some 
cases,  in  addition  to  one  of  the  provisions  above  noted. 

Iowa  prohibits  any  person,  corporation,  etc.,  operating  any  busi- 
ness of  buying,  sellmg,  handling,  consigning,  or  transporting  any 
commodity  or  article  of  commerce,  from  forming,  entering,  main- 
taining, or  contributmg  to  any  pool  for  the  prevention  of  full  and 
free  competition  among  buyers,  sellers,  or  dealers  in  any  commodity 
or  any  article  of  commerce.^ 

JMissouri  and  South  CaroUna  proliibit  persons,  corporations,  etc., 
engaged  in  bupng  or  selling  any  article  or  thing,  from  entering  into 

'  Arizona,  Laws  1912,  chap.  73,  sec.  1. 

2  California,  Laws  1907,  chap.  530,  sec.  1;  Kansas,  Laws  1897,  chap.  265,  see.  1,  G.  S.,  sec.  5142;  Louisiana, 
Laws  1892,  Act  SO,  sec.  1;  Michigan,  P.  A.  1899,  No.  255,  sec.  1;  Nebraska,  R.  S.  (1913),  sec.  4017;  Ohio, 
G.  C,  sec.  6391;  Mississippi,  Code  1906,  sec.  5002,  as  amended  by  Laws  1908,  chap.  119,  sec.  1;  North  Dakota, 
Laws  1907,  chap.  259,  sec.  2;  Texas,  G.  L.  1903,  Chap.  XCIV,  sec.  1. 

*  Iowa,  Laws  1909,  chap.  225,  sec.  1. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  167 

any  pool,  etc.,  to  control  or  limit  the  trade  in  any  such  article  or  to 
Hmit  competition  in  such  trade  by  refusing  to  buy  from  or  sell  to  any 
other  person  or  corporation  such  article  or  thing  for  the  reason  that 
such  person  or  corporation  is  not  a  member  of  the  pool.' 

New  Jersey  prohibits  agreements,  and  understandings  without  ex- 
press agreement,  by  which  the  parties  preclude  free  and  um-estricted 
competition  among  themselves,  or  any  purchaser  or  consumer  in  the 
sale  or  transportation  of  any  article  or  commodity  either  by  pooHng 
or  in  any  other  manner  by  which  the  price  might  be  affected.^ 

The  following  statutes  relate  only  to  pooUng  in  certain  lines  of 
business  or  for  special  purposes: 

Georgia  prohil)its  pools  to  lessen  competition  in  the  business  of 
msurance  transacted  in  tliat  State .^ 

Kansas  and  Nebraska  prohibit  combinations  of  grain  dealers  or 
others  "for  the  pooUng  of  prices  of  different  and  competing  dealers 
and  buyers,  or  to  divide  between  them  the  aggregate  or  net  proceeds 
of  the  earnings  of  such  dealers  and  buyers,  or  any  portion  thereof."* 
Nebraska  has  also  a  substantially  similar  statute  relating  to  com- 
binations of  dealers  and  sellers  of  coal  or  lumber.^ 

Another  section  of  the  Nebraska  statutes  in  substance  prohibits 
persons,  etc.,  dcahng  in,  handling,  or  consigning  grain,  from  forming, 
maintaining,  or  contributing  to,  any  pool  for  the  prevention  of  com- 
petition among  buyers,  sellers,  or  dealers  in  grain,  or  which  tends  to 
prevent  the  fullest  competition  in  the  purchase,  sale,  or  dealing  in 
grain  by  persons,  etc.,  not  doing  business  through  such  pool,  or  the 
prevention  of  competition  by  requiring  members  not  to  deal  with 
nonmembers,  or  which  requires  its  members  to  refuse  to  sell, 
purchase,  or  consign  grain  to  any  person,  etc.,  who  purchases  or 
receives  grain  from  nonmembers,  or  wliich  has  for  one  of  its  objects 
the  prevention  of  any  person,  etc.,  not  shipping  grain  through  ele- 
vators, whether  operated  by  members  or  not,  from  finding  purchasers, 
by  boycotting,  or  threatening  to  boycott,  such  purchasers." 

Montana  forbids  warehousemen  to  enter  into  any  contract,  agree- 
ment, combination,  or  understanding  with  any  other  warehousemen 
at  any  railway  station  whereby  the  amount  of  grain  to  be  received  or 
handled  by  the  warehouses  at  such  station  shall  be  equalized  or  pooled 
between  said  warehouses,  or  whereby  the  profits  or  earnings  shall  be 
divided  or  pooled  or  apportioned  in  any  manner.^ 

1  Missouri,  R.  S.,  chap.  98,  sec.  10300,  as  amended  in  1913;  South  Carolina,  Laws  1902,  No.  .574,  sec.  5. 

2  New  Jersey,  Laws  1913,  chap.  13,  sec.  1. 

3  Georgia,  Code,  sec.  240C. 

4  Kansas,  Laws  18S7,  chap.  175,  sec.  1;  G.  S.,  see.  5182;  Nebraska,  Comp.  Stats.,  sec.  7978. 
6  Nebraska,  R.  S.  (1913),  soc.  402G. 

sNebraska,  Laws  1897,  chap.  80,  sec.  1. 
'  Montana,  Laws  1915,  chap.  69,  sec.  1. 


168  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

Mississippi  prohibits  combinations  to  prevent  by  pooling  the 
separate  and  individual  bidding  for  the  performance  of  a  pubHc  work 
for  the  State,  or  any  county,  municipaUty,  or  levee  board  thereof.^ 

Nebraska  and  Oklahoma  prohibit  combinations  of  bridge  builders 
or  contractors  or  others  "for  the  pooling  of  prices  of  different  com- 
peting bridge  contractors  or  to  divide  between  them  the  aggregate  or 
net  proceeds  of  the  earnings  of  such  contractors,  or  any  portion 
thereof."^ 

Washington  prohibits  commission  merchants  from  entering  into 
any  pool  for  the  purpose  of  artificially  raising  or  depressing  the  market 
price  of  any  farm,  dairy,  orchard,  or  garden  produce,  or  of  excluding 
from  the  market  the  produce  of  any  particular  locahty,  grown  or 
manufactured  by  any  person  within  the  State.^ 

Section  6.  Price  control. 

Constitutional  provisions. — The  constitutions  of  Arizona  (Art. 
XIV,  sec.  15)  and  Washington  (Art.  XII,  sec.  22)  prohibit  corpora- 
tions, copartnerships,  or  associations  of  persons  in  the  State  from 
combining  or  making  any  contract  with  any  incorporated  company, 
copartnersliip,  etc.,  or  in  any  manner  whatever,  to  fix  the  prices  of 
any  product  or  commodity. 

The  constitution  of  Louisiana  (art.  190,  adopted  Nov.  22,  1913) 
declares  that  it  shall  be  unlawful  for  persons  or  corporations,  or  their 
legal  representatives,  to  combine  or  conspire  together,  or  to  unite  or 
pool  their  interests,  for  the  purpose  of  forcing  up  or  down  the  price  of 
any  agricultural  product  or  article  of  necessity  for  speculative  purposes. 

The  constitution  of  Montana  (Art.  XV,  sec.  20)  forbids  any  corpora- 
tion, person,  etc.,  to  form  directly  or  indirectly  any  trust  or  make 
any  contract  for  the  purpose  of  fixing  the  price  of  any  article  of 
commerce,  or  product  of  the  soil,  for  consumption  by  the  people. 

The  constitution  of  Idaho  (Art.  XI,  sec.  18)  prohibits  any  corpora- 
tion, association  of  persons,  or  stock  company  from  directly  or  in- 
directly combining  or  contracting  witli  any  corporation  for  the 
purpose  of  fixing  the  price  of  any  article  of  commerce  or  of  the 
produce  of  the  soil  or  of  consumption  by  the  people. 

South  Dakota  (Const.,  Art.  XVII,  sec.  20)  has  a  similar  provision, 
except  that  it  prohibits  fixing  the  prices  of  "  any  product  or  commod- 
ity so  as  to  prevent  competition  in  such  prices"  or  to  establish 
excessive  prices  therefor. 

The  constitutions  of  Utah  (Art.  XII,  sec.  20)  and  North  Dakota 
(sec.  146)  prohibit  and  declare  unlawful  and  against  public  policy, 
any  combination  by  individuals,  corporations,  or  associations,  hav- 

1  Mississippi,  Code  1906,  sec.  5008. 

-  Nebraska,  R.  S.  (1913),  sec.  4037;  Oklahoma,  Comp.  Laws  1909,  soc.  8820;  see  also  Indiana  Antitnis 
Law  of  1907,  sec.  3,  under  "  Restraint  of  competition"  (p.  162). 
3  Washington,  Remington  &  Ballinger's  Code  (1910),  sec.  7032. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  169 

ing  for  its  object  or  effect  the  controlling  of  the  price  of  any  products 
of  the  soil  or  of  any  article  of  manufacture  or  commerce  or  the  cost 
of  exchange  or  transportation. 

The  constitution  of  Wyoming  (Ai"t.  X,  sec.  8)  prohibits  the  consoli- 
dation or  combination  of  corporations  to  control  or  influence  produc- 
tion or  prices. 

The  constitution  of  New  Hampshire  (art.  82)  grants  to  the  general 
court  the  power  to  enact  laws  ' '  to  prevent  the  operations  within  the 
State  of  all  persons  and  associations,  and  all  trusts  and  corporations, 
foreign  or  domestic,  and  the  officers  thereof,  who  endeavor  to  raise 
the  price  of  any  article  of  commerce." 

Statutory  provisions. — New  Jersey  prohibits  combinations  or 
agreements  between  corporations,  fu'ms,  or  persons — 

(1)  To  increase  the  price  of  merchandise  or  of  any  commodity.^ 

(2)  To  fix  at  any  standard  or  figure,  whereby  its  price  to  the  public 
or  consumer  shall  in  any  manner  be  controlled,  any  article  ^  or 
commodity  of  merchandise,  produce,  or  commerce  intended  for  sale, 
use,  or  consumption  in  this  State  or  elsewhere. 

(3)  To  make  any  agreement  by  which  they  directly  or  indirectly 
preclude  a  free  and  um-estricted  competition  among  themselves,  or 
any  purchaser  or  consumers,  in  the  sale  or  transportation  of  any 
article  or  commodity,  either  by  pooling,  ^N-ithholding  from  the  market, 
or  selling  at  a  fixed  price,  or  in  any  other  maimer  by  wliich  the  j)rice 
might  be  alTected. 

(4)  To  make  any  secret  oral  agreement  or  arrive  at  any  under- 
standing, without  express  agreement,  by  which  they  directly  or  in- 
directly preclude  a  free  and  unrestricted  competition  among  them- 
selves or  any  purchaser  or  consumer,  in  the  sale  or  transportation 
of  any  article,  either  b}^  pooling,  withholding  from  .the  market,  or 
selling  at  a  fixed  price,  or  in  any  manner  by  which  the  price  might 
be  affected." 

Kansas  prohibits,  in  substance,  combinations  of  capital,  skill,  or 
acts  by  two  or  more  persons,  corporations,  etc. — 

(1)  To  increase  or  reduce  the  price  of  merchandise,  produce,  or 
commodities,  or  to  control  the  cost  or  rates  of  insurance. 

(2)  To  fix  any  standard  or  figure,  whereby  its  price  to  the  public 
shall  be,  in  any  manner,  controlled  or  established,  any  article  or 
commodity  of  merchandise,  produce,  or  commerce  intended  for  sale, 
use,  or  consumption  in  this  State. 

(3)  To  make  any  contract,  agreement,  etc.,  by  wliich  they  shall 
bind  themselves  (a)  not  to  sell,  manufacture,  or  transport  any  such 
article,  etc.,  below  a  common  staiulard  figure,  or  (b)  to  keep  the  price 

iThe  words  "artk'le"and  "commodity"  in  this  act  are  to  be  construed  as  synonymous  with  natural 
products,  manufactured  products,  and  goods,  wares,  and  merchandise. 
*New  Jersey,  Laws  1913,  chap.  13. 


170  REPORT  OF    THE   COMMISSIONER  OF    CORPORATIONS. 

of  any  such  article,  commodity,  or  transportation  at  a  fixed  or  graded 
ii<'-ure,  or  (c)  to  establish  the  price  of  any  such  article,  transportation, 
etc.,  between  them  or  themselves  and  others,  so  as  to  preclude  free 
and  unrestricted  competition  among  themselves  or  others. 

(4)  To  pool,  combine,  or  unite  any  interests  they  may  have  in  con- 
nection with  the  manufacture,  sale,  or  transportation  of  any  such 
article  or  commodity,  that  its  price  may  in  any  manner  be  affected.^ 

Louisiana,  Michigan,  Ohio,  Nebraska,  North  Dakota,  and  California 
have  statutes  substantially  similar  to  the  Kansas  law.^  None  of  these, 
however,  cover  insurance.  The  other  principal  differences  are: 
Louisiana,  Michigan,  Ohio,  Nebraska,  North  Dakota,  and  California 
omit  the  word  "  manufacture"  after  ''sell"  in  clause  (a),  paragraph (3) ; 
use  "graduated"  instead  of  "graded"  in  clause  (h),  paragraph  (3). 
Louisiana  omits  "commodity  or  transportation"  in  clause  (6), 
paragraph  (3).  These  six  States  also  omit  "manufacture"  before 
"sale"  in  paragraph  (4).  Nebraska  adds  "production"  after  "sale" 
in  paragraph  ( 4) .  In  the  Michigan,  Ohio,  Louisiana,  Nebraska,  North 
Dakota,  and  California  acts  the  word  "at"  foUows  "fix"  in  para- 
graph (2),  making  it  read  "to  fix  at  any  standard,"  etc.  Michi- 
gan, Ohio,  Nebraska,  California,  and  North  Dakota  do  not  have 
"produce"  after  "merchandise"  in  paragi'aph  ( 1).  Nebraska  inserts 
"card  or  list  price"  after  "standard  figure"  in  clause  (a),  paragi"aph 
(3) ,  and  North  Dakota  "or  card  price  list "  in  the  same  clause.  Michi- 
gan and  Ohio  insert  "or  fixed  value"  after  "standard  figure"  in  tliis 
clause.  In  the  Michigan  and  Ohio  statutes,  "directly  or  indirectly" 
is  inserted  immediately  before  "unite"  in  paragraph  (4).  Louisiana 
omits  "  sale,  use  "  before  "  consumption  "  in  paragraph  ( 2) .  Nebraska 
has  "upon"  after  "controlled  or  established"  in  paragraph  (2). 
North  Dakota  inserts  "property"  before  "merchandise"  in  para- 
graph (1);  and  "manufacture"  takes  the  place  of  "commerce" 
in  paragraph  (2).  California  omits  "  or  reduce"  in  paragraph  (1),  and 
in  California,  Michigan,  and  Ohio  the  words  ''or  consumer"  follow 
"the  pubhc"  in  paragraph  (2).  In  the  Nebraska  law  the  words 
"dispose  of,  traffic  in"  follow  "sell"  in  clause  (a),  paragraph  (3),  and 
the  phrase  ' '  with  the  intent  to  preclude,  or  the  tendency  of  which  is 

1  Kansas,  Laws  1897,  chap.  265,  sec.  1;  G.  S.,  sec.  5142. 

State  V.  Phipps  et  al.,  50  Kans.,  609  {1893). — Alleged  that  defendants  were  agents  of  foreign  insurance 
companies  doing  business  in  the  State,  that  the  companies  had  combined  to  control  the  price  and  rate  of 
insurance  in  Oswego,  Kans.,  that  they  increased  such  rates,  and  that  accused  were  compelling  local  agents 
to  observe  rates  so  established.  Urged  that  the  law  of  1889  so  far  as  it  affected  foreign  insurance  companies 
or  their  agents  was  in  conflict  with  the  power  of  Congress  to  regulate  interstate  commerce,  the  court  having 
recently  held  that  insurance  was  "trade."  Held,  that  "trade,"  so  used,  was  not  synonymous  with  niter- 
state  commerce,  that  insurance  was  not  interstate  commerce,  and  that  the  State  has  power  to  regulate  the 
business  of  foreign  insurance  companies.  Conviction  affirmed  under  the  antitrust  law  of  1889.  (Some- 
what similar  but  less  comprehensive  than  the  statute  of  1897  above  cited.) 

2  Louisiana,  Laws  1892, act  90,  sec.  1;  Michigan,  P.  A.  1899,  No.  255,  sec.  1;  Ohio,  G.  C.,sec.  C391;  Nebraska, 
R.  S.  (1913),  sec.  4017;  North  Dakota,  Laws  1907,  chap.  259,  sec.  1;  California,  Laws  1907,  chap.  530,  sec.  1, 
as  amended  by  Laws  1909,  chap.  362. 


TRUST  LAWS  ANO  UNFAIR  COMPETITION.  171 

to  prevent  or  preclude,"  is  used  instead  of  ''so  as  to  preclude"  in 
clause  (c),  paragraph  (3).  Michigan  adopts  the  word  ''arts"  instead 
of  "acts"  in  the  opening  clause. 

The  law  of  Texas  is  substantially  similar  to  that  of  Kansas,  the 
principal  difference  being  that  in  addition  the  former  prohibits  (a) 
the  fixing  or  maintenance  of  prices,  etc.,  as  well  as  increasing  or 
reducing  prices^  and  (b)  affecting,  by  any  of  the  means  set  forth  in 
the  law,  the  price  of  preparing  any  product  for  market  or  transporta- 
tion.^ 

Arizona  has  a  law  similar  to  the  Kansas  statute,  as  has  also  Colo- 
rado, except  that  the  latter  does  not  apply  to  insurance. ^ 

Wliile,  as  already  pointed  out,  certain  pro^asions  of  the  California 
law  are  very  similar  to  tliose  of  the  Kansas  statute,  the  former  act 
provides  also  that  no  agreement,  combination,  etc.,  shall  be  deemed 
to  be  unlawful  or  within  the  provisions  of  the  act  whose  object  is 
to  conduct  its  operations  at  a  reasonable  profit  or  to  market  at  a 
reasonable  profit  tliose  products  which  can  not  otherwise  be  so  mar- 
keted; nor  shall  it  be  deemed  unlawful  for  persons  or  corporations 
engaged  in  the  business  of  selhng  or  manufacturing  commocUties 
of  a  hko  character  to  employ,  organize,  or  own  any  interest  in  any 


1  G.  L.  1903,  Chap.  XCIV,  sec.  1. 

Queen  Insurance  Co.  v.  S!a^c,  8j  Tci.,  250  (/SS."?).— Action  under  act  of  1889  (somewhat  similar  to  act 
cited)  against  Texas' Insurance  Chib,  an  association  of  insurance  agents,  and  57  foreign  insurance  corpora- 
tions. Alleged  that  the  club  was  organized,  with  the  consent  and  procurement  of  defendant  companies, 
for  the  purpose  of  fixing  rates  and  commissions.  Held,  that  the  act  did  not  apply,  as  insurance  was  neither 
"trade"  nor  a  "commodit)'"  within  the  meaning  of  the  act. 

Wiggins  v.  Bisso,  92  Tex.,  219  (^lS9S).—ln  a  suit  by  a  partner  for  an  accounting,  defendant  pleaded  that 
the  profits,  if  any,  were  accumulated  under  an  unlawful  agreement  with  the  St.  Louis  Brewing  Associa- 
tion whereby  said  partnership  and  brewing  association  coml^ined  their  skill,  capital,  labor,  and  acts  to  create 
and  carry  out  restriction;^  in  trade,  to  increase  the  price  of  beer,  and  to  prevent  competition  in  transportation, 
sale,  and  pnrcliueof  beer,  etc.,  and  set  up  a  contract  providing  for  the  sale  of  beer  to  the  dealer  at  stipulated 
prices,  the  manufacturer  obligating  himself  not  to  sell  beer  to  any  other  person  in  the  town  and  the  dealer 
obligating  himself  not  to  buy  from  any  other  except  said  manufacturer.    On  demurrer,  held  a  good  defense. 

WaUrs-Pierce  Oil  Co.  v.  Texas,  10  Texas  Civil  Appeals,  1  (1898),  177  i7.S.,;25(?900).— The  Waters-Pierce  Oil 
Co.,  a  foreign  corporation  doing  business  in  Texas,  was  alleged  to  have  made  contracts  with  dealers  in  oil, 
through  it's  agents  in  the  State,  which  bound  the  dealers  to  buy  only  of  the  Waters-Pierce  Co.,  to  sell  at  a 
price  fixed  by  the  company,  not  to  sell  to  competing  dealers,  and  to  pay  certain  penalties  to  the  company  if 
they  bought  from  a  competitor.  The  court  of  civil  appeals  sustained  a  decree  forfeiting  the  right  of  the 
company  to  do  business  in  the  State,  holding  that  the  statutes  involved  were  a  valid  exercise  of  the  police 
power  of  the  State.  On  writ  of  error  to  the  Supreme  Court  of  the  United  States  the  judgment  was  afFiTHied, 
the  court  holding  that  the  courts  of  Texas  had  the  right  to  interpret  their  statutes  to  apply  to  Intrastate 
commerce  only;  that  the  statute  of  March  30,  1SS9,  imposedconditions  which  it  was  within  the  power  of 
the  state  to  impose,  and  that  this  statute  was  not  repealed  by  the  act  of  April  30,  1S95. 

WalcTs-PicrccOil  Co.  v.  State,  100  S.  W.,  918  {Tci.  1907):  212  {7.  S.,  Sff  (/sa9).—.Mleged  that  the  Waters- 
Pierce  Oil  Co.  was  a  party  to  an  agreement  or  understanding  with  the  Standard  Oil  Co.  of  New  Jersey,  one 
object  of  which  was  to  create  a  monopoly  and  control  the  price  of  petroleum  oil  and  prevent  competition 
In  its  sale  in  a  large  territory,  including  Texas,  and  to  a  Inrge  extent  such  object  was  accomplished.  Held, 
that  the  performance  of  such  agreement  within  the  State  constituted  a  violation  of  the  antitrust  laws  of  1899 
and  1903,  although  the  agreement  may  not  have  been  iTiade  therein.  Penalty  assessed  and  permit  to  do 
business  in  State,  except  as  to  interstate  commerce,  ordered  canceled.  Affirmed  by  Supreme  Court  of 
United  States,  which  held  that  laws  prohibiting  acts  which ' '  tend  "or  are  "  reasonably  calculated  "to  re-slrain 
trade  and  prevent  competition  are  not  so  vague  and  indefinite  as  to  deprive  any  one  of  due  process  of  law; 
and  declined  to  hold  a  fine  of  over  .?!, 000,000  so  excessive  as  to  amount  to  dei>rivation  of  property  without 
due  process  of  law  where  it  appeared  that  the  business  was  extensive  and  profitable  during  the  period  of 
violation,  and  that  the  corporation  had  over  .'!-10,0(X),000  of  assets,  and  had  declared  dividends  amounting 
to  several  hundred  per  cent. 

2  Arizona,  Laws  1912,  chap.  73,  sec.  1;  Colorado,  Laws  1913,  chap.  161,  sec.l. 


172  EEPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

association,  etc.,  having  as  its  object  the  transportation,  marketing, 
or  delivery  of  such  commodities.'  Colorado  also  has  a  similar  pro- 
vision.^ 

A  section  of  the  Ohio  law  imposes  a  much  heavier  penalty  in  case  of 
combinations  to  control  the  price  or  supply,  or  to  prevent  competi- 
tion in  the  sale  of  bread,  butter,  eggs,  flour,  meat,  or  vegetables.^ 

Arkansas  prohibits  any  person,  corporation,  firm,  etc.,  from  entering 
into  any  pool,  agreement,  etc.,  whether  the  same  is  made  in  the  State 
or  elsewhere,  to  regulate  or  fix  either  in  the  State  or  elsewhere  the 
price  of  any  article  of  manufacture,  commodity,  or  any  article  or  thing 
whatsoever,  or  the  price  or  premium  to  be  paid  for  insuring  property, 
or  to  maintain  said  price  when  so  fixed.* 

Mississippi  has  a  statute  similar  to  that  of  Arkansas,  except  that  the 
provision  against  fixing  prices  is  hmited  to  the  State  instead  of  "in 
this  State  or  elsewhere."  ^ 

South  Carolina  and  Tennessee  prohibit  arrangements,  contracts, 
trusts,  etc.,  designed  or  which  tend  to  advance,  reduce,  or  con- 
trol the  price  or  the  cost  to  the  producer  or  consumer  of  articles 
imported  into  the  State,  or  in  the  manufacture  or  sale  of  articles  of 
domestic  growth  or  domestic  raw  material.'*     Kansas  has  a  similar 

1  California,  Laws  1907,  chap.  530,  sec.  1,  as  amended  by  Laws  1909,  chap.  362. 

Grogan  v.  Chaffee,  156  Cal.,  611  (1909). — A  manufacturer  of  olive  oil.  in  a  quantity  relatively  small  in 
comparison  with  the  amount  manufactured  and  sold  in  the  market  supplied  by  him,  sought  an  injunction, 
alleging  that  the  defendant  bought  oil  under  an  express  agreement  that  he  would  not  s?ll  it  at  less  than  a 
given  price  and  that  he  had  sold  and  threatened  to  sell  it  at  less  than  such  price.  Held,  that  there  was 
nothing  unreasonable  or  unlawful  in  the  efl'ort  of  a  manufacturer  to  maintain  a  standard  price  for  his  goods; 
that  it  was  simply  a  means  of  securing  the  legitimate  benefits  of  the  reputation  which  his  product  may  have 
attained;  that  the  condition  was  valid  as  between  the  original  seller  and  buyer;  that,  as  between  them, 
its  breach  may  be  enjoined  by  the  manufacturer,  and  that  section  1G73,  Civil  Code,  declaring  void  contracts 
restraining  the  exercise  of  a  lawful  business,  did  not  apply.  (Antitrust  Law  referred  to  but  not  involved 
in  decision.) 

B.  Ghirarddli  Co.\.  Ilunsicker  et  al.,  164  Cal.,  S55  (/P/i").— This  case  is  similar  to  Grogan  v.  Chaff  je 
except  that  defendants  did  not  purchase  from  plaintiff,  but  from  a  jobber  who  purchased  from  plaintiff 
upon  the  same  general  conditions  on  which  Chaffee  bought  from  Grogan.  Held,  that  such  a  condition 
was  enforceable,  not  only  against  the  jobber,  but  also  against  a  purchaser  who  bought  to  sell  again  atretaU 
under  an  agreement  with  the  jobber,  which  in  terms  was  made  for  the  express  benefit  of  the  manufacturer, 
whereby  he  undertook  to  maintain  the  fixed  retail  price;  that  the  contract  of  the  second  purchaser  was  one 
of  the  class  referred  to  in  section  1559,  Civil  Code,  providing  that  a  contract  made  expressly  for  the  benefit 
of  a  third  person  may  be  enforced  by  him  at  ajiy  time  before  the  parties  thereto  rescind  it;  and,  further, 
that  the  agreement  was  not  in  violation  of  the  State  Antitrust  Act  as  amended  in  1909,  nor  unenforceable 
as  being  in  restraint  of  trade  under  the  common  law. 

2  Colorado,  Laws  1913,  chap.  101,  sec.  1. 

3  Ohio,  O.  C,  sec.  639G,  as  amended  by  the  act  of  May  3, 1913. 
<  Arkansas,  Act  1,  1905,  as  amended  Laws  1913,  Act  161. 

Stale  V.  Frank  et  al.,  169  8.  W.,  333  (Ark.,  /9//).— Defendants,  proprietors  of  laundries  in  Little  Rock, 
were  alleged  to  have  agreed  with  each  other  to  fix  prices  to  be  charged  their  customers  and  to  have  con- 
ducted business  under  this  agreement.  It  was  further  alleged  that  for  the  purpose  of  driving  out  com- 
petition in  the  city  of  Malvern  they  entered  into  a  combination  to  do  the  laundering  of  that  place  at  a  less 
price  than  was  charged  at  Little  Rock  and  other  places.  The  complaint  alleged  a  violation  of  the  antitrust 
statute  (acts  1905,  p.  1,  sec.  1).  The  State  supreme  court  in  sustaming  a  demurrer  to  the  complaintheld 
that  the  subject  matter  of  the  agreement  was  not  a  "commodity,"  "convenience,"  or  "repair,"  nor  was 
it  within  the  phrase '■  any  article  or  thing  whatsoever, "  as  used  in  the  statute;  that  the  business  of  laundering 
was  a  mere  service  done,  and  an  agreement  to  regulate  the  price  to  be  charged  therefor  was,  in  its  last 
analysis,  merely  an  agreement  to  fix  the  price  of  labor,  or  services,  which  had  not  been  madeimlawful. 

^  Mississippi,  Code  1906,  sec.  5002,  as  amended  by  Laws  190S,  chap.  119,  sec.  1. 

6  South  Carolina,  Civil  Code,  sec.  2437;  Tennessee,  Laws  1903,  chap.  140,  sec.  1. 


TRUST  LAWS  AND   UNFAIR  COMPETITION.  173 

statute,  differing  principally  in  that  it  extends  to  agreements  affecting 
attorneys'  or  doctors'  fees,  the  rate  of  insurance,  and  the  rate  of  mter- 
est  on  loans,  or  any  other  services.* 

South  Carolina  also  has  a  statute  prohibiting  pools,  agreements,  etc., 
to  regulate  or  fix  the  price  of  any  article  or  tiling  whatsoever,  or  to 
maintain  said  price  when  so  regulated  or  fixed,  or  to  fix  or  limit  the 
price  of  property  insurance.- 

Idaho  prohi]>its  corporations,  associations  of  persons,  etc.,  directly 
or  indirectly  to  combine  or  contract  in  any  manner  whatsoever  to  fix 
the  price  of  any  article  of  commerce,  or  of  produce  of  the  soil,  or  of 
consumption  by  the  people.^  Illinois,  Utah,  and  Iowa  have  similar 
provisions  in  their  laws,  except  that  they  also  prohibit  combinations, 
etc.,  of  ''individuals,"  and  prohibit  combinations  ''to  regulate  or 
fix  the  price  of  any  article  of  merchandise  or  commodity."  *  The 
Utah  laws  also  proliibit  any  combination  by  persons  having  for  its 
object  or  effect  the  control  of  prices  for  professional  services,  any 
products  of  the  soil,  any  article  of  manufacture  or  commerce,  or  the 
cost  of  exchange  or  transportation.^ 

Wisconsin  prohibits  any  agreement,  contract,  etc.,  to  restrain  or 
prevent  competition  in  the  price  of  any  article  or  commodity  in  general 
use  in  the  State  or  constituting  a  subject  of  trade  or  commerce,  or 
which  shall  in  any  manner  control  or  fix  the  price  of  any  such  article 
or  fix  any  standard  or  figure  by  which  the  price  to  the  pubhc  of  anj- 
such  article  shaU  be  in  any  manner  controlled  or  established.^ 

Indiana  prohibits  every  scheme,  design,  understanding,  contract, 
etc.,  to  increase  or  reduce  the  price  of  merchandise  or  any  com- 
modity, natural  or  artificial/  and   all  arrangements,  etc.,  between 

1  Kansas,  Laws  1SS9,  chap.  257,  sec.  1;  G.  S.,  sec.  5185. 

^  South  Carohna,  Laws  1902,  No.  574,  sec.  1. 

3  Idaho,  Laws  1909,  p.  297. 

<  Illinois,  Laws  1891,  p.  206,  as  amended  by  Laws  1893  and  1907;  Utah,  Stats.,  sec.  175.3;  Iowa,  Stats., 
sec.  5060. 

Fori  et  al.  v.  Chicago  Milk  Shippers'  Association,  155  III.,  166  {1895).— The  milk  producers,  shippers,  and 
wholesale  dealers  in  and  around  Chicago  formed  an  association  to  regulate  the  sale  and  price  of  milk  to  the 
retail  dealers.  The  boards  of  management  of  the  association  in  pursuance  of  this  purpose  fixed  the  price 
to  be  paid  for  milk  during  certain  periods,  notified  the  members  and  city  dealers,  and  required  all  parties 
buying  milk  from  said  association  to  give  bonds  to  secure  compliance  with  this  and  other  orders.  The 
association  was  given  control  of  all  milk  consigned  by  any  of  its  members  to  any  stand  in  Chicago.  In  an 
action  by  the  association  against  Ford  et  al.  to  recover  for  milk  delivered,  the  defendants  pleaded  that 
the  acts  of  the  association  were  unlawful  under  laws  of  1891,  page  206,  and  on  appeal  to  the  State  supreme 
codrt  the  plea  was  sustained. 

B  Utah,  Stats.,  sec.  1752. 

6  Wisconsin,  Laws  1907,  p.  432;  Stats.,  sec.  1791.i. 

Buttcricl:  Publishing  Co.,  respondent. v.  Rose,  appellant,  HI  Wis.,  533  (/.9/0).— Plaintiff  entered  into  a  con- 
tract with  defendant  in  which  the  latter  agreed  to  purch;ise  a  specified  amount  of  plaintitl's  patterns  (pat- 
ented), to  sell  them  at  retail  prices  fixed  by  plaintilT,  and  not  to  sell  any  other  make  of  patterns  duiing 
the  continuance  of  the  contract.  Subsequently  defendant  refused  to  receive  any  more  patterns  and  adver- 
tised and  sold  patterns  of  a  rival  concern.  Defendant  contended,  among  other  things,  that  the  contract 
was  in  restraint  of  trade  and  in  violation  of  section  1770g,  Wisconsin  Statutes  (similar  to  sec.  1791j,  but 
applies  to  foreign  corporations).  Held,  that  this  section  was  not  intended  to  restrict  the  rights  of  a  patentee, 
acquired  under  the  laws  of  the  United  States,  and  that  to  hold  that  it  did  apply  would  make  it  uncon- 
stitutional. 

'  Indiana,  Laws  1907,  chap.  243,  sec.  1. 


174  EEPORT   OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

persons  or  corporations  who  control  the  output  of  "any  article  of 
merchandise,  designed,  or  which  tend  to  advance,  reduce,  or  control 
the  price  or  the  cost  to  the  producer  or  consumer.^ 

A  Micliigan  statute  prohibits  all  contracts  and  agreements  the 
purpose  or  mtent  of  which  is  (among  other  things)  to  enhance  or 
control  or  regulate  the  price  of  any  article  of  machinery,  tools, 
implements,  vehicles,  or  appliances,  to  be  used  in  any  branch  of 
productive  industry/.  A  clause  of  the  act  saves  contracts  "loiown  to 
the  common  law  and  in  equity  as  those  relating  to  good  will  of  trade,"" 

Minnesota  prohibits  any  pool,  combination,  or  understanding  what- 
soever wliich  tends  in  any  way  or  degree  to  limit,  fix,  control,  main- 
tain, or  regulate  the  price  of  any  article  of  trade,  manufacture,  or 
use  bought  and  sold  in  the  State. ^ 

Mississippi  prohibits  combinations,  contracts,  understandings,  etc., 
expressed  or  implied,  to  limit,  increase,  or  reduce  the  price  of  a 
commodity.* 

Mississippi  requires  the  charter  or  articles  of  association  or  the 
law  under  wliich  a  clearing-house  association  is  organized  to  prohibit 
it  and  its  officers  and  managers  from  attempting  to  make  or  enforce 
any  rule,  regulation,  agreement,  or  understanding  in  respect  to  (a) 
the  fees,  commissions,  or  other  compensation  chargeable  by  or  pay- 
able to  or  to  be  charged  by  or  paid  to  any  member  by  its  customers  or 
otherwise  for  the  collection  by  or  through  such  member  or  its  agent 
or  correspondent  of  checks,  drafts,  notes,  or  bills  of  exchange  drawn 
upon  banks,  bankers,  trust  companies,  or  others  that  are  not  mem- 
bers of  such  associations  or  that  are  outside  its  boundaries;  (h)  the 
rates  of  discount  or  interest  chargeable  or  to  bo  charged  by  or  to  be 
paid  to  members  on  loans  or  discounts  to  or  for  customers  or  others; 

(c)  the  rates  of  interest  to  be  allowed  by  members  on  deposits;  and 

(d)  the  rates  of  exchange.* 

Missouri  prohibits  pools,  agreements,  etc.,  to  regulate,  control,  or 
fix  the  price  of  any  article  of  manufacture,  mechanism,  commodity, 
etc.,  or  anytliing  whatever  bought  and  sold,  or  the  price  to  be  paid 
for  property  insurance,  or  to  maintain  said  price  when  so  regulated 
or  fixed. ^     Also  all  agreements  or  contracts,  designed  or  made  Avith  a 

1  Indiana,  Stats.,  sec.  3S78.  « 

2  Michigan,  P.  A.  1905,  No.  229,  sec.  1. 

3  Minnesota,  Stats.  (1913),  sec.  3973. 

■•  Mississippi,  Code  1906,  sec.  5002,  as  amended  by  I,aws  1908,  chap.  119,  sec.  1. 

Barataria  Canning  Co.  v.  Joulian,  80  Miss.,  555  {1902) .—The.  defendant  contracted  to  sell  to  plaintiff,  a 
competing  manufacturer,  all  the  cove  oysters  which  he  should  pack  during  certain  months  except  tlvree 
carloads  per  month,  and  further  agreed  that  these  tliree  carloads  should  not  be  sold  at  a  lower  price  than  tliat 
offered  to  the  trade  by  the  plaintiff.  The  contract  was  held  void  as  an  agreement  to  limit  the  price  of  a 
commodity  within  the  prohibition  of  sections  4437,  4438,  Code,  1892  (substantially  similar  to  act  cited). 

=  Mississippi,  Laws  1914,  chap.  124,  sec.  65. 

«  Missouri,  Rev.  Stats.,  chap.  98,  sec.  10299,  as  amended  in  1913. 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  175 

view  to  increase,  or  which  tend  to  increase,  the  market  price  of  any 
product,  commodity,  or  thing,  or  the  price  of  property  insurance.^ 

Montana  prohibits  any  person,  corporation,  etc.,  directly  or 
indirectly,  from  combining  or  forming  any  trust,  or  making  any 
contract,  for  the  purpose  of  fixing  the  price  of  any  article  of  com- 
merce, or  product  of  the  soil,  for  consumption  by  the  people.  The 
statute  provides  that  "article  of  commerce"  shall  include  gas,  water, 
water  power,  electric  fight,  and  electric  power.^  It  is  also  unlawful 
for  warehousemen  to  enter  into  any  contract,  agreement,  combina- 
tion or  understanding  with  any  other  warehousemen  at  any  railway 
station,  whereby  the  price  to  be  paid  for  any  Idnd  of  grain  at  such  sta- 
tion shall  be  fixed  or  in  any  manner  affected.^ 

1  Missouri,  R.  S.,  chap.  98,  sec.  10301,  as  amended  in  1913. 

State  V.  Firemen's  Fund  Ins.  Co.  et  al.,  52  S.  W.,  695  (Supreme  Court  of  Missouri,  /S99).— Foreign  fire 
insurance  companies  doing  business  in  St.  Joseph  subscribed  for  the  rate  books  issued  bj'  one  who  had  fixed 
rates  for  a  former  association.  The  agents  of  the  companies  formed  a  "social  club,"  and  employed  as  secre- 
tary a  man  who  had  formerly  been  employed  by  the  one  who  issued  the  rate  boolcs.  To  prevent  rebates  all 
agents  submitted  their  monthly  statements  to  the  secretary  of  the  club.  Each  policy  written  by  an  agent 
was  put  in  an  unsealed  envelope,  addressed  to  liis  company,  and  turned  over  to  the  secretary  of  the  club, 
who  compared  it  with  the  rate  book,  and  if  the  premium  charged  did  not  correspond  therewith,  the  agent 
was  called  upon  for  an  explanation.  The  members  of  tlie  club  agreed  to  abide  by  the  rates  fixed,  and  fines 
were  provided  for  departures  from  these  rates.  Held,  that  the  club  was  a  pool  or  trust,  under  the  act  of 
1897,  section  l  (similar  to  act  cited),  and  that  said  companies  had  forfeited  their  right  to  do  business  in  the 
State. 

State  V.  Continental  Tobacco  Co.,  177  Mo.,  1  (1903). — Proceeding  to  forfeit  right  to  do  business  in  the  State. 
Among  other  things  it  was  alleged  that  the  Continental  Tobacco  Co.  purchased  the  business  of  a  competitor 
and  closed  the  factory.  Held,  that  tlio  antitrust  law  of  1897  which  prohibits  any  corporation,  etc.,  from 
creating  or  entering  into  any  pool,  trust  agreement,  etc.,  with  any  other  corporation,  etc.,  to  regulate  or  fix 
the  price  of  any  article  of  manufacture  or  to  maintain  such  price  when  so  fixed  and  regulated,  was  not 
broad  enough  to  prohibit  one  corporation,  in  good  faith,  in  the  legitimate  pursuit  of  its  business,  from 
purchasing  the  assets  of  another  corporation  in  a  similar  business. 

Stitev.  Armour  Packing  Co.  et  al.,  173  Mo.,  356  {1903).— Q,uo  warranto  proceedings  to  oust  certain  packers 
from  doing  business  in  State.  AVholesale  meat  dealers  selling  from  6.5  to  80  per  cent  of  all  dressed  beef  and 
from  50  to  60  per  cent  of  all  dressed  pork  in  St.  Joseph,  St.  Louis,  and  Kansas  City  formed  a  voluntary 
association  which  fixed  and  controlled  prices  and  apportioned  territory.  Held,  a  violation  of  antitrust  law 
and  defendants  fined,  subject  to  ouster  if  fine  was  not  paid. 

State  V.  Assurance  Companies,  251  Mo.,  278  (/9/3).— Attorney  general  in  an  information  in  nature  of 
quo  warranto  charged  that  certain  foreign  fire-insurance  companies  agreed  to  unitedly  withdraw  from 
the  State  on  a  certain  day  and  to  cease,  by  concerted  movement,  to  write  insurance  in  the  State.  On 
demurrer,  held  that  respondents  had  no  legal  right,  by  agreement,  to  withdraw  in  a  body  or  to  cancel  their 
policies  in  pursuance  of  agreement;  that  the  information  stated  a  good  cause  of  a'tion;  and  that  the  court 
had  jurisdiction  to  issue  a  temporary  injunction  in  aid  of  or  ancillary  to  a  pending  quo  warranto  writ, 
restraining  said  companies  from  withdrawing  from  the  State  and  otherwise  doing  irreparable  injury  and 
canceling  existing  policies. 

Slate  V.  Polar  M''ave  Ice  &  Fuel  Co.,  169  S.  W.,  126  ( Mo.,  f9/.J).— The  defendant  corporation  was  organized 
to  take  over  the  business  of  seven  companies  engaged  in  furnishing  ice  in  St.  Louis .  Tliree  of  the  companies 
were  wholesalers  and  the  remainder  retailers.  The  wholesalers  controlled  about  20  per  cent  of  the  whole- 
sale trade  of  tlie  city,  and  tlie  retailers  about  40  to  50  per  cent  of  the  retail  trade.  By  a  series  of  contracts 
and  paper  payments  without  tlic  actual  payment  of  any  money,  the  stock  of  the  seven  companies  was  ex- 
changed for  stock  of  the  defendant  corporation.  In  quo  warranto  proceedings,  it  was  alleged  that  the  seven 
companies,  before  the  forming  of  the  defendant  corporation,  had  a  combination  whereby  they  fixed  and 
mivintained  the  wholesale  and  retail  prices  of  ice;  and  that  the  defendant  ( orporation  was  formed  to  enable 
t'.iem  more  easily  to  fix  and  mamtain  the  pri-es  and  control  the  i'-e  trade  in  St.  Louis.^  A  referee  recom- 
mended judgment  for  defendant,  but  on  exceptions  by  the  State  the  circuit  court  of  St.  Louis  disapproved 
the  findings  and  rendered  a  judgment  ousting  defendant  of  its  charter  rights,  holding  that  its  organization 
and  incoriJoration  was  a  violation  of  the  Missouri  antitrust  statute  (Rev.  Stats.,  sec.  10301).  On  appeal  the 
state  supreme  court  affirmed  the  decision,  but  modified  the  judgment  by  making  the  ouster  con- 
ditional. 

2  Montana,  Laws  1909,  chap.  97,  sec.  1. 

3  Montana,  Laws  1915,  chap.  69,  sec.  1. 


176  EEPOET  OF   THE   COMMISSIONER  OF   COEPORATIONS. 

New  Mexico  prohibits  contracts  or  combinations  having  for  their 
object  or  which  shall  operate  to  control  the  price  of  any  article  of 
manufacture  or  product  of  the  soil  or  mine.^ 

New  York  proliibits  contracts,  agreements,  etc.,  whereby  compe- 
tition in  the  State  in  the  price  of  any  article  or  commodity  of  com- 
mon use  is  or  may  be  restrained  or  prevented;^  and  conspiracies  to 
commit  any  act  injurious  to  trade  or  commerce.^     Recent  statutes 

1  New  Mexico,  C.  L.  1897,  sec.  1292. 

2  New  York,  Gen.  Business  Law,  sec.  340. 

Straus  V.  American  Publishers'  Association,  177  N.  Y.,  47S  {1003);  193  N.  Y.,  Jfi6;  199  N.  Y.,  6i8,-  231 
U.  S.  222  (1913). — The  American  Publisliers'  Association  was  composed  of  about  75  per  cent  of  the 
publishers  of  copyrighted  and  uneopyrighted  books  in  tlie  United  States,  and  the  American  Booksellers' 
Association  included  a  majority  of  the  booksellers  throughout  the  United  States.  The  associations  adopted 
resolutions  and  made  agreements  obligating  members  to  sell  copyrighted  books  only  to  those  maintaining 
retail  pri-es  on  such  books.  Plaintiff  in  error,  havuig  cut  prices,  was  boycotted  by  members  of 
the  association,  and  brought  suit,  praying  that  the  combination  and  agreements  be  declared  unlawful  and 
that  defendants  be  enjoined  from  acting  thereunder  or  accomplishing  the  purpose  thereof,  and  for  damages. 
The  Court  of  Appeals  of  New  York  held  that  the  agreement  as  to  copyrighted  books  was  not  illegal  because 
of  the  copyright  laws  of  the  United  States,  but  that  as  to  uneopyrighted  books  it  was  a  violation  of  State 
antitrust  law.  The  Supreme  Court  of  the  United  States  held  that  the  court  "erred  in  holding  that  the 
agreement  was  justified  by  the  copyright  act,  and  was  not  witliin  the  denunciation  of  the  Sherman  Act, 
and  in  denying,  for  that  reason  alone,  the  right  of  the  plaintiffs  in  error  to  recover  under  the  State  act  as  to 

copyrighted  books." 

Paine  Lumber  Co.,  Ltd.,  etal.  v.  Neal  et  ah,  212  Fed.,  259  (/9i.j).— Complainants,  manufacturers  of  wood 
products,  alleged  that  the  defendants,  composed  of  officers  and  agents  of  the  United  Brotherhood  of 
Carpenters  and  Joiners  of  America,  and  of  the  Joint  District  Council  of  New  York  and  vicinity  of  the 
United  Brotherhood  of  Carpenters  and  Joiners  of  America,  certain  union  manufacturers  of  wood  products, 
and  a  number  of  master  carpenters,  entered  into  agreements  which,  among  other  thU3gs,  provided  that 
"  There  shall  be  no  restrictions  against  the  use  of  any  manufactured  material  except  non-union  or  prison- 
made,''  and  that  in  pursuance  of  such  agreements  defendants  had  prevented  the  free  sale  and  use  of  com- 
plainants' goods  because  they  did  not  run  so-called  union  shops.  The  court  held  the  agreements  to  be  in 
violation  of  the  Sherman  Antitrust  Law  and  the  New  York  State  antitrust  law  (Gen.  Business  Law,  sec. 
310),  and,  in  expressing  an  opinion  in  regard  to  whether  article  54,  section  580  of  the  New  York  Penal  Law 
applied  to  these  acts,  stated  that  the  gist  of  the  offense  is  an  agreement  to  prevent  competition  regardless 
of  the  motive  of  the  parties;  the  prevention  of  competition  in  business  being  an  "act  injurious  to  trade" 
within  the  statute.  However,  relief  by  injunction  was  denied  on  the  ground  that  such  relief  was  not 
available  to  a  private  suitor  to  correct  a  general  business  situation  in  the  case  of  employers  or  a  general 
trade  situation  in  the  case  of  employees,  and  that  there  was  ample  remedy  at  law.  ( Aflarmed  by  the  Cir- 
cuit Court  of  Appeals,  214  Fed.,  82  [1014].) 

3  N.  Y.  Penal  Law,  Art.  LIV,  sec.  580. 

People  Y.  Sheldon  et  ah,  139  N.  Y.,2b\,  ()S93).— This  case  was  decided  under  a  section  (now  PenalCode,  art. 
54,  sees.  580-6)  prohibiting  conspiracies  to  commit  any  act  injurious  to  trade  or  commerce,  etc.  Coal 
dealers  of  Lockport  organized  the  Lockport  Coal  Exchange,  raised  prices  75  cents  per  ton,  and  eliminated 
competition.  Held,  no  error  to  instruct  jury  that  if  the  purpose  of  the  agreement  was  to  prevent  com- 
petition in  the  price  of  coal  between  retail  dealers  it  was  illegal  and  justified  the  conviction  of  the  defend- 
ants. Held  further,  that  these  provisions  required  the  State  not  only  to  show  an  agreement  but  an  overt 
act— in  this  case  the  raising  of  the  price  of  coal. 

Cummings  v.  Union  Blue  Stone  Co.  et  al.,  16%  N.  Y.,  401  (1900).— The  Blue  Stone  Association  was  formed 
by  15  dealers  to  prevent  competition.  The  association  designated  the  Blue  Stone  Co.,  one  of  its  members, 
to  act  as  sales  agent  for  all  bluestone.  Sales  were  apportioned  among  producers  according  to  a  schedule, 
and  prices  v."ere  increased.  One  of  the  parties  sued  the  company  for  breach  of  the  contract,  which  was 
held  void  as  contrary  to  public  policy.  Held,  further,  that  the  scope  of  the  contract,  and  not  the  possible 
self-restraint  of  the  parties  to  it,  is  the  test  of  its  validity,  and  that  in  a  civil  action  it  need  not  be  shown 
that  the  article  was  one  of  prime  necessity. 

People  v.  Buyer  et  al.,  US  N.  Y.  Supp.,  7^8  (1914).— The  New  York  Live  Poultry  Dealers'  Protective 
Association,  composed  of  the  principal  poultry  receivers  in  the  New  York  market  and  controlling  about 
90  per  cent  of  the  poultry  shipped  to  that  city,  and  an  association  of  poultry  jobbers,  including  nearly 
all  of  the  large  wholesale  dealers,  formed  an  agreement  for  pooling  their  profits.  The  agreement,  among 
other  things,  provided  that  the  members  of  the  jobbers  association  should  purchase  all  of  the  poultry  sent 
to  the  receivers  at  prices  to  be  agreed  upon  each  week.  Independent  receivers  who  failed  to  observe  prices 
fixed  by  the  association  were  embarrassed  by  having  the  members  of  the  association  purchase  all  poultry 
intended  to  be  shipped  them;  and  independent  dealers  who  did  not  maintain  association  prices  were  either 
bought  out  or  competing  markets  were  established  near  by  and  price  cutting  resorted  to  for  the  purpose 
of  embarrassing  them.  Nineteen  of  the  parties  were  indicted  for  conspiracy  under  sec.  580  of  the  New 
York  Penal  Law  (Consolidated  Laws,  chap.  40).  and  of  these  13  were  found  guilty  and  sentenced  to  tliree 
months'  imprisomnent  and  a  fine  of  $500  each  imposed.  On  appeal  to  the  appellate  division  of  the  Supreme 
Court  the  conviction  was  aflOrmed  (160  N.  Y.  App.  Div.,  542).  Later  it  was  also  affirmed  by  the  Court  of 
Appeals,  215  N.  Y.,  48. 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  177 

also  provide  that  it  shall  be  a  misdemeanor  for  any  buyer  of  milk 
for  sliipment/  or  commission  merchant  dealing  in  farm  produce,^  to 
enter  into  any  combination  to  fix  prices;  and  provide  fm-ther  that 
for  such  cause  the  commissioner  of  agriculture  may  decline  to  grant 
or  may  revoke  a  license  to  conduct  such  business. 

South  Dakota  prohibits  combinations  of  capital  or  skill  (1)  to 
increase  or  reduce  the  price  of  commodities;  (2)  to  fix  any  standard 
or  figure  whereby  the  price  to  the  public  shall  be  in  any  maimer 
estal)lished  or  controlled. 

The  statute  also  makes  it  unlawful  (1)  for  any  person  or  persons, 
corporation,  etc.,  to  fix  the  price  of  any  produce  or  commodity  so  as 
to  obstruct  or  delay  or  prevent  competition  in  such  production  or 
transportation,  or  in  the  purchase  or  sale  of  any  product  or  com- 
modity; (2)  for  any  person,  corporation,  etc.,  in  another  State  to 
directly  or  otherwise  combine,  agree,  etc.,  with  any  person,  corpo- 
ration, etc.,  in  the  State,  or  for  any  person,  corporation,  etc.,  in  the 
State  so  to  combine,  agree,  etc.,  with  any  other  person,  corporation, 
etc.,  witliin  or  without  the  State,  or  for  any  two  persons,  corpora- 
tions, etc.,  organized  or  existing  without  the  State  and  doing  business 
within  the  State,  so  to  combine,  agree,  etc.,  to  fix  prices  of  any 
product  or  commodity  so  as  to  obstruct  or  prevent  competition  in 
the  purchase  or  sale  of  any  product  or  commodity.^ 

Kansas  and  Nebraska  proliibit  agreements,  contracts,  etc.,  be- 
tween grain  dealers  or  between  grain  dealers  and  any  other  person, 
corporation,  etc.,  to  fix  the  price  which  any  grain  dealer  or  dealers, 
or  any  other  person,  shall  pay  for  grain,  hogs,  cattle,  or  stock.* 

Nebraska  prohibits  also  agreements,  contracts,  etc.,  between  lum- 
ber or  coal  dealers  or  between  such  dealers  and  an^^  other  person, 
corporation,  etc.,  to  fix  the  price  or  minimum  price  at  which  any 
lum])er  or  coal  dealer,  or  dealers,  or  any  other  person,  shall  sell 
lumber  or  coal.^ 

Another  section  of  the  Nebraska  statutes  prohibits  any  combina- 
tion or  agreement  between  fire  insurance  companies  transacting  busi- 
ness in  the  State,  or  their  officers  or  employees,  relatmg  to  rates, 
agents'  commissions,  or  the  manner  of  transacting  business.^ 

California  prohibits  the  issuance  or  ownership  of  trust  certificates, 
or  entering  into  any  contract,  combination,  etc.,  the  purpose  and 
effect  of  which  shall  be  to  place  the  management  or  control  of  such 
combinations  or  the  manufactured  product  thereof  in  the  hands  of 

1  N.  Y.  Laws  1913,  chap.  408,  sees.  57,  61. 

2  Idem,  chap.  457,  sees.  286,  289. 

3  South  Dakota,  Laws  1909,  chap.  224,  sees.  1-5. 

*  Kansas,  Laws  1SS7,  chap.  175,  sec.  1;  G.  S.,  sec.  5182;  Nebraska,  R.  S.  (1913),  sec.  8858. 

5  Nebraska,  R.  S.  (1913),  sec.  4026. 

6  Idem,  sec.  4022. 

3(X)35°— 16 12 


178  EEPOKT   OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

any  trustee,  with  the  intent  to  limit  or  fix  the  price  of  any  article  of 
commerce,  use,  or  consumption.^ 

Michigan  and  Ohio  have  laws  similar  to  this  California  statute.^ 

The  law  of  Oklahoma  varies  from  that  of  California  principally  in 
the  use  of  the  disjunctive  ''or"  between  "purpose"  and  "effect"  and, 
after  the  word  "combinations,"  of  the  words  "or  the  conduct  or  the 
operation  of  the  same,  or  the  output  of  manufactured  product  thereof, 
or  the  marketing  of  the  same  in  the  hands  of  any  trust  or  trustees, 
holding  corporation  or  association,  firm,  or  committee,  with  the  in- 
tent" etc.3 

Illinois,  Iowa,  Kansas,  Missouri,  and  Utah  have  statutes  similar 
to  the  California  act,  the  principal  difference  being  that  the  prohibi- 
tion against  the  issuance  or  ownership  of  trust  certificates  is  limited 
to  "corporations,"  and  one  of  the  parties  to  the  prohibited  combina- 
tions, contracts,  etc.,  must  be  a  corporation,  or  its  officers,  directors, 
stockholders,  etc.^ 

A  California  statute  provides  that  no  person,  corporation,  etc., 
appropriating  water  for  power  purposes  shall  enter  into  any  agree- 
ment, combination,  or  trust  in  restraint  of  trade  contrary  to  law, 
and  if  any  works  owned  or  operated  by  any  Hcensee  under  this  act 
shall  be  controlled  in  any  manner  whatsoever  so  that  it  or  they  form 
a  part  of  or  in  any  way  effect  any  combination,  or  if  it  or  tliey  are  in 
any  wise  controlled  by  any  combination  or  conspiracy  to  increase  or 
prevent  the  lowering  of  the  price  at  which  electricity  or  electrical  or 
other  power  is  to  be  sold,  rented,  or  distributed,  all  rights  to  the 
appropriation  of  water  shall  be  forfeited.^ 

In  Washington,  corporations  not  formed  for  profit  are  prohibited 
from  entering  into  any  agreement  or  combination  to  fix  or  establish 
or  wliich  shall  attempt  to  ILx  or  establish  the  price  of  any  commodity.^ 

Washington  also  prohil)its  commission  merchants  from  entering 
into  any  combination,  conspiracy,  or  pool  for  the  purpose  of  artifi- 
cially raising  or  depressing  the  market  price  of  any  farm,  dairy, 
orchard,  or  garden  produce,  or  of  excluding  from  the  market  the 
produce  of  any  particular  locaHty  grown  or  manufactured  by  any 
person  within  the  State.'' 

Alabama  prohibits  produce  merchants  from  entering  into  any 
combination  to  fix  prices.^ 

1  California,  Laws  1907,  chap.  530,  sec.  10. 
=  Michigan,  P.  A.  1899,  No.  255,  sec.  10;  Ohio,  0.  C,  sec.  6392. 
3  Oklahoma,  LawsJ90S,  chap.  83,  sec.  10. 

i  Illinois,  Laws  1891,  p.  20G,  as  amended  by  laws  of  1893  and  1907,  sec.  2;  Iowa,  Code,  sec.  50g1;  "!ldansas, 
Laws  1889,  chap.  257,  sec.  2;  Missouri,  11.  S.,chap.  9S,sec.  10306,  as  amended  in  1913;  Utah, Stats.,  sec.  1754 
6  California,  Laws  1911,  chap.  400,  sec.  28. 
6  Washington,  Remington  &  Ballinger's  Code  (1910),  sec.  3762. 
'  Idem,  sec.  7032. 
»  Alabama,  Laws  1915,  p.  162. 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  179 

Section  7.  Limitation  of  output. 

Agreements  or  combinations  for  the  purpose  of  limiting  output  are 
prohibited  by  the  constitutions  of  6  States  (Arizona,  Idaho,  IMontana, 
South  Dakota,  Washington,  and  Wyoming)  and  tlie  statutes  of  28 
(Alabama,  Arizona,  Arkansas,  CaHfornia,  Connecticut,  Idaho,  Illinois, 
Indiana,  Iowa,  Kansas,  Louisiana,  Michigan,  ^Mumesota,  Mississippi, 
Missouri,  Montana,  Nebraska,  New  Jersey,  New  Mexico,  New  York, 
North  Dakota,  Ohio,  Oklahoma,  South  Carolina,  South  Dakota,  Texas, 
Utah,  and  Wisconsin). 

Constitutional  prohibitions. — The  constitutions  of  Idaho  and 
Montana,  in  substance,  prohibit  persons,  corporations,  etc.,  from 
formmg  a  trust,  or  making  any  contract  for  the  purpose  of  regulathig 
the  production  of  any  article  of  commerce,  or  of  the  produce  of  the 
soil,  or  of  consumption  by  the  people.*  In  Montana  the  words  "  of  the 
product  of  the  soil,  for  consumption  by  the  people,"  are  used. 

In  substance,  the  constitutions  of  South  Dakota  and  Washington 
prohibit  corporations,  associations,  etc.,  from  combining  or  makmg 
any  contract  with  any  other  corporation  or  association  to  hmit  the 
production  of  any  product  or  commodity  so  as  to  prevent  competition 
in  such  production.^ 

The  constitution  of  Arizona  (Ai-t.  XIV,  sec.  15)  prohibits  corpo- 
rations, copartnerships,  or  associations  of  persons  in  the  State  from 
combmmg  or  making  any  contract  with  any  incorporated  company, 
copartnership,  etc.,  or  m  any  maimer  whatever  to  limit  the  production 
of  any  product  or  commodity. 

The  constitution  of  Wyomuig  (Art.  X,  sec.  8)  prohibits  the  consoli- 
dation or  combmation  of  corporations  to  control  or  influence  pro- 
ductions or  j)ricos  thereof. 

Statutory  prohibitions. — The  laws  of  CaHfornia  and  9  other 
States  (Alabama,  lUinois,  Iowa,  Kansas,  Michigan,  Missouri,  Oliio, 
Oklahoma,  and  Utah),  broadly  speaking,  prohibit  the  issuance  or 
ownership  of  trust  certificates,  and  combinations,  contracts,  or  agree- 
ments the  purpose  and/or  effect  of  which  shall  be  to  place  the  man- 
agement or  control  of  such  combination  or  the  manufactured  product 
thereof  in  the  hands  of  any  trustee  with  the  intent  to  lessen  the  pro- 
duction and/or  sale  of  any  article  of  commerce,  use,  or  consumption, 
or  to  prevent,  restrict,  or  diminish  the  manufacture  or  output  of  any 
such  article.^ 

The  law  of  Alabama  does  not  apply  to  trust  certificates,  and  other 
variations  from  the  above  form  appear  in  the  laws  of  other  States, 

1  Idaho,  Constitution,  Art.  XI,  sec.  IS;  Montana,  Constitution,  Art.  XV,  sec.  20. 

2  South  Dakota,  Constitution,  Art.  XVII,  sec.  20;  Washington,  Constitution,  Art.  XII,  sec.  22. 

3  California,  Laws  1907,  chap  530,  sec.  10;  Alabama,  Stats.,  sec.  7580;  Illinois,  act  of  June  11,  1891,  as 
amended  to  1907,  sec.  2;  Iowa,  Code,  sec.  5061;  Kansas,  Laws  18S9,  chap.  257,  sec.  2;  Michigan,  P.  A.  1899, 
No.  255,  sec.  10;  Missouri,  R.  S.,chap.  98,  sec.  10306,  as  amended  in  1913;  Ohio,  G.  C,  sec.  6392;  Okla- 
homa, act  of  June  10,  1908,  sec.  10;  Utah,  Stats.,  sec.  1754. 


180  EEPOKT  OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

especially  Oklahoma.  There  is,  however,  considerable  similarity  in 
form  and  substance. 

The  laws  of  Arkansas  and  other  States  (Alabama,  Illinois,  Iowa, 
Mississippi,  Missouri,  South  Carohna,  Utah,  Wisconsin,  and  Lou- 
isiana), in  substance,  prohibit  pools,  agreements,  combinations,  etc., 
to  fix  or  limit  in  the  State  or  elsewhere  the  amount  or  quantity  of 
any  article  of  manufacture,  mechanism,  commodity,  convenience,  re- 
pair, any  product  of  mining,  or  any  article  or  thing  whatsoever.^ 

In  Alabama  and  Mississippi  the  words  "or  elsewhere"  are  omitted. 

In  Missouri  and  South  Carolina  the  words  "in  the  State  or  else- 
where" are  omitted. 

The  laws  of  lUinois,  Iowa,  and  Utah  apply  to  "any  article,  com- 
modity or  merchandise  to  be  manufactured,  mined,  produced  or 
sold"  in  the  State. 

The  laws  of  Wisconsin  apply  to  "any  article  or  commodity  in  general 
use  in  this  State  or  constituting  a  subject  of  trade  or  commerce 
therein"  to  be  manufactured,  mined,  produced,  or  sold  in  the  State. 

A  statute  of  Louisiana  prohibits  every  contract,  combmation  in 
the  form  of  trust,  or  conspiracy  in  restraint  of  trade  or  commerce  or 
to  fix  or  Hmit  the  amount  or  quantity  of  any  article,  commodity,  or 
merchandise  to  be  manufactured,  mined,  produced,  or  sold  in  the 
State.2 

Although  the  form  of  the  statutes  varies,  other  ^States  ^  (Arizona, 
Louisiana,  Michigan,  IVIississippi,  New  Jersey,  North  Dakota,  Ohio, 
Nebraska,  California,  South  Dakota,  Indiana,  and  Texas)  prohibit 
combinations  to  Hmit  output. 

The  following  extracts  show  that  there  is  a  slight  difference  in  the 
scope  of  these  acts: 

Prohibit  combinations  to  Umit  the  production  of  commodities  (South 
Dakota). 

To  limit,  increase  or  reduce  the  production  or  output  of  a  commod- 
ity (Mishissippi). 

To  limit  or  reduce  the  production  of  merchandise  or  any  commodity 
(Michigan,  New  Jersey,  Ohio,  California,  and  Nebraska). 

To  hmit  or  reduce  the  production  of  property,  merchandise,  or  com- 
modities (North  Dakota). 

1  Arkansas,  act  of  1905,  as  amended  Mar.  12,  1913,  sec.  1;  Alabama,  Code  1907,  sec.  7579;  lUinois,  act  of 
June  11, 1891,  as  amended  to  1907,  seel;  Iowa,  Code,  sec. 5060;  Mississippi,  Code  190(5,  ,sec.5002,  as  amended 
by  Laws  1908,  cbap.  119,  sec.  1;  Missouri,  R.  S.,  cliap.  98,  sec.  10299,  as  amended  in  1913;  South  Carolina, 
Laws  1902,  No.  574,  sec.  1;  Utah,  Stats.,  sec.  1753;  Wisconsin,  Stats.  (1913),  sec.  1791J;  Louisiana,  Acts 
1890,  No.  86. 

2  Louisiana,  Acts  1890,  No.  86. 

3  Arizona,  Laws  1912,  chap.  73,  sec.  1;  Louisiana,  Acts  1892,  No.  90;  Michigan,  P.  A.  1S99,  No.  255,  seel; 
Mississippi,  Code  1906,  sec.  5002,  as  amended  by  Laws  1908,  chap.  119,  sec.  1;  New  Jersey,  Laws  1913,  chap. 
13,  sec.  1;  North  Dakota,  Laws  1907,  chap.  259,  sec.  2;  Ohio,  0.  C,  sec.  6391;  Nebraska,  bitats.,  sec.  6281; 
California,  Laws  1907,  chap.  530,  sec.  1;  South  Dakota,  Laws,  1909,  chap.  224,  sec.  1;  Indiana,  K.  S.  1908, 
sec.  3866;  Texas,  Laws,  1903,  Chap.  XCIV,  sec.  1. 


TRUST  LAWS  AND  UNFAIR   COMPETITION".  181 

To  limit  or  reduce  the  production  of  merchandise,  produce,  or 
commodities  (Louisiana). 

To  limit  the  production  of  merchandise,  products,  or  commodities 
(Arizona). 

To  Umit  or  reduce  the  production  of  merchandise  or  any  com- 
mocUty,  natural  or  artificial  (Indiana). 

To  regulate,  fix,  or  hmit  the  output  of  any  article  or  commodity 
wliich  may  be  manufactured,  mined,  produced,  or  sold,  or  the  amount 
of  insurance  wliich  may  be  undertaken,  or  the  amount  of  work  that 
may  be  done  in  the  preparation  of  any  product  for  market  or  trans- 
portation (Texas). 

Idaho  prohibits  corporations,  associations,  etc.,  from  combining  or 
contracting  with  any  corporation  for  the  purpose  of  regulating  the 
production  of  any  article  of  commerce  or  of  produce  of  the  soil  or 
of  consumption  by  the  people.^ 

Montana  in  a  substantially  similar  act  includes  "persons,"  and 
includes  in  the  phrase  "articles  of  commerce"  gas,  water,  water 
power,  electric  light,  and  electric  power,  for  whatever  purpose  used  or 
employed.^ 

Minnesota  prohibits  combinations,  understandings,  etc.,  which 
limit  or  tend  to  hmit  the  production  of  any  article  of  trade,  manufac- 
ture, or  use,  bought  and  sold  within  the  State.-'' 

New  Mexico  prohibits  every  contract  or  combination  ha\'ing  for  its 
object  or  which  shall  operate  to  control  the  quantity  of  any  article 
of  manufactiu-e  or  product  of  the  soil  or  mine.* 

New  York  prohibits  every  contract,  arrangement,  combination,  etc., 
whereby  competition  in  the  State  in  the  supply  of  any  article  or 
commodity  of  common  use  is  or  may  be  restrained  or  prevented.^ 

Connecticut  prohibits  conspiracies,  combinations,  or  agreements  for 
the  purpose  of  Imiiting  or  rcstrammg  the  production,  manufacture, 
shipment,  or  sale  of  ice,  coal,  or  any  other  necessity  of  life,  for  the 
purpose  of  iucreasuig  the  price  thereof.^ 

California  prohibits  the  destruction  of  "animal,  vegetable  or  other 
stuffs,  products  or  articles,  in  restraint  of  trade  which  are  customary 
food  for  human  bemgs  and  are  in  fit  sanitary  condition  to  be  used  as 
such."' 

Another  California  statute  provides  that  no  person,  corporation, 
etc.,  appropriating  water  for  power  purposes  shall  enter  into  any 
agreement,  combination,  or  trust  in  restraint  of  trade  contrary  to  law, 
and  if  any  worlds  o^vned  or  operated  by  any  licensee  un(U'r  this  act 
shall  be  controlled  in  any  manner  whatsoever  so  that  it  or  tluy  form  a 
part  of  or  in  any  way  effect  any  combination,  or  if  it  or  they  are  in 

•  Idaho,  Laws  1909,  act  of  Mar.  11, 1909,  sec.  1.  »  Xew  York,  Cons.  Laws,  chap.  20,  sec.  340. 
2  Montana,  Laws  1909,  chap.  97,  sec.  1.  «  Connecticut,  P.  A.  1911,  chap.  185. 

'  Minnesota,  Stats.  (1913),  sec.  8973.  i  California,  Laws  1913,  chap.  233,  sec.  1. 

*  Xew  Mexico,  C.  L.  1S97,  see.  1292. 


182  EEPORT   OF    THE    COMMISSIOlSrER   OF    COEPOEATIONS. 

any  wise  controlled  by  any  combination  or  conspiracy  to  limit  the 
output  of  electricity  or  electrical  or  other  power,  all  rights  to  the 
appropriation  of  water  shall  be  forfeited.^ 

Wisconsin,  by  a  very  similar  provision,  prohibits  combinations, 
contracts,  and  conspiracies  to  limit  the  output  of  hydraulic  or  hydro- 
electric power  and  provides  that  the  State  may  take  possession  of  the 
improvement  as  in  cases  of  receivership  and  that  the  members  of 
the  Railroad  Commission  shall  act  as  receivers  during  such  period  as 
the  court  may  determine.^ 

In  Washington,  corporations  not  formed  for  profit  are  prohibited 
from  entering  into  any  agreement  or  combination  to  limit  or  regulate, 
or  to  attempt  to  Imiit  or  regulate,  the  production  or  distribution  of 
any  commodity.^ 

Section  8.  Division  of  territory. 

North  Carolina  prohibits  any  person,  corporation,  etc.,  engaged  in 
buying  or  selling  anything  of  value  in  the  State  from  having  any 
agreement  or  understanding,  express  or  implied,  not  to  buy  or  sell 
within  certain  territorial  limits  within  the  State,  with  intention  of 
preventing  competition  in  selling,  or  to  fix  the  price  or  prevent  com- 
petition in  buying  said  things  within  these  limits.  The  act  does  not 
prohibit  an  agent  from  representing  more  than  one  principal,  but 
does  not  authorize  two  or  more  principals  to  employ  a  common 
agent  for  the  purpose  of  suppressing  competition  or  lowering  prices. 
It  is  provided  further  that  nothing  herein  shall  prevent  a  person, 
firm,  or  corporation  from  selling  his  or  its  business  and  good  will 
to  a  competitor  and  agreeing  not  to  compete  with  the  purchaser  in  a 
limited  territory,  as  is  now  allowed  under  the  common  law,  pro- 
vided that  such  agreement  shall  not  violate  the  principles  of  the  com- 
mon law  against  trusts  and  shall  not  violate  the  provisions  of  this 
act.* 

Nebraska  and  Oklahoma  proliibit  any  bridge  contractor  or  bridge 
builder,  or  any  other  person,  corporation,  etc.,  from  entering  an  agree- 
ment, combination,  etc.,  for  the  allotment  of  any  territory  which  any 
bridge  contractor,  person  or  persons,  or  corporation  or  association 
shall  have  for  his  or  its  exclusive  territory.^ 

Texas  prohibits  combinations  of  capital,  skill,  or  acts  to  abstain 
from  engagmg  in  or  continuing  business  or  from  the  purchase  or  sale  of 
merchandise,  produce,  or  commodities  partially  or  entirely  within 
the  State  or  any  portion  thereof.^ 

1  California,  Laws  1911,  chap.  406,  sec.  28. 

2  Wisconsin,  Stats.  1913,  sees.  1596-1672. 

3  Washington,  Remington  &  Ballinger's  Code  (1910),  sec.  3702. 
*  North  Carolina,  Laws  191.3,  chap.  41,  sec.  5  (f). 

5  Nebraska,  R.  S.  (1913),  sec.  4037;  Olclahoma.Comp.  Laws  1909,  sec.  8820. 
8  Texas,  Laws  1903,  Chap.  XCIV,  sec.  1  (7), 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  183 

Section  9.  Eestraints  on  resales. 

Nebraska  proiiibits  combinations  of  capital,  skill,  or  acts  to  estab- 
lish any  pretended  agency  for  making  the  sale  of  any  article  of 
merchandise,  produce,  commodity,  or  manufacture  appear  to  be  for 
the  original  vendor  for  the  purpose  of  enabling  such  vendor  to  con- 
trol the  wholesale  or  retail  price  after  the  title  shall  have  passed  from 
him.*  Another  section  of  the  Nebraska  laws  prohibits  the  sale  of 
any  article  upon  condition  that  it  shall  not  be  sold  again  by  the  pur- 
chaser or  restraining  such  sale  by  the  purchaser.^ 

New  Jersey  prohibits  "  any  merchant,  firm  or  corporation,  for  the 
purpose  of  attracting  trade  for  other  goods,  to  appropriate  for  his  or 
their  owii  ends  a  name,  brand,  trade-mark,  reputation,  or  good  will 
of  any  maker  iii  whose  product  said  merchant,  firm  or  corporation 
deals,  or  to  discriminate  against  the  same,  by  depreciating  the  value 
of  such  products  in  the  public  mind,  or  by  misrepresentation  as  to 
value  or  quality,  or  by  price  inducement,  or  by  unfair  discrimination 
between  buyers,  or  in  any  other  manner  whatsoever,  except  in  cases 
where  said  goods  do  not  carry  any  notice  prohibiting  such  practice 
and  excepting  in  case  of  a  receiver's  sale,  or  a  sale  by  a  concern 
going  out  of  business."  Violation  of  this  provision  may  be  enjoined 
and  renders  the  party  liable  to  threefold  damages.'' 

North  Dakota  prohibits  any  combination  of  capital,  skill,  or  acts 
for  the  purpose  of  establishing  any  pretended  agency  to  cover  the 
sale  of  any  property,  article,  or  commodity  of  merchandise,  produce, 
or  manufacture  intended  for  sale,  use,  or  consumption  in  the  State, 
or  to  make  such  sale  appear  to  be  for  the  original  vendor.^ 

1  Nebraska,  R.  S.  (1913),  sec.  4017. 

2  Idem,  sec.  4050. 

3  New  Jersey,  Laws  1913,  chap.  210. 

Ingersollet  al.  v.  Goldstein,  93  Atl.  193  (JV.  /.  Ch.,  /9/5).— Complainants,  manufacturers  of  Ingersoll 
watches,  brought  a  bill  framed  under  chapter  210,  Laws  1913,  to  restrain  defendants  from  advertising  for 
sale  or  from  selling  complainants'  watches  at  a  less  price  than  that  advertised  bj'  the  latter  as  the  price  to 
the  consumer.  Ingersoll  Dollar  Watches  carried  notices  reading  as  follows:  "Mechanism  in  this  watch  is 
covered  by  United  States  patents  and  the  watch  is  licensed  and  sold  under  and  suljject  to  the  following 
conditions  assented  to  by  purcliase  and  controlling  all  sales  and  uses  thereof,  any  violation  of  which  license 
conditions  revokes  and  terminates  all  rights  and  licenses  as  to  this  and  all  other  watches  of  makers  in  vio- 
lator's possession  and  subjects  the  violator  to  suit  for  infringement  of  said  letters  patent:  (1)  Jobbers  may 
sell  only  to  retail  dealers,  may  not  sell  to  any  one  d&signated  by  makers  as  objectionable,  may  not  detach 
or  sell  witliout  this  notice  and  may  sell  only  at  rates  specified  in  schedules  furnished  by  makers.  (2)  Re- 
tailers may  advertise  and  soil  only  to  buyers  for  use  at  one  dollar.  (3)  No  donation,  discount,  rebate, 
premium  or  bonus  may  be  allowed  or  given  in  comiection  with  any  sale  at  wholesale  or  retail.  (4)  It  will 
not  be  offered  as  a  premium  or  bonus  for  or  in  connection  with  the  sale  of  other  goods;  or  included  in  any 
combined  sale.  {!>)  fiuarantee  with  date  of  sale  indorsed  thereon  to  accompany  each  watch."  The  bill 
was  dismissed,  the  court  holding  tliat  at  common  law,  where  the  vendor  sells  his  whole  mterest  or  prop- 
erty in  chattels,  witli  conditions  restricting  the  sale  thereof,  the  title  passes,  but  the  conditions,  lieing 
against  public  policy,  are  void;  that  the  statute  under  consideration,  being  in  derogation  of  the  common 
law,  must  be  strictly  construed;  that  the  watches  did  not  "carry  any  notice  prohibiting''  the  practice 
condemned  Ijy  the  statute,  Init  on  the  contrary  the  notice  was  too  broad  and  forbade  under  certain  penal- 
ties the  sale  under  all  conditions  at  a  price  less  than  that  fixed. 

While  this  report  was  in  press  this  law  was  amended  by  the  omission  of  the  words  "for  the  purpose  of 
attracting  trade  for  other  goods,"  and  the  addition  of  the  following  sentence:  "Tlie  notice  prohibiting 
such  practice  shall  contain  a  copy  of  this  section  and  forbid  the  violation  of  any  of  its  provisions. "  (New 
Jersey,  Laws  191.">,  chap.  376,  approved  .Vpr.  21,  191").) 

4  North  Dakota,  Laws  1907,  chap.  259,  sec.  2. 


184  EEPOET   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

Section  10.  Competitive  methods. 

Exclusive  contracts. — Michigan  prohibits  agi'eements,  under- 
standings, etc.,  requiring  that  any  particuLar  make  or  brand  of  any 
article  of  machinery,  tools,  implements,  veliicles,  or  appliances  used 
in  productive  industry  shall  be  dealt  in  by  either  party  to  the  agree- 
ment to  the  exclusion  of  all  other  makes  or  brands  of  such  articles; 
and  also  prohibits  agreements,  understandings,  etc.,  providing  for 
the  exclusive  sale  of  certain  makes  or  brands  of  manufactured  articles 
of  machinery,  tools,  implements,  vehicles,  or  appliances  used  in  any 
branch  of  productive  industry,  and  stipulatmg  sums  to  be  paid  as 
hquidated  damages  to  either  party  for  every  article  so  sold  of  other 
than  the  specified  make  or  brand. ^ 

North  Carolina  prohibits  sales  of  goods,  wares,  or  merchandise, 
etc.,  directly  or  indirectly  upon  the  condition  that  the  purchaser 
shall  not  deal  in  the  goods,  wares,  etc.,  of  a  competitor  of  the  vendor.^ 

Massachusetts  prohibits  any  person,  corporation,  etc.,  doing  busi- 
ness in  the  State  from  maldng  it  a  condition  of  the  sale  of  goods, 
wares,  or  merchandise  that  the  purchaser  shall  not  deal  in  the  goods, 
etc.,  of  any  other  person,  corporation,  etc.;  but  does  not  prohibit 
the  appomtment  of  sole  agents  for  the  sale  of,  nor  the  maldng  of  con- 
tracts for  the  exclusive  sale  of  goods,  wares,  or  merchandise.^ 

Massachusetts  prohibits  also  any  person,  corporation,  etc.,  from 
makuig  it  a  condition  of  any  sale  or  lease  of  any  tool,  implement, 
appHance,  or  machinery  that  the  purchaser  or  lessee  shall  not  buy, 
lease,  or  use  machinery,  tools,  etc.,  or  material  or  merchandise  of  any 
person,  corporation,  etc.,  other  than  such  vendor,  or  lessor;  but  this 
provision  does  not  impair  the  right,  if  any,  of  the  vendor  or  lessor  of 
any  tool,  macliuiery,  etc.,  protected  by  a  patent  right  vested  in  such 
vendor  or  lessor  to  require  by  virtue  of  such  patent  right  the  vendee 
or  lessee  to  purchase  or  lease  from  such  vendor  or  lessor  such  com- 
ponent and  constituent  parts  of  said  tool,  machuiery,  etc.,  as  the 
vendee  may  thereafter  require  during  the  continuance  of  said  patent 
right.  This  act  does  not  prohibit  the  appointment  of  agents  or  sole 
agents  to  sell  or  lease  machhiery,  tools,  implements,  or  appliances.* 

1  Michigan,  P.  A.  1905,  No.  229,  sec.  2. 

2  North  Carolina,  Laws  1913,  chap.  41,  sec.  5b. 

3  Massachusetts,  R.  L.,  chap.  56,  sec.  1. 

Commonwealth  v.  Strauss,  191  Mass.,  5^5  (/90C).— Defendant,  agent  of  Continental  Tobaeco  Co.,  sold 
tobacco  luider  an  agreement  that  if  the  purchaser  should  not  deal  in  any  other  tobacco  he  would  be  allowed 
a  rebate  of  6  per  cent.  Prices  paid  by  the  purchaser  were  such  that  if  he  did  not  secure  the  rebate,  his  sales 
of  this  tobacco  would  not  show  a  satisfactory  profit.  Held,  that  the  contract  was  illegal,  and  that  the  ex- 
ception in  the  statute  allowing  the  appointment  of  exclusive  sales  agents  did  not  include  such  an  agreement 
nor  was  the  rebate  system  here  practiced  witliin  exception  of  statute.  Held,  fiu-ther,  that  the  law  was  not  in 
contravention  of  articles  1  and  10  of  the  declaration  of  rights  of  the  constitution  of  Massachusetts,  nor  Arti- 
cle I,  section  8,  of  the  Constitution  of  the  United  States,  or  the  foui'teenth  amendment  thereof,  nor  affected 
by  the  Federal  Antitrust  Law. 

^  Massachusetts,  Laws  1907,  chap.  469. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  185 

Kansas  prohibits  a  f)erson,  firm,  corporation,  or  association  of 
persons  doing  business  in  the  State  from  making  it  a  condition  of  the 
sale  of  goods,  wares,  or  merchandise  that  the  purchaser  sliall  not 
sell  or  deal  in  the  goods,  etc.,  of  any  other  person,  firm,  etc.  This 
law  does  not  prohibit  the  appointment  of  agents  or  sole  agents  for 
the  sale  of,  nor  the  making  of  contracts  for  the  exclusive  sale  of,  goods, 
etc.i 

Refusal  to  deal. — Missouri  and  South  Carolina  declare  it  unlaw- 
ful for  any  two  or  more  persons,  corporations,  etc.,  engaged  in  buying 
or  selling  any  article  or  thing  to  enter  into  any  pool,  agreement,  etc., 
to  control  or  limit  the  trade  in  any  article  or  thing,  or  to  limit  com- 
petition in  such  trade  by  refusing  to  buy  from,  or  sell  to,  any  other 
person,  corporation,  etc.,  for  the  reason  that  such  other  person  is  not 
a  member  of  the  pool,  agreement,  etc.,  or  to  boycott,  or  threaten  to 
boycott,  any  person  for  buying  from,  or  selling  to,  any  other  person 
who  is  not  a  member  of  the  pool,  agreement,  etc.^ 

The  Texas  law  is  broader  and  prohibits  (1)  two  or  more  persons, 
corporations,  etc.,  engaged  in  buying  or  selling  any  article  of  merchan- 
dise, produce,  or  commodity  from  entering  into  an  agreement  or 
understanding  to  refuse  to  buy  from  or  sell  to  any  other  person,  cor- 
poration, etc.;  (2)  two  or  more  persons,  corporations,  etc.,  agreeing 
to  boycott  or  tlireaten  to  refuse  to  buy  from  or  sell  to  any  person, 
corporation,  etc.,  for  buying  from  or  selling  to  any  other  person, 
corporation,  etc.^ 

'  Kan.  Gen.  Stats.,  1909,  sec.  1&49. 

2  Missouri,  R.  S.,  chap.  9S,  sec.  10300,  as  amended  in  1913;  South  Carolina,  Laws  1902,  No.  574,  sec.  5. 
Walsh  V.  Association  of  Master  Plumbers,  97  Mo.  App.,  B80(_1902). — Plaintiff  alleged  an  agreement  between 

a  plumbers'  association  and  dealere  and  manufacturers,  whereby  the  latter  agreed  not  to  sell  supplies 
to  otliers  than  members  of  the  association,  and  the  former  to  boycott  any  dealer  selling  to  nonmembers, 
entered  into  for  the  purpose  of  fixing  prices  and  limiting  production  of  such  articles;  alleged  fm'ther  that 
he  had  refused  to  join  association  and  for  that  reason  defendants  refused  to  sell  him  supplies  or  permit 
same  to  be  sold  to  him.  Held,  that  any  remedy  existing  before  the  enactment  of  the  antitrust  law  was 
not  abridged  by  section  8979,  Revised  Statutes  1S99  (substantially  similar  to  act  cited),  making  it  the 
duty  of  the  attorney  general  and  prosecuting  attorneys  under  his  direction  to  iastitute  proceedings  to 
restrain  such  violations;  that  the  agreement  was  unlawful,  and  that  an  injunction  would  lie  to  restrain 
the  parties  to  such  agreement  from  keeping  its  temis  or  demanding  that  they  be  kept,  thus  leaving  the 
defendant  corporations  free  to  deal  or  not  to  deal  with  appellant  as  they  might  choose.  Held,  further, 
that  the  petition  did  not  show  the  association  to  be  illegal,  that  presumably  it  was  formed  for  mutual  pro- 
tection and  to  fight  competition,  which  it  might  lawfully  do  by  lawful  methods  to  the  extent  of  driving 
nonmembers  out  of  business;  and  that  the  facts  alleged  would  not  authorize  the  court  to  dissolve  the 
association. 

3  Texas,  Laws  1903,  Chap.  XCIV,  sec.  3;  Rev.  Civ.  Stats.  (1911),  Art.  779S. 

State  V.  Racine  Sattky  Co.,  IS/,  S.  W.,  4OO  (Trias,  1911).— In  an  action  to  recover  penalties  it  was  alleged 
that  defendant  was  a  manufactui'er  of  farming  implements  and  buggies,  and  that  it  contracted  with  a 
dealer  at  Waco  to  give  him  the  exclusive  .sale  of  its  goods  at  such  place,  the  latter  agreeing  not  to  buy  or 
sell  any  other  makes  of  like  goods.    On  demurrer,  liold  a  violation  of  the  antitrust  act  of  1903. 

Star  Mill  &  Elevator  Co.  w  Fort  Worth  Grain  d-  Elevator  Co.,  1^6 S.  W.,604  (Texas,  1912).— Fort  Worth 
Grain  &  Elevator  Co.  made  agreement  with  the  Stai'  Mill  Co.  not  to  buy  grain  from  fanners,  brokers,  or 
others  not  regularly  engaged  in  grain  business  in  Panhandle  of  Texas.  Held,  that  such  agreement  was 
direct  violation  of  law  (Act  1903,  Chap.  XCIV,  sees.  3,  4)  and  therefore  void  and  not  enforceable. 

Nickels  V.  Prewitt  Attto  Co.,  I49  S.  W.,  1094  ( T(i-.s,  /9/2).— Appellant  Nickels  contracted  with  the  Prewitt 
Auto  Co.  for  the  exclusive  agency  for  its  machines  in  a  specified  tcrrilor>'  for  a  fixed  period.  Appellant 
gave  notes  in  payment  for  machines  and  when  sued  set  up  in  defense  that  the  contract  violated  the  Texas 
Antitrust  Law  of  1903,  above  cited.    Held,  that  the  contract  was  not  in  violation  of  the  antitrust  law,  as 


186  EEPORT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

The  statutes  of  Indiana  provide — 

That  any  person,  firm  or  association  of  persons  who  shall  make  any  contract  or  enter 
into  any  agreement  or  make  any  combination  or  enter  into  any  arrangement,  directly  or 
indirectly,  to  induce,  procure  or  prevent  any  wholesale  or  retail  dealer  in  or  manufac- 
turer of  merchandise  or  of  supplies  or  of  material  or  article  intended  for  trade  or  used 
by  any  mechanic,  artisan  or  dealer  in  the  prosecution  of  his  business  from  selling  such 
supplies  to  any  dealer  or  to  any  mechanic  or  artisan;  and  that  any  dealer  in  or  manu- 
facturer of  such  supplies  or  material  or  article  of  trade  or  supplies  or  material  to  be 
used  by  any  mechanic,  artisan  or  dealer,  who  shall  be  a  party,  directly  or  indirectly, 
to  any  such  contract,  combination  or  arrangement,  or  who  shall  upon  the  request  of 
any  party  to  any  such  contract,  combination  or  arrangement  refuse  to  sell  such  articles 
of  trade,  supplies  or  materials,  or  articles  sold  by  any  dealer  or  used  by  any  mechanic, 
or  artisan,  to  any  such  person  or  persons  who  may  recjuire  them  in  the  prosecution  of 
their  said  business,  for  the  reason  that  said  dealer,  mechanic  or  artisan  is  not  a  member 
of  a  combination  or  association  of  persons,  shall  be  guilty  of  conspiracy  against  trade. ^ 

A  Nebraska  statute,  in  substance,  prohibits  persons,  etc.,  deaUng 
in,  handUng,  or  consigning  grain,  from  forming,  maintaining,  or 
contributing  to  any  pool,  trust,  combination,  etc.,  for  the  preven- 
tion of  competition  among  buyers,  sellers,  or  dealers  in  grain,  or 
which  tends  to  prevent  the  fullest  competition  in  the  purchase,  sale, 
or  dealing  in  grain  by  persons,  etc.,  not  doing  business  through  such 
pool,  trust,  combination,  etc. ;  or  for  the  prevention  of  competition  by 
requiring  members  not  to  deal  with  nonmcmbers ;  or  which  requires 
its  members  to  refuse  to  sell,  purchase,  or  consign  grain  to  any  per- 
son, etc.,  who  purchases  or  receives  grain  from  nonmembers;  or 
which  has  for  one  of  its  objects  the  prevention  of  any  person,  etc., 
not  shipping  grain  through  elevators,  whether  operated  by  members 
or  not,  from  finding  purchasers,  by  boycotting  or  threatening  to 
boycott  such  purchasers.^ 

it  did  not  proliibit  the  company  from  malving  sales  elsewhere,  nor  did  it  attempt  to  fix  prices,  nor  proliibit 
appellant  from  purchasing  or  selling  other  articles  of  the  same  kind  purchased  elsewhere. 

IVood  V.  Texas  Ice  &  Cold  Storage  Co.,  171  S.  W.,  497  (  Texas,  1914). — Under  a  contract,  an  ice  manufac- 
turer and  wholesaler  agreed  to  sell  a  retail  ice  dealer  at  a  fLxed  price,  or  the  market  price  if  it  should  fall 
below  the  price  fixed,  a  certain  quantity  of  ice  or  as  much  more  as  his  trade  required,  provided  the  former 
was  able  to  supply  the  extra  ice.  The  retailer,  in  tm-n,  agreed  to  purchase  all  his  ice  from  this  wholesaler 
if  he  could  supply  his  demands.  The  retailer  sued  for  breach  of  contract,  claiming  that  the  wholesaler 
refused  to  furnish  ice  at  the  contract  price,  and  that  he  was  compelled  to  go  into  the  market  and  purchase 
ice  at  an  increased  price.  On  appeal,  judgment  for  defendant  was  affirmed,  the  court  holding  that  the 
contract  was  contrary  to  Rev.  Stats.,  1911,  art.  7798,  sub.  1 ;  that  the  purpose  of  the  statute  is  to  make  illegal 
such  a  contract  without  reference  to  the  intent  of  the  parties  and  without  reference  to  its  actual  effect; 
and  further  that  the  fact  that  one  of  the  parties  was  a  wholesaler  and  the  other  a  retailer  does  not  take  the 
contract  out  of  a  statute  applying  to  parties  engaged  in  the  same  character  of  business. 

1  Indiana,  Stats.,  sec.  3884. 

2  Nebraska,  Laws  1897,  chap.  80,  sec.  1. 

State  V.  Omaha  Elevator  Co.  et  al.,  75  Nebr.,  637  {1906). — Defendants  were  members  of  the  Nebraska 
Grain  Dealers'  Association,  the  main  objects  of  which  were  to  control  the  price  of  grain,  destroy  compe- 
tition, and  drive  out  "u'regular"  and  independent  dealers.  The  association  sought  to  compel  "irregular" 
dealers  to  become  "regular,"  or  to  force  them  out  of  business  by  controlling  the  bidding  in  the  purchase 
or  sale  of  grain.  Prices  were  fixed  and  the  markets  divided.  Held,  that  such  acts  were  illegal  under  the 
law  of  1905. 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  187 

Local  price  discrimination. — Twenty-three  States^  (Arkansas, 
California,  Indiana,  Iowa,  Kansas,  Louisiana,  Massachusetts,  ]\Iichigan, 
Minnesota,  Mississippi,  Missouri,  Alontana,  Nebraska,  New  Jersey, 
North  Carohna,  North  Dakota,  Oldahoma,.  Oregon,  South  Carohna, 
South  Dakota,  Utah,  Wisconsin,  and  Wyoming)  have  passed  so-caUed 
"antidiscrimination"  statutes  which,  broadly  speaking,  prohibit  any 
person  or  corporation  engaged  in  the  production,  manufacture,  or  dis- 
tribution of  a  commodity  from  discriminating  between  different  locali- 
ties of  the  State  by  selling  such  commodity  at  a  lower  rate  in  one  sec- 
tion than  another,  allowance  being  made  for  the  difference  in  quality 
and  in  the  cost  of  transportation.  The  statutes  vary  principally  in 
the  following  particulars : 

(a)  The  character  of  the  article  or  commodity  in  the  purchase  or 
sale  of  which  discrimination  is  prohibited;  some  deahng  with  a  single 
class  of  commodities,  such  as  petroleum  products,  and  others  with 
any  commodity  in  general  use. 

(6)  Intent;  some  statutes  prohibiting  the  acts  if  done  for  the  pur- 
pose of  destro}ing  competition,  while  under  others  a  specific  intent 
is  not  necessary  to  complete  the  offense. 

(c)  Allowances;  in  some  States  differences  in  cost  of  transporta- 
tion are  considered  in  determining  whether  discriminations  exist, 
while  in  others  differences  in  grade  or  quahty  may  also  be  consideied. 

The  tiend  of  legislation  is  indicated  below. 

Discrimination  in  sales  and  purchases. — ^These  statutes  may  be 
divided  into  two  general  classes — those  prohibiting  local  price  cutting 
and  those  prohibiting  discriminations  in  the  purchase  of  a  commodity. 

Each  of  the  States  above  named  except  Oregon  forbids  sales  at  a 
lower  price  in  ons  localit}^  than  in  another.  Oklahoma  further  prohibits 
sales  "at  the  same  rate  or  price  at  a  point  away  from  that  of  produc- 
tion or  manufacture  as  at  the  place  of  production  or  manufacture,  after 
making  due  allowance  for  the  chfference,  if  any,  in  the  grade,  quantity 
or.  quality,  and  in  the  actual  cost  of  transportation  from  the  point  of 
production  or  manufacture,  if  the  effect  or  intent  thereof  is  to  estab- 
lish, or  maintain  a  virtual  monopoly  liindering  competition,  or  restric- 
tion of  trade." 

Thirteen  of  these  States  (Indiana,  Iowa,  Kansas,  Minnesota,  Mis- 
souri, Montana,  Nebraska,  North  Dakota,  Oregon,  South  Dakota, 

1  Arkansas,  Laws  1913,  Act  51;  California,  Laws  1913,  chap.  276;  Indiana,  Laws  1913,  p.  304;  Iowa,  Laws 
1913,  chap.  310;  Kansas,  Gen.  Stats.,  1909,  chap.  85,  Laws  1915,  chap.  36S;  Louisiana,  Laws  1908,  Act  128; 
Massachusetts,  Laws  1912,  chap.  651;  Michigan,  P.  .\.  1913,  No.  135;  Minnesota,  Laws  1907,  chap.  269,  Laws 
1913,  chap.  230;  Mississippi,  Code  1906,  sec.  5002,  as  amended  by  Laws  1908,  chap.  119,  sec.  1;  Missouri, 
R.  S.,  98,  as  amended  1913,  sec.  10314;  Montana,  Laws  1913,  chaps.  7,  8;  Nebraska,  Acts  1913,  chap.  117; 
New  Jersey,  Laws  1913,  chap.  14;  North  Carolina,  Laws  1913,  chap.  41,  sec.  5  (c);  North  Dakota,  Laws  1907, 
chaps.  258,  260,  Laws  1913,  chap.  2S7;  Oklahoma,  Constitution,  Art.  IX,  sec.  45,  Act  June  10,  190S,  sec.  5, 
Laws  1913,  chap.  114;  Oregon,  Laws  1915,  chap.  344;  South  Carolina,  Acts  1909,  No.  7;  South  Dakota,  Laws 
1907,  chap.  131,  Laws  1913,  chap.  356;  Utah,  Comp.  Laws  1907,  sees.  1762x-1762x7,  Laws  1913,  chaps.  12, 41; 
Wisconsin,  Laws  1909,  chap.  395,  Laws  1913,  chap.  165;  Wyoming,  Laws  1911,  chap.  62,  Laws  1915,  chap.  23. 


188  EEPOET  OF   THE   COMMISSIONER   OF   COEPOEATIONS. 

Utah,  Wisconsin,  and  Wyoming)  prohibit,  under  certain  conditions, 
purchases  at  a  higher  rate  in  one  locality  than  in  another. 

Class  of  articles  or  commodities. — Thirteen  States  (Kansas,  Louisi- 
ana, Massachusetts,  Montana,  Nebraska,  New  Jersey,  North  Dakota, 
Oklahoma,  South  Carolina,  South  Dakota,  Utah,  Wisconsin,  and 
Wyoming)  prohibit  discriminations  in  connection  ^\'^th  the  purchase 
(or  sale)  of  "any  commodity  in  general  use." 

The  variations  from  the  above  are  as  follows: 

Missouri,  "any  commodity  or  article  of  commerce  in  general  use." 

South  Dakota,  ''any  commodity  in  general  use,  or  product." 
(South  Dakota  has  two  such  statutes  mth  slightly  different  terms.) 

New  Jersey  and  Oklahoma  prohibit  such  discriminations  in  the 
sale  of  "any  commodity  of  general  use"  or  in  "rendering  any  service 
to  the  public,"  and  California,  in  the  sale  or  furnishing  of  "any  com- 
modity of  general  use  or  consumption  or  the  product  or  service  of 
any  public  utility." 

Mississippi  prohibits  such  discriminations  in  the  sale  of  "a  com- 
modity" or  in  "rendering  any  service  or  manipulating,  handhng  or 
storing  any  commodity." 

Iowa,  "  any  commodity  of  commerce." 

North  Carolina,  "any  thing  of  value." 

Arkansas,  "news  for  pubhcation." 

Kansas,  "news  and  news  reports  for  newspaper  use." 

Utah,  "information  or  news  for  pul)lication." 

Michigan,  "petroleum  products." 

Minnesota,  "petroleum  or  any  of  its  products." 

Indiana,  "milk  or  mdk  products." 

Minnesota,  Oregon,  and  Wisconsin  (1909),  "milk,  cream  or  butter 
fat." 

North  Dakota,  "milk,  cream,  biitter  fat,  grain  or  any  commodity 
in  general  use."     (Two  statutes  in  North  Dakota.) 

Utah  and  Wyoming  (1915),  "milk,  cream  or  butter  fat"  and 
"poultry  or  eggs." 

Specijic  intent. — As  indicated  below,  the  statutes  vary  considerably 
in  the  provisions  relating  to  intent. 

"With  the  view  of  injuring  the  business  of  another."  (North 
Carolina.) 

"Who  shall  destroy  or  attempt  to  destroy  competition."  (]\[is- 
sissippi.)^ 

"Intentionally,  for  the  purpose  of  destroying  competition." 
(Kansas  and  Wyoming.) 

I  Although  the  statute  provides  that  it  shall  be  sufBcient  to  make  out  a  prima  facie  ease  to  show  a  sale  or 
offer  for  sale  at  a  lower  price,  or  a  lower  charge  for  services,  at  one  place  in  the  State  than  another,  it  is 
necessary  to  allege  an  intent  to  destroy  competition  and  thereby  create  a  monopoly.  Standard  Oil  Co.  of 
Ky.  V.  State,  104  Miss.,  886  (1913). 


TRUST  LAWS  AND  UNFAIE   COMPETITION,  189 


cc- 


•  Intentionally,  for  the  purpose  of  destroying  the  business  of  a 
competitor  in  any  locality."  (Michigan,  Nebraska,  North  Dakota, 
and  South  Carolina.) 

"Intentionally,  for  the  purpose  of  injuring  or  destroying  the 
business  of  a  competitor  in  any  locality."      (Louisiana.) 

"With  the  intention  of  creating  a  monopoly  or  destroying  the 
business  of  a  competitor."  (Minnesota;  Utah,  and  Wisconsin — 
1909,  subtantially  same.) 

"For  the  purpose  of  creating  a  monopoly  or  destroying  compe- 
tition in  trade."      (Oklahoma  Constitution.) 

"For  the  purpose  of  creating  a  monopoly  or  destroying  the  busi- 
ness of  a  competitor."      (Wyoming — 1915.) 

"For  the  purpose  of  destroying  the  business  of  a  competitor  in 
any  locality  or  creating  a  monopoly."     (Iowa.) 

"Maliciously,  or  for  the  purpose  of  destroying  the  business  of  a 
competitor  and  of  creatmg  a  monopoly  in  any  locality."  (Mass- 
achusetts.) 

"Intentionally,  for  the  purpose  of  destroying  the  business  of  a  com- 
petitor in  any  locality  and  creating  or  maintaining  a  monopoly." 
(Indiana.) 

"Intentionally,  or  other^^dse,  for  the  purpose  of  destrojdng  the 
business  of  a  competitor,  or  creatmg  a  monopoly  in  any  locality." 
(Minnesota— 1907.) 

"With  intent  and  for  the  purpose  of  destroying  competition  by 
any  regular,  established  dealer  in  such  commodity  or  product." 
(South  Dakota     1913.) 

"Intentionally,  foi*  the  purpose  of  destroying  the  competition  of  any 
regular,  established  dealer  of/in  such  commodity,  or  to  prevent  the 
competition  of  any  person,  who  in  good  faith  intends  and/or  attempts 
to  become  such  dealer."  (Missouri,  Oklahoma — 1913,  South  Dakota — 
1907,  Wisconsin — 1913,  and  Utah.)  Montana  is  the  same,  but  inserts 
"firm  or  corporation"  between  "person"  and  "wdio."  California  is 
substantially  the  same,  but  inserts  "firm,  private  corporation  or 
municipal  or  other  public  corporation,"  between  "person"  and  "who." 

"With  the  intention  of  creating  a  monopoly,  or  of  destroying  the 
business  of  a  competitor,  or  of  any  regular  established  dealer,  or  to  pre- 
vent competition  of  any  person  who  in  good  faith  intends  and  attempts 
to  become  such  a  dealer."     (North  Dakota — 1913.) 

"With  the  intention  of  creating  a  monopol}^,  destroying  the  busi- 
ness of  a  competitor  or  restraining  in  any  maimer  an  open  competi- 
tion."    (Oregon.) 

Discrimination  unla\\'ful  "if  the  effect  or  intent  thereof  is  to  estab- 
lish or  maintain  a  virtual-  monopoly,  hindering  competition,  or 
restriction  of  trade."     (New  Jersey  and  Oklahoma — 1908.) 


190  EEPOET  OF   THE   COMMISSIONER   OF   COEPOEATIONS. 

No  specific  intent :  Arkansas,  Kansas,  and  Utah  statutes  respecting 
news  service. 

Allowances. — The  statutes  vary  considerably  in  the  provisions 
relating  to  the  factors  to  be  considered  in  determining  whether  there 
has  been  any  unfair  discrimination  in  the  sale  or  purchase  of  a  com- 
modity.    These  may  be  divided  into  three  broad  classes: 

(a)  Those  permittiag  the  consideration  of  the  difference,  if  any, 
in  transportation  charges.  (Kansas,  Minnesota — 1913,  Montana, 
North  Dakota— 1913,  South  Dakota— 1907,  Wisconsin— 1909,  Utah— 
1913,  chap.  41,  and  Wyoming — 1911.) 

(h)  Those  permitting  the  consideration  of  the  difference,  if  any, 
in  the  grade  or  quality  of  the  commodity  as  well  as  in  transportation 
charges,  (Iowa,  Indiana,  Louisiana,  Massachusetts,  ^lichigan, 
Minnesota — 1907,  Missouri,  Nebraska,  North  Dakota — 1907,  Oregon, 
Utah,  Wisconsin,  and  Wyoming — 1915.) 

(c)  Those  permitting  the  consideration  of  the  above  and  any  differ- 
ence in  quantity.  (New  Jersey,  Oklahoma — 1908,  and  South  Caro- 
lina.) 

Cahfornia  permits  the  consideration  of  differences  ''in  the  grade, 
quahty  or  cjuantity,  and  for  cost  differences  between  such  places  due 
to  distance  from  the  point  of  production,  manufacture  or  distribu- 
tion and  expense  of  distribution  and  operation." 

Mississippi  provides  for  the  consideration  of  "differences  of  freiglit 
and  other  necessary  expenses  of  sale  and  dehvery"  and  "differences 
in  the  necessary  expenses  of  carrying  on  the  business." 

North  Carohna  prohibits  such  discriminations  "where  there  is  not 
good  and  sufHciont  reason,  on  account  of  transportation  or  the  ex- 
pense of  doing  business." 

With  respect  to  discriminations  in  furnishing  news  service  the 
statute  of  Arkansas  is  silent  as  to  allowances,  and  thnt  of  Kansas 
requires  the  news  to  be  furnished  "upon  the  same  terms  as  to  every 
other  newspaper  for  the  same  service  without  discrimination." 

Exceptions. — Six  States  (California,  Iowa,  Oklahoma,  South  Da- 
kota— 1913,  Utah,  and  Wyoming — 1915)  permit  prices  to  be  made 
to  meet  competition.  The  statute  of  South  Dakota,  however, 
requires  "actual  legitimate  competition." 

Another  South  Dakota  statute,  prohibiting  discrimination  in  the 
purchase  of  commodities,  provides  that  prices  may  be  raised  in  any 
given  section,  "to  but  not  above  the  prices  paid"  by  others,  "when 
necessary  to  meet  actual  legitimate  competition  in  such  section." 

In  Cahfornia  the  act  "is  not  intended  to  prohibit  the  meeting  in 
good  faith  of  a  competitive  rate,  or  to  prevent  a  reasonable  classifi- 
cation of  service  by  pubhc  utiUties  for  the  purpose  of  estabhshing 
rates." 


TKUSr  LAWS  AND  UNFAIR   COMPETITION.  191 

An  Oklahoma  statute  provides  that  nothing  therem  contained  shall 
prevent  a  combination,  or  any  member  thereof,  "from  meeting  any 
price,  made  by  any  one  not  connected  in  any  way  with,  or  influenced 
by,  any  member  thereof,  at  any  point  within  this  State  without  being 
required  to  make  such  price  genefally,  so  long  as  such  outside  party 
maintains  such  price  in  good  faith,  but  no  longer,  if  such  point  be 
within  the  immediate  territory  of  a  financially  weaker  competitor." 

Further  exceptions  are  made  in  Wyoming  where  the  law  of  1911  does 
not  apply  to  "  any  case  where  by  reason  of  different  railroad  rates  or 
other  natural  things  in  favor  of  any  manufacturer  or  dealer  of  goods  of 
this  or  another  State  such  manufacturer  or  dealer  sells  at  a  different 
price  than  he  does  in  another,  m  order  to  meet  the  competitive  rates 
or  other  natural  tlimgs  in  favor  of  such  other  manufacturer  or  dealer;" 
nor  to  "any  case  where  any  manufacturer  of  or  dealer  in  goods 
manufactured  or  produced  in  this  State  sells  products  in  one  place 
cheaper  than  in  another  to  meet  upon  the  same  or  more  favorable 
basis  any  competition  from  foreign  States,  or  this  State."  It  is  also 
provided  that  tlie  act  shall  not  prevent  sales  at  "proper  commer- 
cial discount  customary  in  the  sale  of  such  particular  goods." 

Evidence. — For  provisions  relating  to  evidence  necessary  to  estab- 
lish a  prima  facie  case  under  some  of  the  antidiscrimination  statutes, 
see  Evidence,  burden  of  proof,  indictment,  etc.,  page  208. 

Court  decisions. — Antidiscrimuxation  statutes  have  been  declared 
constitutional  by  courts  in  Iowa,  ]\Iuinesota,  Mississippi,  Nebraska, 
and  South  Dakota,  and  the  judgment  of  the  court  in  the  latter  State 
has  been  affirmed  by  the  Supreme  Court  of  the  United  States.^ 

1  state  V.  Fairmont  Creamery  Co.  of  Nebraska,  1.53  Iowa,  702  {1912). — Defendant  was  indicted  for  a  vio- 
lation of  Iowa  Code  Supplement,  section  5028-b,  as  amended  by  chapter  222,  acts  thirty-tliird  general 
assembly  (superseded  by  Laws  1913,  chap.  310),  prohibiting  discriminations  in  the  purchase  of  milk,  cream, 
or  butter  fat  for  manufacture,  or  of  poultry,  eggs,  or  grain  for  sale  or  storage.  The  statute  was  assailed  as 
a  violation  of  the  State  and  Federal  Constitutions.  Section  G  of  article  1  of  the  constitution  of  Iowa  pro- 
vides that  "all  laws  of  a  general  nature  shall  have  a  imi form  operation;  the  General  Assembly  shall  not 
grant  to  any  citizen  or  class  of  citizens,  privileges  or  immunities  which  upon  the  same  terms  shall  not 
belong  to  all  citizens."  It  was  urged  that  the  act  was  discriminatory  and  arbitrary  in  its  classification, 
being  limited  in  its  application  to  specified  lines  of  business,  and  further  limited  to  particular  methods 
of  imrsuing  the  same.  Held,  that  the  classification  was  reasonable  and  substantial,  although  the  opera- 
tion of  the  act  is  limited  to  a  comparatively  few  people;  and  that  it  did  not  violate  the  provisions  of  the 
State  constitution  relating  to  imifonnlty  of  laws  and  special  pri^-ileges  or  the  fourteenth  amendment  of 
the  Federal  Constitution.  (The  law  of  1913  applies  to  discrimination  in  sales  and  purchases  of  any  com- 
modity of  commerce.) 

State  ei  rel.  Young  v.  Standard  Oil  Co.,  HI  Minn.,  S5  (1910). — Action  by  attorney  general  to  adjudge 
defendant  giiilty  of  unfair  discrimination  under  chapter  2G9,  Laws  1007,  and  to  cancel  its  license  to  do 
business  in  Mimiesota.  Among  other  gromids  of  demurrer  it  was  urged  that  the  statute  was  repugnant 
to  section  1  of  the  fourteenth  amendment  of  the  Federal  Constitution,  and  to  sections  33  and  34  of  article  4 
of  the  State  constitution.  Demurrer  sustained  and  State  appealed.  Held,  that  the  legislature  may 
impose  special  restrictions  regulating  the  sale  and  distribul  ion  of  one  class  of  commodities,  unless  beyond 
doubt  no  substantia!  conditions  or  usages  of  trade  dilTerentiate  that  class  from  others;  and  that  the  statute 
was  a  valid  police  regulation.    Order  sustaining  demurrer  reversed. 

State  V.  Bridgeman  and  liusscll  Co.,  117  Minn.,  1S6  {1912). — Defendant  corporation  was  indicted  for  a 
violation  of  chapter  408,  Laws  1903  (reenacted  by  chap.  230,  Laws  of  1913),  prohibiting  discrimination  in 
the  purchase  of  milk,  cream,  or  butter  fat.  The  quest  ion  of  the  constitutionality  of  the  statute  was  certi- 
fied to  the  supreme  court.  Defendant  urged  that  the  act  violated  the  c(|uality  clause  of  the  fourteenth 
amendment  of  the  Federal  Constitution,  the  equality  clause,  section  2,  article  1,  and  sections  33  and  34, 


192         kepokt  of  the  commissioner  of  corporations. 

General  price  cutting  and  other 'methods  of  injuring  com- 
petitors.— In  addition  to  the  statutes  above  noted  may  be  mentioned 
those  prohibiting  general  price  cutting  or  selling  below  the  cost  of  pro- 
duction for  the  purpose  of  injuring  competitors. 

Idaho  penalizes  every  person,  Qorporation,  etc.,  engaged  in  business 
in  the  State  (1)  ''who  shall  enter  into  any  contract,  combination  or 
conspiracy,  or  who  shall  give  any  direction  or  authority  to  do  any  act, 
for  the  purpose  of  driving  out  of  business  any  other  person  engaged 
therein,"  or  (2)  "who  for  such  purpose  shall  in  the  course  of  such 
business  scU  any  article  or  product  at  less  than  its  fair  market  value, 
or  at  a  less  price  than  it  is  accustomed  to  demand  or  receive  therefor 

in  any  other  place  under  like  conditions."^ 

, • 

article  4,  prohibiting  special  legislation,  of  the  constitu'tion  of  Minnesota.  Held,  that  classification  was  a 
matter  of  legislative  policy  and  discretion,  and  it  was  only  when  a  classification  was  manifestly  arbitrary 
that  the  courts  would  declare  a  statute  miconstitutional;  that  the  classification  in  the  act  in  question  was 
not  an  arbitrary  one;  and  that  the  statute  did  not  violate  the  equality  provisions  of  either  the  Federal  or 
State  Constitutions,  or  the  provisions  of  the  latter  respecting  special  legislation. 

Standard  Oil  Co.  of  Kij.  v.  State,  104  Mist.,  8S6  {1013).— In  an  action  by  the  attorney  general,  it  was  alleged 
that  the  Standard  O  il  Co.  of  Kentucky  offered  its  products  for  sale  in  d  ilTerent  places  in  the  State  on  the  same 
day  at  dhTercnt  prices,  in  violation  of  chapter  119,  section  1,  of  tlie  Laws  of  1908.  On  appeal  from  an  order 
overruling  the  company's  demurrer,  it  was  contended  that  the  statute  was  unconstitutional,  being  in  viola- 
tion of  the  fourteenth  amendment  to  the  Federal  Constitution  in  that  it  undertook  to  deny  to  the  individual 
the  right  to  sell  property  at  such  prices  and  on  such  considerations  as  he  might  choose.  Held,  that  the 
statutes  did  not  violate  either  the  State  or  Federal  Constitutions;  that  the  purpose  of  the  reduclinn  of 
prices  was  the  real  test;  and  that  the  statute  did  not  deny  the  right  to  show  that  the  reduction  of  prices  was 
made  not  to  destroy  competition  and  to  create  a  monopoly,  but  was  due  to  local  conditions  or  was  in  fur- 
therance of  any  other  reasonable  business  policy.  The  court,  however,  held  that  the  demiurer  should  have 
been  sustained  on  account  of  failure  to  conform  to  the  rules  of  pleading.  Subsequently  thebillwasamended, 
an  order  overruling  the  company's  demurrer  thereto  was  allirmed  on  appeal,  and  the  case  remanded  for 
trial,  the  court  holding,  as  to  the  contention  that  the  alleged  transactions  constituted  interstate  commerce 
and  therefore  were  subject  only  to  the  Federal  laws,  that  the  sale  and  distribution  of  a  commodity,  though 
imported  from  other  States,  after  being  received  into  the  State  and  becoming  incorporated  into  the  general 
mass  of  property  therein,  constituted  intrastate  commerce  and  were  subject  to  the  State  laws  (65  So.,  468, 
1914). 

State  V.  Drayton,  82  Ncbr.,  2H  (WO^).— Defendant,  agent  of  the  Atlas  Elevator  Co.,  was  charged  with  dis- 
criminating between  different  sections  of  the  State  liy  selling  lumber,  lime,  plaster,  cement,  and  brick  at  a 
lower  rate  in  Orchard,  Nebr.,  than  was  charged  in  Brunswiclt  in  the  same  State,  contrary  to  chapter  157, 
Laws  of  1907  (similar  to  Laws  1913,  chap.  117),  prohibiting  such  discrimination  in  the  sale  of  any  com- 
modity in  general  use.  Defendant  moved  to  quash  the  information.  Motion  sustained  and  State  appealed. 
Held,  that  the  act  did  not  prevent  any  person  or  corporation  from  engaging  in  any  lawful  business,  prevent 
legitimate  competition,  interfere  with  the  due  management  of  any  business,  nor  prevent  the  sale  of  any 
commodity  at  any  price  which  the  owner  might  fix  or  demand;  that  it  was  not  class  legislation  within  the 
constitutional  prohibition;  that  the  right  to  enter  into  lawful  contracts  was  not  abridged;  and  that  the  act 
was  within  the  police  power  of  the  State.    Exceptions  of  the  State  sustained. 

Central  Lumber  Co.  v.  South  Dakota,  236  U.  S.,  157  (/.O/^).— Plaintiff  in  error  was  found  guilty  of  unfair 
discrimination  under  the  laws  of  South  Dakota,  1907,  chapter  131,  and  was  sentenced  to  pay  a  fine  of  S200 
and  costs.  It  was  objected  that  the  statute  conflicted  with  the  Federal  Constitution  as  denying  the  equal 
protection  of  the  laws,  because  it  affected  the  conduct  of  only  a  particular  class — those  selling  goods  in  two 
places  in  the  State— and  was  intended  for  the  protection  of  only  a  particular  class — regular  established 
dealers— and  also  because  it  unreasonably  infringed  the  liberty  of  contract.  Held,  that  the  fourteenth 
amendment  did  not  prohibit  legislation  special  in  character;  that  if  a  class  was  deemed  to  present  a  con- 
spicuous example  of  what  the  legislature  sought  to  prevent,  it  might  be  dealt  with  although  otherwise  not 
distinguishable  from  others  not  embraced  in  the  law;  that  the  statute  extended  to  those  who  intended  to 
become  regular  established  dealers,  and  if  the  same  degree  of  protection  was  not  granted  to  parties  making 
a  transitory  incursion  into  the  business,  it  was  not  objectionable;  and  that  as  to  the  statute  depriving  the 
plamtiff  in  error  of  its  liberty  becar.se  forbidding  a  certain  class  of  dealings,  it  is  enough  to  say  that  as  the 
law  does  not  otherwise  encounter  the  fourteentli  amendment  it  is  not  to  be  disturbed  on  this  ground. 

See  also  orders  of  Oklahoma  Corporation  Commission,  p.  203  n 

1  Idaho,  Laws  1911,  chap.  215,  sec.  4. 


TKUST   LAWS   AND   UNFAIR   COMPETITION.  193 

Two  other  States,  Nebraska  and  South  Carohna,  have  adopted 
substantially  similar  laws.^  The  statute  of  the  latter  State,  however, 
includes  ''giving  away"  as  well  as  selhng  below  cost  of  manufacture 
for  the  purpose  of  financially  injuring  competitors  and  is  limited  in 
its  appHcation  to  persons  engaged  in  the  manufacture  or  sale  of  any 
article  of  commerce  or  consumption  from  raw  material  produced  or 
mined  \vitliin  the  State.  This  provision  is  apparently  further  qualified 
by  the  following: 

Said  person  *  *  *  or  corporation  resorting  to  this  method  of  eecuring  a  monop- 
oly in  the  manufacture,  refining  and  sale  of  the  finished  products  produced  or  mined 
in  this  State,  shall  be  deemed  guilty  of  a  conspiracy  to  form  or  secure  a  trust  or 
monopoly  in  restraint  of  trade,  etc. 

Alabama,  while  not  adopting  this  form  of  legislation,  penalizes  any 
person  or  corporation  which  shall  destroy,  or  attempt  to  destroy, 
competition  in  the  manufacture  or  sale  of  a  commodity.^ 

Mississippi,  like  Alabama,  penalizes  individuals,  corporations,  etc., 
who  shall  destroy,  or  attempt  to  destroy,  competition  in  the  manu- 
facture or  sale  of  a  commodity,  but  adds  the  words  "by  selling  or 
offering  same  at  a  price  below  the  normal  cost  of  production."  ^ 

Tennessee  proliibits  any  person,  firm,  or  corporation  engaged  in 
manufacturing  from  giving  away  or  selling  for  a  less  price  than  the 
cost  of  manufacture  any  manufactured  article  in  the  State,  with  the 
intent  and  purpose  of  destroying  honest  competition.^ 

Texas  penalizes  any  member,  agent,  employee,  officer,  director, 
or  stockholder  of  any  business,  firm,  corporation  or  association  of 
persons  who  shall  with  the  intent  or  purpose  of  driving  out  competition 
or  for  the  purpose  of  financially  injuring  competitors  sell  within  the 
State  at  less  than  cost  of  manufacture  or  production  or  sell  in  such  a 
way  or  give  away  within  the  State  products  for  the  purpose  of  driving 
out  competition  or  financially  injuring  competitors,  or  give  secret 
rebates  on  such  purchase  for  the  purpose  aforesaid.^ 

Arkansas  penalizes  any  person  or  corporation  engaged  in  the  manu- 
facture or  sale  of  any  article  of  commerce  or  consumption  produced, 
manufactured,  or  mined  in  the  State,  or  elsewhere,  who  shall,  with 
the  intent  and  purpose  of  driving  out  competition,  or  for  the  purpose 
of  financially  injuring  competitors,  sell  within  the  State,  at  less  than 
cost  of  manufacture  or  production,  or  sell  in  such  a  way,  or  give 
away  in  the  State,  their  productions  for  the  purpose  of  driving  out 

1  Nebraska,  Comp.  Stats.,  sec.  6302f;  South  Carolina,  Laws  1902,  No.  574,  sec.  3. 

'  Alabama,  St^ts.,see.  7S81. 

3  Mississippi,  Code  190C,  as  amended  by  Laws  190S,  chap.  119,  sec.  1. 

*  Tennessee,  Laws  1907,  chap.  SO,  as  amended  by  Laws  1907,  chap.  360. 

5  Texas,  Rev.  Grim.  Stats.,  1911,  art.  147L 

30035°— 16 13 


194  KEPOET  OF   THE   COMMISSIONEK  OF   COEPOEATIONS. 

competition,  or  financially  injuring  competitors.^     The  provision  is 
apparently  qualified  by  the  following: 

Said  person,  *  *  *  resorting  to  this  method  of  securing  a  monopoly  within  this 
State  in  such  business,  shall  be  deemed  guilty  of  a  conspiracy  to  form  and  secure  a 
trust  or  monopoly  in  restraint  of  trade. 

Massachusetts  prohibits  any  person,  corporation,  etc.,  from  com- 
bining for  the  purpose  of  destroying  the  trade  or  business  of  any 
person,  firm,  association,  or  corporation  engaged  in  selhng  goods  or 
commodities  and  of  creating  a  monopoly  within  the  Commonwealth.^ 

North  Carolina  proliibits  any  person,  corporation,  etc.,  from  directly 
or  indirectly,  willfully  destroying  or  injuring,  or  undertaking  to 
destroy  or  injure,  the  business  of  any  opponent  or  business  rival  in 
the  State  "by  circulating  false  reports"  tendmg  to  damage  the 
credit  or  character  of  said  opponent  or  rival,  or  tending  to  interfere 
with  the  trade  of  said  opponent,  with  the  purpose  of  attempting  to 
fix  the  price  of  anything  of  value  when  the  competition  is  removed.^ 

North  Carohna  prohibits  also  any  person,  corporation,  etc.,  from 
doing,  or  from  having  any  contract,  express  or  implied,  to  do,  any  of 
the  following  acts: 

1.  To  wilfully  destroy  or  injure,  or  undertake  to  destroy  or  injure, 
the  business  of  any  opponent  or  business  rival  in  the  State  of  North 
Carolina,  with  the  purpose  or  intention  of  attempting  to  fix  the  price 
of  anything  of  value  when  the  competition  is  removed. 

2.  To  buy  or  sell  within  the  State  anytliing  of  value  which  is  sold 
or  bought  in  the  State  to  injure  or  destroy,  or  undertake  to  mjure 
or  destroy,  the  business  of  any  rival,  by  lowermg  the  price  of  any- 
thing sold,  so  low,  or  raising  the  price  of  anything  bought,  so  high 
as  to  leave  an  unreasonable  or  inadequate  profit  for  a  time,  with 
the  purpose  of  increasing  the  profit  on  the  business  when  such  rival 
is  driven  out  of  business,  or  his,  theh,  or  its  business  is  injured.' 

Oklahoma  prohibits  a  combination  ^  or  any  member  thereof  from 
raising  or  lowering  the  price  of  a  commodit}^  or  lowering  the  price 
for  services  rendered,  in  the  immediate  teriitory  of  a  financially 
weaker  competitor,  while,  at  the  same  time,  it  is  deaUng  in  a  hke 
commodity  for  a  different  and  more  advantageous  price,  or  charging 
a  greater  rate  for  hke  services  at  another  point  within  the  State, 
and  declares  the  same  to  be  unfair  and  destructive  competition. 
The  doing  of  any  act  which  directly  or  indirectly  brings  about  a 
similar  effect  on  such  weaker  competitor  is  also  prohibited.  Allow- 
ance is  to  be  made  for  grade  or  quality  of  product  and  freight  rate. 

1  Arkansas,  act  of  1905,  as  amended  Mar.  12, 1913,  sec.  6. 

2  Massachusetts,  Laws  1912,  chap.  651,  sec.  2. 

■     3  North  Carolina,  Laws  1911,  chap.  167,  sec.  lb. 

■I  North  Carolina,  Laws  1913,  chap.  41,  sec.  5  c,  d. 

s  In  substance,  "  combination ' '  is  defined  as  the  association  together  of  two  or  more  corporations  engaged 
in  tlie  same  lino  of  business  by  tlie  control  of  certificates  of  stoclc  or  other  interest  in  more  than  one  such 
corporation  by  any  one  of  them  or  by  any  stockholder  thereof. 


TKUST   LAWS  AND  UNFAIE   COMPETITION.  195 

The  combination  is  permitted,  however,  to  meet  the  price  made  by 
any  one  not  connected  with  it,  or  influenced  by  it,  at  any  particular 
point  within  the  State. ^ 

Wisconsin  prohibits  combinations,  associations,  agreements,  etc., 
of  two  or  more  persons  for  the  purpose  of  willfully  or  maliciously 
injurmg  another  in  liis  reputation,  trade,  business,  or  profession  by 
any  means  whatever.^ 

Regulation  of  transportation. — The  constitutions  of  Aiizona 
and  Washmgton  prohibit  corporations,  copartnerships,  or  associations 
of  persons  in  the  State  from  combining  or  making  any  contract  with 
any  incorporated  company,  copartnership,  etc.,  or  in  any  manner 
whatever  to  regulate  the  transportation  of  any  product  or  commodity.^ 

An  Ai'izona  statute  prohibits  combinations  of  capital,  skill,  or  acts 
by  two  or  more  persons,  corporations,  etc.,  to  regulate  the  transpor- 
tation of  any  product  or  commodity.* 

Briefly,  South  Dakota  prohibits  combinations,  understandings, 
agreements,  etc.,  to  regulate  the  transportation,  directly  or  othermse, 
of  any  product  or  commodity,  so  as  to  obstruct  or  prevent  compe- 
tition.^ 

New  York  prohibits  foreign  corporations  engaged  in  the  transpor- 
tation business  in  that  State,  and  any  partnership  or  other  association 
or  person  so  engaged  from  creating,  or  becoming  a  party  to  any  pool, 
trust,  agreement  or  understanding  to  control  the  volume  of  transpor- 
tation between  this  country  and  Europe,  or  to  control,  limit,  regulate 
or  fix  the  rates  thereof,  and  further  penalizes  the  refusal  to  sell  trans- 
portation between  the  United  States  and  Europe  either  eastbound  or 
westbound  at  the  usual  and  legal  rates.® 

Section  11.  Specific  provisions  affecting  agricultural  interests. 

Aside  from  the  antidiscrimination  laws  ot  Indiana,  Minnesota, 
North  Dakota,  Oregon,  Utah,  Wisconsin,  and  Wyoming,  which  apply 

1  Oklahoma,  Laws  1913,  chap.  114,  sees.  4,  5. 

2  Wisconsin,  Stats.  1898,  sec.  4466a. 

Aikens  v.  Wiscomin,  105  U.  S.,  194  (/904).— Upon  information  brought  under  the  Wisconsin  statutes 
of  1898,  sec'tion  4466a,  it  was  charged  that  one  Aikens  and  two  others,  who  were  managers  of  three  Mil- 
waukee newspapers,  conspired  together  with  the  intent  of  willfully  and  maliciously  injuring  the  Journal 
Co.,  the  publisher  of  another  Milwaukee  paper.  It  was  alleged  that  this  company  had  given  notification 
of  an  increase  of  about  2.5  per  cent  in  its  charges  for  advertising  and  that  thereupon  the  managers  of  these 
three  other  papers  agreed  that  if  any  person  should  agree  to  pay  the  increased  rate  to  the  Journal  Co.  then 
he  should  not  be  permitted  to  advertise  in  their  papers  except  at  a  corresponding  increase  in  rate,  but  if 
he  should  refuse  to  pay  the  Journal  Co.  the  increased  rate,  then  he  should  be  allowed  to  advertise  in  their 
papers  at  the  rate  previously  charged.  On  writ  of  error  to  the  Supreme  Court  of  the  United  States  as  to 
the  constitutionality  of  the  Wisconsin  statute,  the  judgment  of  the  lower  court,  finding  the  three  managers 
guilty  as  charged,  was  affirmed,  the  court  holding  that  this  statute  is  not  in  conflict  with  the  fourteenth 
amendment  to  the  Federal  Constitution  so  far  as  it  prohibited  combinations  Intended  to  do  wrongful 
harm  and  that  the  amendment  was  not  intended  to  protect  the  liberty  to  combine  to  inflict  malicious 
mischief  even  upon  such  intangibles  as  business  or  reputation. 

3  Arizona,  Constitution,  Art.  XIV,  sec.  15;  Washington,  Constitution,  Art.  XII,  sec.  2Z 

*  Arizona,  Laws  1912,  chap.  73,  sec.  1. 

&  South  Dakota,  Laws  1909,  chap.  224,  sees.  2,  3,  4,  5. 

« New  York  Cons.  Laws,  Gen.  Bus.  Law,  sec.  350. 


196  KEPORT   OF    THE   COMMISSIONER    OF   CORPORATIONS. 

to  milk,  cream,  and  butter  fat,  and  certain  laws  of  Kansas,  Montana, 
Nebraska,  and  Tennessee,  noted  herein  under  ''Pooling"  (p.  167)  and 
''Restraint  of  competition"  (p.  159),  the  following  provisions  affecting 
agricultural  interests  have  been  adopted : 

The  constitution  of  Louisiana  (art.  190,  adopted  Nov.  22,  1913) 
declares  that  it  shall  be  unlawful  for  persons  or  corporations,  or  their 
legal  representatives,  to  combine  or  conspire  together,  or  to  unite 
or  pool  their  interests,  for  the  purpose  of  forcing  up  or  down  the  price 
of  any  agricultural  product  or  article  of  necessity,  for  speculative 
purposes. 

In  Illinois  an  act  to  define  trusts  and  conspiracies  against  trade, 
etc.,  one  section  of  which  provided  that  the  act  should  not  apply  to 
"agricultural  products  or  hve  stock  while  in  the  hands  of  the  pro- 
ducer or  raiser,"  was  declared  unconstitutional  by  the  United  States 
Supreme  Court,  which  held  that  the  act,  by  virtue  of  this  clause,  was 
in  contravention  of  the  fourteenth  amendment  to  the  Constitution 
of  the  United  States  as  denying  the  equal  protection  of  the  laws.^ 

There  is  a  similar  provision  in  the  laws  of  Indiana,  Louisiana, 
Michigan,  and  Texas. ^ 

The  statutes  of  California  and  Colorado  contain  a  practically  iden- 
tical provision  which  apparently  would  exempt  agricultural  associa- 
tions from  the  operation  of  the  antitrust  laws : 

No  agreement,  combination  or  association  shall  be  deemed  to  be  imlawful  or 
within  the  provisions  of  this  act,  the  object  and  business  of  which  are  to  conduct  its 
operations  at  a  reasonable  profit  or  to  market  at  a  reasonable  profit  those  products 
which  can  not  otherwise  be  so  marketed,  Provided  further,  That  it  shall  not  be  deemed 
to  be  imlawful,  or  within  the  provisions  of  this  act,  for  persons,  firms  or  corporations, 
engaged  in  the  business  of  selling  or  manufacturing  commodities  of  a  similar  or  like 
character,  to  employ,  form,  organize  or  own  any  interest  in  any  association,  firm  or 
corporation,  ha^ing  as  its  object  or  purpose  the  transportation,  marketing  or  delivery 
of  such  commodities.^ 

California  prohibits  the  destruction  of  "  animal,  vegetable,  or  other 
stuffs,  products,  or  articles,  in  restraint  of  trade  which  are  customary 
food  for  human  beings  and  are  in  fit  sanitary  condition  to  be  used  as 
such."* 

In  Ohio  when  the  violation  of  the  provisions  of  the  antitrust  law 
consists  of  a  combination  to  control  the  price  or  supply  or  to  prevent 
competition  in  the  sale  of  bread,  butter,  eggs,  flour,  meat,  or  vege- 
tables or  any  one  of  said  articles,  the  person  or  persons  thus  engaged 
are  subject  to  greater  punishment  than  in  other  cases.-^ 

1  Illinois,  act  of  June  20,  1S03,  sec.  9;  Connolly  v.  Union  Sewer  Pipe  Co.,  184  U.  S.,  540  (1902).  (See 
p.  97.) 

2  Indiana,  Burns  R.  S.,  1914,  sec.  3881;  Louisiana,  Laws  1892,  act  90,  sec.  8;  Micliigan,  Howell's  Stats., 
191.3,  sec.  14892;  Texas,  Rev.  Crim.  Stats.  1911,  .\rt.  1477. 

3  California,  Laws  1907,  chap.  530,  sec.  1,  amended  by  Laws  1909,  chap.  362;  Colorado,  Laws  1913,  chap. 
161,  see.  1. 

<  California,  Laws  1913,  chap.  233,  sec.  1. 

5  Ohio,  G.  C,  sec.  6396,  as  amended  May  3, 1913. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  197 

The  law  of  Florida  prohibits  arrangements,  trusts,  combinations, 
etc.,  between  persons  and  corporations,  made  with  a  view  to,  or  tend- 
ing to  prevent,  hinder,  or  obstruct  the  lawful  sale  in  the  State  of  beef 
or  other  fresh  meat  of  cattle  or  any  other  edible  animal  raised,  fat- 
tened, or  fed  in  the  State,  or  any  other  beef  or  fresh  meat,  or  with  a 
view  to  or  tendmg  to  prevent,  hinder,  or  obstruct  the  lawful  sale  of 
any  cattle,  etc.,  in  the  State,  or  which  shall  tend  to  monopolize  or 
control  the  sale  or  price  of  fresh  meat  m  the  State. ^ 

Washington  prohibits  commission  merchants  from  entering  into 
any  combination,  conspiracy,  or  pool  for  the  "purpose  of  artificially 
raising  or  depressing  the  market  price  of  any  farm,  dairy,  orchard, 
or  garden  produce,  or  of  excluding  from  the  market  the  produce  of 
any  particular  locality  grown  or  manufactured  by  any  person  wdthin 
the  State.^ 

Colorado  has  substantially  a  similar  provision,  but  includes  a 
"gentlemen's  agreement,"  and  further  prohibits  the  making  of  "any 
unfair,  unreasonable,  or  unjust  discrimination  in  any  of  these 
respects."^ 

Section  12.  Specific  provisions  affecting  labor. 

In  Wisconsin  it  is  provided  that  nothing  in  the  antitrust  act  of 
1893  shall  be  construed  to  affect  labor  unions  or  any  other  association 
of  laborers  organized  for  the  purpose  of  promoting  the  weliare  of  its 
members.* 

In  Louisiana  the  provisions  of  the  antitrust  act  of  1892  do  not 
affect  any  combination  or  confederation  of  laborers  for  the  purpose 
of  procuring  an  increase  of  their  wages  or  redress  of  grievances.^ 

In  Montana  the  provisions  of  the  antitrust  law  of  1909  do  not 
apply  to  any  arrangements,  agreement,  or  combination  between 
laborers  made  wath  the  object  of  lessening  the  number  of  hours  of 
labor  or  increasing  wages. ^ 

The  law  of  Michigan  declares  that  the  provisions  of  the  antitrust 
act  shall  not  apply  to  services  of  laborers  or  artisans  who  are  formed 
into  societies  or  organizations  for  the  benefit  and  protection  of  their 
members.^ 

In  California  and  Colorado,  labor,  whether  skilled  or  unskilled,  is 
not  a  commodity  ^nthin  the  meaning  of  the  antitrust  law.^ 

A  law  of  Oklahoma  declares  that  no  agreement,  combination,  or 
contract  by  or  between  two  or  more  persons  to  do  or  procure  to  be 

'  Florida,  Comp.  Laws  1910,  sec.  3160. 

2  Washington,  Remington  &  Ballinger's  Code  (1910),  sec.  7032. 

'  Colorado,  Laws  1913,  chap.  5S,  sec.  12. 

4  Wisconsin  Stats.  (1913),  sec.  1747h. 

5  Louisiana,  Laws  1892,  Act  90,  sec.  8. 

6  Montana,  Laws  1009,  chap.  97,  sec.  2. 

'  Micliigan,  Howell's  Stats.  (1913),  sec.  14S92. 

8  California,  Laws  1907,  chap.  530,  as  amended  hy  Laws  1909,  chap.  302;  Colorado,  Laws  1913,  chap.  161, 
sec.  1. 


198  pEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

done,  or  not  to  do  or  procure  to  be  done,  any  act,  in  contemplation 
or  furtherance  of  any  trade  dispute  between  employers  and  em- 
ployees in  the  State,  shall  be  deemed  as  criminal,  nor  shall  those 
engaged  therein  be  indictable  or  otherwise  punishable  for  the  crime 
of  conspiracy  if  such  act  committed  by  one  person  would  not  be 
punishable  as  a  crime,  nor  shall  such  agreement,  combination,  or 
contract  be  considered  as  in  restraint  of  trade  or  commerce,  nor 
shall  any  restraining  order  or  injunction  be  issued  with  relation 
thereto.  It  is  provided  also  that  nothing  in  this  act  shall  be  con- 
strued to  authorize  force  or  violence.^ 

Kansas  provides  that  in  cases  involving  the  relations  of  employer 
and  employee,  or  in  cases  between  employees,  or  persons  employed 
and  persons  seeking  employment,  no  injunction  shall  issue  without 
notice.  A  restrainmg  order  may  be  so  issued  under  certam  con- 
ditions but  it  shall  be  indorsed  of  record,  shall  define  the  injury  and 
state  why  it  is  irreparable  and  why  the  order  was  granted  without 
notice  and  that  the  order  shall  expire  in  not  to  exceed  seven  days; 
further,  no  such  injunction  or  restrainmg  order  shall  be  granted 
unless  necessary  to  prevent  irreparable  injury  to  property  or  to  a 
property  right  and  for  which  there  is  no  adequate  remedy  at  law; 
nor  shall  such  processes  prohibit  any  person  or  persons  from  termin- 
ating any  relation  of  employment,  or  from  ceasing  to  perform  any 
work  or  labor,  or  from  recommending,  advising,  or  persuading 
others  by  peaceful  means  to  do  so;  or  from  attending  at  or  near  a 
house  or  place  where  any  person  resides  or  works,  or  carries  on 
business,  or  happens  to  be  for  the  purpose  of  peacefully  o])tainmg 
or  communicating  information,  or  of  peacefully  persuading  any 
person  to  work  or  to  abstain  from  working;  or  from  ceasing  to 
patronize  or  to  employ  any  party  to  such  dispute;  or  from  recom- 
mending, advising,  or  persuading  others  by  peaceful  means  to  do  so; 
or  from  paying  or  giving  to  or  withholding  from  any  person  engaged 
in  such  dispute  any  strike  benefits  or  other  moneys  or  things  of 
value;  or  from  peaceably  assembling  at  any  place  in  a  lawful  manner 
and  for  lawful  purposes ;  or  from  doing  any  act  or  thing  which  might 
la\^^ully  be  done  in  the  absence  of  such  dispute  by  any  party  thereto. ^ 

Massachusetts  provides  that  it  shall  not  be  unlawful  for  persons 
employed  or  seeking  employment  to  enter  into  any  arrangements, 
agreements  or  combinations  with  the  view  of  lessening  the  hours  of 
labor,  increasing  their  wages,  or  bettering  their  condition;  that  no 
restraining  order  or  injunction  shall  be  granted  in  any  case  involving 
the  relations  of  employer  and  employee  or  persons  employed  and 

1  Oklahoma,  Comp.  Laws  1909,  sec.  4042. 

State  V.  Coyle,  122  Pac,  243  {Okla.  /9/^).— Held,  that  the  above-cited  law  must  be  considered  as  a  part 
of  the  antitrust  act,  and  that  construed  together  the  antitrust  law  did  not  violate  either  the  constitution 
of  Oklahoma  or  the  fourteenth  amendment  to  the  Federal  Constitution. 

2  Kansas,  Laws  1913,  chap.  233. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  199 

persons  seeking  employment,  unless  necessary  to  prevent  irreparable 
injury  to  property  or  property  rights,  and  there  is  no  adequate 
remedy  at  law,  and,  further,  such  property  or  property  right  shall  be 
particularly  described  and  sworn  to  in  the  application;  that  rights 
existing  under  or  growing  out  of  the  relations  of  employer  and 
employee  shall  be  construed  to  be  personal  and  not  property  rights; 
that,  in  all  cases  involving  violations  of  the  contract  of  employment, 
parties  shall  be  left  to  their  remedy  at  law  unless  irreparable  damage 
is  about  to  be  committed;  that  no  persons  who  are  employed  or 
seeking  employment,  etc.,  shall  be  indicted,  prosecuted,  or  tried, 
etc.,  for  entering  into  any  arrangement,  etc.,  for  the  purposes  stated 
above  or  for  any  act  done  in  pursuance  thereof,  unless  such  act  is  in 
itself  unlawful.^ 

It  also  provides  in  substance  that  when  a  strike,  lockout,  or  other 
labor  trouble  exists,  the  employer,  if  attempting  to  fdl  the  places  of 
the  strikers,  etc.,  shall  plainly  and  explicitly  mention  such  conditions. 
This  law  operates  in  a  particular  case  until  the  State  Board  of  Con- 
ciliation and  Arbitration  decides  that  the  employer's  business  has 
resumed  its  normal  and  usual  manner.^ 

Section  13.  Holding  companies. 

The  constitution  of  Georgia  (Art.  IV,  sec.  2)  provides  that  the 
general  assembly  shall  have  no  power  to  authorize  any  corporation 
to  buy  shares  or  stock  in  any  other  corporation,  or  to  make  any  con- 
tract or  agreement  whatever  with  any  such  corporation,  which  may 
have  the  effect  or  be  intended  to  have  the  effect  to  defeat  or  lessen 
competition  in  their  respective  business,  or  to  encourage  monopoly; 
and  that  all  such  contracts  and  agreements  shall  be  illegal  and  void. 

The  Oklahoma  constitution  (Art.  IX,  sec.  41)  declares  that  no  cor- 
poration chartered  or  Hcensed  to  do  business  in  the  State  shall  own, 
hold,  or  control  in  any  manner  whatever  the  stock  of  any  competitive 
corporation,  or  corporations  engaged  in  the  same  kind  of  business 
in  or  out  of  the  State,  except  stock  pledged  to  secure  debt,  or  acquired 
in  satisfaction  of  debt,  and  stock  so  acquired  sliall  be  disposed  of 
within  12  months.  While  owned  it  shall  have  no  right  to  participate 
in  the  control  of  the  corporation,  except  with  the  consent  of  the  State 
Corporation  Commission.  Banks  and  trust  companies  are  subject  to 
similar  restrictions  except  that  the  consent  of  the  State  Corporation 
Commission  to  participate  in  the  control  of  the  corporation  is  not 
expressly  required. 

Massachusetts  prohibits  any  one  in  his  individual  capacity,  or  act- 
ing for  a  corporation,  etc.,  from  securhig  or  holding  tlic  control  of 
corporate  stock  for  the  purpose  of  evading  the  provisions  of  the  anti-. 

'  Massachusetts,  Laws  1914,  chap.  778.  '  Massachusetts,  Laws  1914,  chap.  347. 


200  EEPOET  OF   THE   COMMISSTONEE    OF   COEPORATIONS. 

discrimination  statute.^  This  State  also  prohibits  a  manufacturing 
or  other  corporation  wliich  has  its  place  of  business  in  a  city  or  town 
in  which  a  gas  company  proposes  to  manufacture  gas  for  light,  from 
holding  more  than  10  per  cent  of  the  capital  stock  of  such  gas  com- 
pany; ^  and  also  provides  that,  after  January  1,  1918,  it  shall  be  un- 
lawful for  a  trust  company  to  hold  more  than  10  per  cent  of  the  capital 
stock  of  any  other  trust  company.^ 

Mississippi  prohibits  the  formation  of  combinations,  contracts,  etc., 
to  issue,  own,  or  hold  the  certificates  of  stock  of  any  trust  or  combme.* 
Another  section  of  the  Mississippi  laws  provides  that  no  corporation 
shall  directly  or  indirectly  acquire  any  part  of  the  capital  stock  of  any 
other  competing  corporation  doing  business  in  the  State,  nor  directly 
or  indirectly  acquire  the  franchise,  plant,  or  equipment  of  any  com- 
peting corporation  in  the  State.'^ 

Mississippi,  by  an  act  of  1914,  also  provides  that  ''no  part  of  the 
stock  of  any  bank  except  regional  reserve  banks,  doing  business  in 
this  State  shall  be  owned  by  any  bank  under  the  provisions  of  this 
act."  « 

Mississippi  further  forbids  corporations  to  own,  rent,  or  other- 
wise acquire  any  interest  in  any  cotton  gin,  where  such  corporation  is 
interested  or  participates  in  the  manufacture  of  any  cottonseed  oil, 
or  any  of  its  products  or  by-products,  or  in  the  manufacture  of 
cottonseed  meal,  hulls  or  other  cottonseed  products  or  by-products, 
or  which  has  any  interest  in  any  compress  business.  A  cottonseed 
oil  company  or  compress  may  operate  ginneries  of  the  capacity  of 
not  exceeding  600  saws,  but  such  ginneries  must  be  located  in  the 
city  or  town  of  the  location  of  its  cotton-oil  plants  or  compresses,  and 
it  is  provided  that  such  gmneries  shall  not  be  operated  for  the  purpose 
of  destroying  the  ginning  business.'' 

Nebraska  prohibits  any  corporation  from  doing  business  in  the 
State  a  majority  of  whose  stock  is  owned  or  controlled  or  held  in 
trust  for  any  other  corporation  wliich  conducts  its  business  elsewhere 
in  a  manner  that  would  be  prohibited  by  the  Nebraska  law^s  if  so 
conducted  witliin  the  State.^ 

New  Jersey  provides  as  follows: 

ISIo  corporation  heretofore  organized  or  hereafter  to  be  organized  under  the  proA'i- 
sions  of  the  act  to  wluch  this  is  an  amendment,  or  the  amendments  thereof  or  supple- 
ments thereto,  except  as  otherwise  provided  therein  or  tliereby,  shall  liereafter 
purchase,  hold,  sell,  assign,  transfer,  mortgage,  pledge,  or  otherwise  dispose  of  the 

'  Massachusetts,  Laws  1912,  chap.  651,  sec.  4. 

2  Massachusetts,  Laws  1914,  chap.  742,  sec.  04. 

3  Massachusetts,  Laws  1914,  chap.  504,  sec.  1. 

*  Mississippi,  Code,  sec.  5002,  as  amcuded  by  Laws  190S,  chap.  119,  sec.  1. 
5  Mississippi,  Code  1906,  sec.  5005,  as  amended  by  Laws  1910,  chap.  223. 
s  Mississippi,  Laws  1914,  chap.  124,  sec.  64. 
'  Mississippi,  Laws  1914,  chap.  102,  sec.  1. 
8  Nebraska,  Stats.,  6302g. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  201 

shares  of  the  corporate  stock  of  any  other  corporation  or  corporations  of  this  or  any 
other  State,  or  of  any  bonds,  securities  (;r  other  evidence  of  indebtedness  created  by 
any  other  corporation  or  corporations  of  this  or  any  other  State,  nor  as  owner  of  such 
stock  exercise  any  of  the  rights,  i)owers  and  privileges  of  ownersliip,  including  the  riglit 
to  vote  thereon.  Provided,  that  nothing  lierein  contained  shall  ojjerate  to  prevent  any 
corporation  or  corporations  from  acquuing  the  l)onds,  securities  or  other  e^-idences  of 
indebtedness  created  by  any  non-competing  corporation  in  payment  of  any  debt  or 
debts  due  from  any  such  non-competing  corporation;  nor  to  prevent  any  corporation  or 
corporations  created  under  the  laws  of  this  State  from  purchasing  as  a  temporary  invest- 
ment out  of  its  surplus  earnings,  reserved  imder  the  provisions  of  this  act,  as  a  working 
capital,  bonds,  securities  or  evidences  of  indebtedness  created  by  any  non-competing 
corporation  or  corporations  of  this  or  any  other  State,  or  from  investing  in  like  securities 
any  funds  held  by  it  for  the  benefit  of  its  employees  or  any  funds  held  for  insurance, 
rebuilding  or  depreciating  purposes;  nor  to  prevent  any  corporation  or  corporations 
created  under  the  laws  of  this  State  from  purchasing  the  bonds,  securities  or  other 
evidences  of  indebtedness  created  by  any  corporation  the  stock  of  which  may  lawfully 
be  purchased  under  the  authority  given  by  section  forty -nine  of  the  act  entitled  "An 
act  concerning  corporations  (Revision  of  1896)"  ;i  -provided,  cdso,  that  nothing  herein 
contained  shall  be  held  to  affect  or  impair  any  right  heretofore  acquired  in  pursuance 
of  the  section  hereby  amended,  by  any  corporation  created  under  the  laws  of  this 
State. 2 

The  New  York  Stock  Corporation  Law  permits  corporations,  under 
certain  conditions,  to  hold  stock  in  other  corporations,  but  moneyed 
corporations  are  expressly  excepted.^  Another  statute  provides  that 
no  stock  corporation  other  than  a  railroad,  street  railroad,  or  electrical 
corporation,  shall  hold  more  than  10  per  cent  of  the  total  capital  stock 
issued  by  any  railroad,  street  railroad,  or  other  common  carrier, 
organized  or  existing  under  the  laws  of  this  State.  Also,  that  no 
corporation  other  than  a  gas,  electrical,  or  street  railroad  corporation 
shall  hold  more  than  10  per  cent  of  the  total  capital  stock  of  any  gas 
or  electrical  corporation  organized  or  existing  under  the  laws  of  New 
York.^ 

Ohio  provides  that  corporations  may  hold  stock  in  kindred  but 
not  competing  corporations,  but  that  this  provision  shall  not  au- 
thorize the  formation  of  a  trust  or  combination  for  the  purpose  of 
restricting  trade  or  competition.^ 

Oklahoma  statutes  prohibit  any  corporation  from  owning,  holding, 
or  controlling  in  any  manner  whatever  "the  stock  of  any  competitive 
corporation  or  corporations  engaged  in  the  same  kind  oi  business,  in 

1  While  this  report  was  on  the  press  this  law  was  amended  by  the  insertion  of  the  following  Itetween 
"1S9C"  and  "provided,  also:"  Nor  to  prevent  any  corporation  crtatcd  under  the  laws  of  this  State  from  pur- 
chasing the  stock,  bonds,  securities  or  evidences  of  indebtedness  of  any  other  corporation  or  corporations  of  this  or 
any  other  State  solely  for  investment,  and  not  using  the  same  by  voting  or  otherwise  to  restrain  trade  or  to  bring 
about,  or  in  attempting  to  bring  about,  the  substantial  lessening  of  competition.  (New  Jersey,  Laws  1915,  chap. 
114.) 

2  New  Jersey,  Laws  1013,  chap,  is,  amending  ".\n  Act  concerning  corporations  (Revision  of  1896)," 
approved  Apr.  21, 1896. 

•*  New  York  Stock  Corporation  Law,  sec.  52. 

4  New  York  Public-Service  Commission  Law,  sees.  5t  and  70,  as  amended  by  Laws  1911,  chap.  788  and 
Laws  1914,  chap.  220. 

5  Ohio,  G.  C,  sec.  8683. 


202  REPORT   OF   THE   COMMISSIONER    OF   CORPORATIONS. 

or  out  of  this  State,  in  violation  of  the  Constitution  and  laws  of  this 

State."  1 

Texas  prohibits  any  corporation  from  acquiring  in  any  way  the 
stock,  bonds,  or  franchises  or  other  rights  or  the  physical  properties 
or  any  part  thereof  of  another  corporation  where  the  purpose  or  effect 
of  such  acquisition  is  to  lessen  competition.^ 

Wyoming  provides  that  it  shall  not  be  lawful  for  a  corporation  to 
use  its  funds  m  the  purchase  of  stock  in  any  other  company,  but  that 
such  corporation  may  hold  stock  in  any  other  company  that  may  be 
subsidiary  or  tributary  thereto  and  that  does  contribute  to  the  objects 
and  purposes  of  the  holding  corporation.^ 

The  Code  of  the  District  of  Columbia  prohibits  any  company  from 
using  any  of  its  funds  in  the  purchase  of  any  stock  in  any  other 
corporation.* 

Section  14.  Special   provisions   affecting   business   declared  to   be   of 
public  consequence. 

Briefly,  the  Idaho  and  Nebraska  laws  provide  that  in  certain  cases 
corporations,  associations,  etc.,  may  be  enjoined  from  continuing  in 
business  in  the  State,  but  if  in  the  judgment  of  the  attorney  general 
such  corporation  is  one  on  which  the  public  is  so  dependent  that  the 
interruption  of  its  business  will  cause  serious  public  loss  or  incon- 
venience he  may  refrain  from  proceeding  to  obtain  a  decree  which  will 
absolutely  prevent  the  continuance  of  such  business,  and  may  apply 
for  a  limited  or  conditional  decree,  or  one  to  take  effect  at  a  future 
day.  The  court,  for  the  same  reasons,  may  take  such  action  and  may 
also,  in  its  discretion,  enjoin  officers,  agents,  or  servants  of  such  cor- 
porations, etc.,  from  continuing  in  its  service  and  enjoin  such  cor- 
poration from  continuing  their  employment  therein,  as  the  case  shall 
seem  to  require.^ 

The  Oklahoma  antitrust  law^  of  1908  provides  that  'Svhenever  any 
business,  by  reason  of  its  nature,  extent,  or  the  existence  of  a  virtual 
monopoly  therein,  is  such  that  the  public  must  use  the  same,  or  its 
services,  or  the  consideration  by  it  given  or  taken  or  offered,  or  the 
commodities  bought  or  sold  therein  oi  offered  or  taken  by  purchase 
or  sale  in  such  a  manner  as  to  make  it  of  pubUc  consequence,  or  to 
affect  the  community  at  large  as  to  supply,  demand,  or  price,  or  rate 
thereof,  or  said  business  is  conducted  in  violation  of  the  first  section 
of  this  Act,"  said  business  is  a  public  business,  and  subject  to  be  con- 
trolled by  the  State,  by  the  Corporation  Commission  or  by  an  action 

1  Oklahoma,  Laws  1908,  chap.  83,  sec.  11. 

2  Texas,  Laws  1903,  Chap.  XCIV,  sec.  2. 

3  Wyoming,  Comp.  Stats.,  1910,  sec.  3983. 

^Districtof  Columbia  Code,  sec.  620.  ■    ■ 

5  Idaho,  Laws  1911,  chap.  215,  sec.  7;  Nebraska,  Stats.,  sec.  6302k. 

6  Sec.  1  declares  illegal  every  act,  agreement,  contract,  or  combination  in  the  form  of  trust  or  otherwise, 
or  conspiracy  in  restraint  of  trade  or  commerce,  withm  the  State,  which  is  against  public  pohcy. 


TRUST   LAWS  AND   UNFAIR   COMPETITION".     •  203 

in  any  district  court  of  the  State,  as  to  all  of  its  practices,  prices,  rates 
and  charges."  It  is  further  declared  to  be  the  duty  of  any  person, 
corporation,  etc.,  engaged  in  any  public  business  to  render  its  services 
or  offer  its  commodities  upon  reasonable  terms  \\'ithout  discrimination 
and  adequately  to  the  needs  of  the  pubUc,  considering  the  facilities 
of  said  business.* 

In  Wisconsin,  if  any  improvement  maintained  under  any  franchise 
granted  pursuant  to  chapter  755,  Laws  of  1913,  shall  be  owned, 
leased,  trusteed,  possessed,  or  controlled  by  any  device  permanently, 

>  Oklahoma,  Laws  1908,  chap.  83,  sec.  13. 

Under  the  authority  of  this  section  the  Corporation  Commission  directed  the  Tishomingo  Ice  &  Cold 
Storage  Co.  to  deliver  ice  to  all  persons  in  Tishomingo,  required  scales  to  be  carried  on  each  wagon  and 
ice  to  be  weighed  when  requested  by  consumers;  fixed  the  price  at  which  the  Ada  Ice  &  Fuel  Co.  should 
sell  ice  to  different  classes  of  consumers  in  Ada;  directed  the  Mangum  Ice  &  Cold  Storage  Co.  to  deliver 
ice  to  all  parties  within  the  corporate  limits  of  Mangiun  and  fixed  the  prices;  directed  the  Geary  Light  & 
Ice  Co.  to  keep  its  plant  clean  and  sanitary  and  to  adopt  measures  to  protect  ice  in  process  of  manufac- 
tiu-e  from  contamination;  imposed  a  fine  of  $100.00  on  the  Pauls  Valley  Ice  Co.  for  refusing  to  deliver  ice 
as  directed  in  a  previous  order;  and  directed  the  Tishomingo  Ice  &  Cold  Storage  Co.  to  deliver  ice  to  con- 
smners  and  fixed  the  price  thereof. 

A  complaint  alleging  that  a  certain  cotton  buyer  paid  more  for  cotton  ginned  by  his  gin  than  for  cotton 
ginned  by  others,  was  dismissed  by  the  Commission,  which  held  that  there  being  several  cotton  buyers 
in  the  town  without  any  understanding  or  combination  as  to  prices,  a  virtual  monopoly  did  not  exist, 
and  that  they  had  no  jurisdiction  of  such  a  case. 

The  Harriss-Irby  Cotton  Co.  was  directed  to  gin  custom  cotton  at  prices  fixed  by  the  Commission. 
Held,  that  iiefore  a  person  who  had  dedicated  private  property  to  a  public  use  could  withdraw  the  same, 
he  must  give  a  reasonable  notice  in  advance  of  such  action,  .\ppealed  to  State  Supreme  Court  and  dis- 
missed for  want  of  jurisdiction. 

Regulalions  for  weighing  cotton  at  compresses  were  prescribed;  the  Commission  holding  that  where 
cotton  was  "docked' '  for  dampness  or  other  causes,  the  actual  weights  together  with  the  amount  each  bale 
was  "docked"  should  be  submitted  to  both  parties  and  that  the  cotton  should  be  reweighed  at  the  request 
of  cither  party.  The  Commission  states  that  this  order  was  resisted  at  the  time  it  was  issued,  but  that  it 
has  been  complied  with,  has  given  satisfaction,  and  that  both  buyers  and  the  compresses  would  now 
object  to  its  repeal. 

Certain  oil  companies  selling  oil  stoves  to  farmers  agreed  to  furnish  them  oil  in  barrel  lots  at  jobber's 
prices.  After  stoves  were  installed,  local  dealers  objected  to  this  arrangement.  Complaint  was  filed  and 
the  Commi.ssion  directed  the  Waters-Pierce  Oil  Co.,  the  Texas  Co.,  and  the  Oklahoma  Oil  Co.  to  sell 
kerosene  in  quantities  of  one  barrel  or  more  at  the  same  price.  The  Commission  states  that  this  order  is 
being  strictly  oljeyed. 

The  Texas  Oil  Co.  and  the  Waters-Pierce  Oil  Co.  were  directed  to  sell  gasoline  in  Idabel,  Okla.,  at  the 
same  price  as  in  other  sections  of  the  coimtry,  plus  any  additional  transporation  charge  and  distributing 
expense. 

The  McUon  Co.,  a  retail  dry  goods  house,  filed  a  complaint  alleging  that  the  Daily  Oklahoman  had  a 
virtual  monopoly  of  all  morning  advertising  in  Oklahoma  City  and  had  refused  to  accept  its  advertising 
because  of  a  controversy  over  other  business  transactions,  and  asked  tliat  the  newspaper  be  required  to 
advertise  for  the  complainant  at  the  same  rate  charged  similar  concerns.  The  Commission  foimd  that  It 
was  the  duty  of  the  Oklahoman  to  advertise  for  the  Mellon  Co.  but  made  no  order.  The  newspaper,  how- 
ever, complied  with  the  suggestions  of  the  Commission. 

Upon  a  comjilaint  filed  by  an  independent  lumberyard,  aUeging  that  other  yards  were  selling  at  or 
below  cost  lor  the  purpose  of  dcstrojnng  competition,  tlie  Commission  directed  the  lumberyards  at  Chero- 
kee to  sell  lumber  to  all  without  discrimination  in  price  for  the  same  quality  and  quantity,  and  that 
lumber  should  not  be  sold  without  a  profit  for  the  purpose  of  driving  a  competitor  out  of  Ijasiness. 

A  complaint  asking  that  the  Cordell  Gin  &  Milling  Co.  l>e  required  to  sell  its  products  to  certain  retail 
merchants  was  dismissed,  tlie  Commission  holding  that  it  had  no  jurisdiction  in  the  regulation  of  a  private 
business  wliich  deals  with  the  public  unless  a  virtual  monopoly  is  shown. 

Five  laundries  which  combined  under  the  name  of  the  Oklahoma  Operating  Co.,  and  increased  prices 
were  directed  not  to  increase  their  prices  over  those  charged  prior  to  the  combination  without  securing 
tlic  permission  of  tlie  Commission  after  a  proper  showing  that  the  prices  should  be  advanced.  Held, 
further,  tliat  the  Commission  liad  no  jurisdiction  to  dissolve  the  coiiihination,tliis  being  for  the  courts. 
The  Commission  states  tliat  "tlie  order  in  this  case  has  l)een  complicfl  with  to  tlie  letter,  and  the  people 
donot  complain  of  the  coml)ination  but  all  are  apparently  satisfied." 

The  Mahoney  Hus,  Baggage,  Carriage  &  Taxicab  Co.  was  directed  to  transfer  all  baggage  under  similar 
conditions  for  the  same  price  and  to  accept  any  baggage  tendered. 


204  EEPOET   OF    THE    COMMISSIONER    OF    CORPOBATIONS. 

temporarily,  (lii'ectly,  indii'ectly,  tacitly,  or  iii  any  manner  whatso- 
ever, so  that  the  same  form  part  of,  or  m  any  way  effect  any  com- 
bination, or  shall  be  in  any  wise  controlled  by  an  unlawful  trust,  or 
fonn  the  subject  of  any  contract  or  conspiracy  to  Ihnit  the  output 
of  any  hydraulic  or  hydroelectric  power  derived  therefrom  or  in  any 
manner  or  m  any  dcgi'ee  m  restraint  of  trade  m  the  generation,  sale, 
or  distribution  of  hydrauhc  or  hydroelectric  power  derived  there- 
from, the  State  may  take  possession  as  in  cases  of  receivership,  and 
the  members  of  the  railroad  commission  shall  act  as  receivers  durmg 
such  period  as  the  court  may  determme.^ 

The  law  of  Texas  declares  all  buildings  which  are  used  for  public 
performances,  the  production  or  exhibition  of  plays,  and  shows  of 
whatever  nature,  to  which  admission  fees  are  charged,  to  be  "pubhc 
houses  of  amusement"  and  subject  to  regulation.  It  is  further  de- 
clared unla\\'ful  to  discriminate  against  reputable  shows  or  other 
productions.  Failure  or  refusal  to  rent  such  houses  of  amusement 
upon  such  terms  as  shall  not  be  deemed  unreasonable,  extortionate, 
or  prohibitive  is  a  misdemeanor.  If  it  be  shown  that  such  houses 
have  been  aheady  rented  and  that  other  bookings  have,  in  good 
faith,  been  made  for  the  dates  applied  for,  and  that  such  renting  and 
booking  was  not  with  the  uitention  of  evadmg  the  act,  the  penalties 
wiU  not  be  unposed.  Tlie  persons  in  charge  of  such  houses  are 
required  to  keep  a  list  of  all  bookings,  with  the  dates  specificaU}^  set 
out,  and  to  exhibit  same  upon  request  to  those  who,  in  good  faith, 
desire  to  rent  such  houses.^ 

The  law  of  Utah  provides  that  all  persons,  associations,  and  cor- 
porations engaged  in  the  business  of  buying,  gathering,  or  accumu- 
lating information  or  news  for  publication,  and  vending,  supplying, 
distributing,  or  disseminating  the  same  for  publication,  either  to 
their  members  or  otherwise,  shall  be  deemed  to  be  engaged  in  a 
business  upon  which  a  public  interest  is  ingrafted,  and  shall  make  no 
distinction  with  respect  to  newspaper  publishers  desiring  to  purchase 
such  news  or  information  for  publication.^ 

Section  15.  Recognition  of  common-law  principles. 

A  few  of  the  State  antitrust  statutes  contain  specific  references 
to  the  common  law. 

In  the  Michigan  antitrust  law  of  June  16,  1905,  it  is  provided 
that  nothuig  in  this  act  shall  be  construed  to  impair  or  invahdate 
agreements  or  contracts  Imo^vn  to  the  common  law  and  in  equity 
as  those' relatmg  to  good  will  of  trade.* 

1  Wisconsin,  Stats.  1913,  sees.  1596-72. 

2  Texas,  Rev.  Crim.  Stats.,  1911,  arts.  14S0-1482. 

«  Utah,  Comp.  Laws,  1907,  sec.  17C)2x.    Cf.  Kansas,  Gen.  Stats.,  1909,  chap.  85;  and  Arkansas  Laws, 
1913,  Act  No.  51. 
*  Michigan,  P.  A.  1905,  No.  229,  sec.  1. 


TRUST  LAWS  AND  UNFAIR   COMPETITION.  205 

Section  1  of  the  antitrust  act  of  June  20,  1905,  provides  that  "all 
agreements  and  contracts  by  which  any  person,  copartnership  or 
corporation  promises  or  agrees  not  to  engage  in  any  avocation, 
employment,  pursuit,  trade,  profession  or  business,  whether  rea- 
sonable or  unreasonable,  partial  or  general,  limited  or  unlimited, 
are  hereby  declared  to  be  against  public  poUcy  and  illegal  and  void." 

Section  6,  however,  provides  that  "this  act  shall  not  apply  to 
any  contract  mentioned  in  this  act  nor  in  restramt  of  trade,  where 
the  only  object  of  the  restraint  irgposed  by  the  contract  is  to  pro- 
tect the  vendee  or  transferee  of  a  trade,  pursuit,  avocation,  profes- 
sion or  busmess,  or  the  good  will  thereof,  sold  and  transferred  for 
a  valuable  consideration  in  good  faith  and  mthout  any  intent  to 
create,  build  up,  estabhsh  or  mamtain  a  monopoly."^ 

In  North  CaroKna,  the  antitrust  law  of  1913  provides,  "that  any 
act,  contract,  combmation  in  the  form  of  trust,  or  conspiracy  m 
restrauit  of  trade  or  commerce  wliich  violates  the  principles  of 
the  common  law  is  hereby  declared  to  be  in  violation  of  section  one 
of  this  act,"  but  pro\ddes  further,  "that  notliing  herem  shall  be 
construed  to  prevent  a  person,  firm  or  corporation  from  selUng  his 
or  its  business  and  good  will  to  a  competitor,  and  agreeing  in  writing 
not  to  enter  the  business  in  competition  with  the  purchaser  in  a 
limited  territory,  as  is  now  allowed  under  the  common  law:  Pro- 
vided, such  agreement  shall  not  violate  the  prmciples  of  the  common 
law  agamst  trusts  and  shall  not  violate  the  provisions  of  this  act."^ 

Mississippi  prohibits  combinations,  contracts,  understandings,  or 
agreements,  expressed  or  impUed,  to  engross  or  forestall  a  com- 
modity.^ 

The  Georgia  Code  pro^-ides  that  "a  contract  wliich  is  against  the 
policy  of  the  law  can  not  be  enforced;  such  are  contracts  *  *  * 
in  general  in  restraint  of  trade."  ■*  Forestalling,  engrossing,  or  regrat- 
ing  is  prohibited.^ 

Massachusetts  declares  illegal  "every  contract,  agreement,  arrange- 
ment or  combination  m  violation  of  the  common  law  in  that  thereby 
a  monopoly  in  the  manufacture,  production  or  sale  in  this  common- 
wealth of  any  article  or  commodity  in  common  use  is  or  may  be  cre- 
ated, established  or  maintained,"  etc.® 

Section  16.  Administration. 

With  respect  to  the  olTicials  charged  with  the  duty  of  enforcing  the 
antitrust  laws,  the  statutes  may  be  divided  mto  four  broad  classes: 
(a)  Those  which  impose  this  duty  upon  the  attorney  general. 

1  Michigan,  P.  A.  1905,  No.  329,  sees.  1,  6. 

2  North  Carolina,  Laws  1913,  chap.  41,  sees.  2,  5. 

'  Mississippi,  Code  190G,  see.  5002,  as  amended  by  Laws  1908,  chap.  119,  see.  1. 

*  Georgia,  Code  1914,  see.  4253. 
5  Georgia,  Code  1914,  sec.  707. 

•  Massachusetts,  Laws  1908,  chap.  454,  sec.  1. 


206  EEPORT  OF   THE   COMMISSIONER   OF   COKPOEATIONS. 

(b)  Those  which  impose  the  duty  upon  the  attorney  general 
and/or  county  or  district  attorneys  or  solicitors. 

(c)  Those  which  impose  the  duty  upon  county  or  district  attor- 
neys, but  under  the  du'ection  of  the  attorney  general. 

(d)  Those  which  impose  the  duty  upon  county  or  district  attor- 
neys. 

In  addition  to  the  provisions  noted  above  may  be  mentioned  those 
which  authorize  certain  proceedings  by,  or  at  the  instance  of, 
private  citizens. 

Attorneys  general. — In  26  States  (Arkansas,  California,  Colo- 
rado, Florida,  Idaho,  Indiana,  Kansas,  Louisiana,  Massachusetts, 
Michigan,  Mississippi,  Missouri,  Montana,  Nebraska,  New  Jersey, 
New  York,  North  Carolina,  North  Dakota,  Ohio,  Oklahoma,  South 
Carolina,  Tennessee,  Texas,  Utah,  Wisconsin,  and  Wyoming)  the 
attorney  general  is  required  to  enforce  the  antitrust  laws  or  certain 
provisions  thereof,  especially  in  proceedings  to  annul  charters  or 
revoke  the  right  of  a  foreign  corporation  to  do  business  in  the  State.* 

Attorneys  general — County  or  district  attorneys. — In  22 
States  (Arizona,  California,  Colorado,  Florida,  Illinois,  Indiana,  Iowa, 
Kansas,  Louisiana,  Massachusetts,  Micliigan,  Minnesota,  IVIississippi, 
Missouri,  Nebraska,  North  Dakota,  Ohio,  Oklahoma,  South  Carolina, 
South  Dakota,  Texas,  and  Wyoming),  some  of  wliich  require  certain 
provisions  to  be  enforced  by  the  attorney  general,  as  noted  above, 
the  general  enforcement  of  the  law  is  left  to  the  attorney  general 
and/or  county  or  district  attorneys.^ 

The  law  of  Texas,  noted  above,  provides  that  "prosecutions  under 
this  act  may  be  instituted  and  prosecuted  by  any  county  or  district 
attorney  of  this  State,  and  when  any  such  prosecutions  have  been 

1  Arkansas,  Laws  1913,  No.  161,  sees.  10,  11;  California,  Laws  1907,  chap.  530,  sec.  3;  Colorado,  Laws 
1913,  chap.  161,  sec.  4;  Florida,  Comp.  Laws,  1914,  see.  3161;  Idaho,  Laws  1911,  chap.  215,  sees.  5,  7; 
Indiana,  Burn's  Ann.  St.,  sec.  3879;  Kansas,  Laws  1899,  chap.  293,  sec.  4,  Laws  1905,  chap.  2,  sec.  3,  Laws 
1909,  chap.  261,  sec.  1;  Louisiana,  Laws  1892,  Act  90,  sees.  2,  3,  Laws  1908,  Act  128,  sec.  4;  Massachusetts, 
Laws  1913,  chap.  709,  sec.  1;  Michigan,  P.  A.  1899,  No.  255,  sec.  3,  P.  A.  1905,  No.  229,  sec.  5,  P.  A.  1913, 
No.  135,  sees.  5,  7;  Mississippi,  Code  1906,  sec.  5005,  as  amended  by  Laws  1910,  chap.  223,  Code  1906,  sec. 
5006;  Missouri,  R.  S.,  chap.  98,  sec.  10318;  Montana,  Laws  1913,  chap.  7,  sec.  2,  chap.  8,  sec.  2;  Nebraska, 
Comp.  Stats.,  1911,  sees.  6302e,  6302h,  6302k,  Laws  1913,  chap.  114;  New  Jersey,  Laws  1913,  chap.  13,  sec.  4; 
New  York,  Cons.  Laws,  chap.  20,  sec.  342;  North  Carolina,  Laws  1913,  chap.  41,  sec.  13;  North  Dakota, 
Laws  1907,  chap.  259,  sees.  10, 11,  Laws  1907,  chap.  260,  sees.  5,  7,  Laws  1913,  chap.  287,  sec.  2;  Ohio,  0.  C, 
sec.  6394,  as  amended  by  Act  of  May  8, 1913;  Oklahoma,  act  of  June  10, 1908,  sees.  2,  8,  12,  Laws  1913,  chap. 
114,  sec.  2;  South  Carolina,  Civ.  Code,  1912,  sec.  2438;  Tennessee,  Laws  1903,  chap.  140,  sec.  2;  Texas,  Laws 
1903,  Chap.  XCrV,  sec.  8;  Utah,  Laws  1913,  chap.  41,  see.  2;  Wisconsin,  Stats.,  sees.  17911,  17701,  1791n-ll, 
1791n-12;  Wyoming,  Laws  1911,  chap.  62,  sees.  3,  4. 

2  Arizona,  Laws  1912,  chap.  73,  sec.  4;  California,  Laws  1907,  chap.  530,  see.  2;  Colorado,  Laws  1913, 
chap.  161,  sees.  3,  5,  8;  Florida,  G.  S.  1906,  sec.  3163;  Illinois,  Act  of  June  11,  1891,  as  amended  in 
1893  and  1907,  sec.  8;  Indiana,  Antitrust  Law  of  1907,  see.  5;  Iowa,  Code  sec.  5067;  Kansas,  G.  S.,secs. 
5145,  5146,  5191;  Louisiana,  Laws  1892,  No.  90,  sec.  4;  Massachusetts,  Laws  1912,  chap.  651,  sec.  6;  Michigan, 
P.  A.  1899,  No.  255,  sec.  2,  P.  A.  1913,  No.  135,  sec.  4;  Minnesota,  Stats.,  sec.  8974;  Mississippi,  Code  1906, 
sec.  5004,  as  amended  by  Laws  1910,  chap.  222,  Code  1906,  sec.  rmc^,  as  amended  by  Laws  1908,  chap.  204; 
Missouri,  R.  S.,  chap.  98,  as  amended  in  1913,  sees.  10303,  10317,  10320;  Nebraska,  Comp.  Stats., sec.  0.301h; 
North  Dakota,  Laws  1907,  chap.  259,  sec.  14,  and  ehap.  260,  sec.  4;  Ohio,  G.  C,  see.  6400,  as  amended  by 
Act  May  8,  1913;  Oklahoma,  Act  June  10,  1908,  sec.  9;  South  Carolina,  Laws  1902,  No.  574,  sees.  4,  7; 
South  Dakota,  Laws  1909,  chap.  224,  sec.  8;  Texas,  Laws  1903,  Chap.  XCIV,  as  amended  by  G.  L.  1907, 
chap.  456,  sec.  21;  Wyoming,  Laws  1911,  chap.  62,  sec.  2. 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  207 

instituted  by  any  county  or  district  attorney,  such  officer  shall  forth- 
with notify  the  Attorney  General  of  such  fact,  and  it  is  hereby  made 
the  duty  of  the  Attorney  General,  when  he  shall  receive  such  notice, 
to  join  such  officer  in  such  prosecution  and  do  all  in  his  power  to 
secure  the  enforcement  of  this  act."  ^ 

Attorney  general — County  or  district  attorneys  under 
DIRECTION  OF  ATTORNEY  GENERAL. — Six  States  (Idaho,  Massachusetts, 
North  CaroUna,  Oliio,  Texas,  and  Utah)  provide  that  these  laws,  or 
certam  provisions  thereof,  may  be  enforced  by  the  attorney  general 
or  by  county  or  district  attorneys  under  the  du-ection  of  the  attorney 
general.  In  Wisconsin  the  district  attorneys  institute  proceedings 
under  certain  sections  of  the  law  upon  the  "advice"  of  the  attorney 
general.^ 

County  or  district  attorneys. — In  some  instances  the  duty  of 
enforcing  the  law  is  given  directly  to  county  or  cUstrict  attorneys. 

In  Kansas  the  neglect  or  refusal  of  the  county  attorneys  to  enforce 
the  law  of  1889  is  a  misdemeanor  punishable  by  fine  and  imprison- 
ment and  forfeiture  of  office.  Upon  such  neglect  or  refusal  the 
attorney  general  is  charged  with  the  duty  of  enforcing  the  law.^ 

In  Louisiana  the  criminal  provisions  of  the  antidiscrimination  act 
are  enforced  by  the  district  attorneys,  the  attorney  general  appear- 
ing in  appeals.'' 

In  IMissouri  the  prosecuting  attorneys  are  required  to  proceed 
against  corporations  for  the  forfeiture  of  charters  or  the  right  to  do 
business  upon  the  failure  of  such  corporations  to  file  certain  affidavits 
required  by  law.^ 

Proceedings  by  or  on  behalf  of  private  citizens. — The  Indi- 
ana antitrust  law  of  1907  provides  that  proceedings  to  prevent  or 
restrain  violations  of  the  laws  on  this  subject  may  be  filed  by  the 
attorney  general  upon  his  own  relation  or  that  of  any  private  person, 
and  that  an  information  may  be  filed  by  any  taxpayer  on  his  own 
relation." 

In  Michigan  it  is  the  duty  of  the  attorney  general  to  file  an  infor- 
mation in  the  nature  of  quo  warranto,  upon  his  own  relation,  or  the 
relation  of  any  person,  on  leave  granted,  against  any  corporate  body 
whenever  it  shall  violate  any  of  the  provisions  of  the  antitrust  act 
of  June  16,  1905.' 

<  Texas,  Laws  1903,  Chap.  XCIV,  as  amended  by  G.  L.  1907,  p.  456,  sec.  21. 

« Idaho,  Laws  1911,  chap.  215,  sec.  18;  Massachusetts,  Laws  1908,  chap.  451,  sec.  2;  North  Carolina,  Laws 
1913,  chap.  41,  sec.  13;  Ohio,  G.  C,  sec.  6395;  Texas,  Laws  1903,  Chap.  XCIV,  sees.  11,  15,  as  amended  by- 
Acts  1907,  p.  221,  and  1909,  pp.  281-282,  G.  L.  1907,  p.  16,  sees.  2,  5,  G.  L.  1907,  p.  175,  sees.  3,  5;  Utah, 
Stats., sec.  1760;  Wisconsin,  Stats.  1898,  sec.   17471. 

3  Kansas,  Laws  1889,  chap.  257,  sec.  7;  G.  S.,  sec.  5191. 

*  Louisiana,  Laws  1908,  act  128,  sec.  4. 

6  Missouri,  R.  S.,  chap.  98,  sec.  ia322. 

6  Indiana,  Antitnist  Law.  1907,  sec.  5. 

'  Michigan,  P.  A.  1905,  No.  2'29,  sec.  5. 


208  BEPOBT   OF   THE   COMMISSIONER  OP   COEPOEATIONS. 

The  law  of  Massachusetts  provides  that  upon  complaint  on  oath 
filed  in  the  supreme  judicial  court,  or  superior  court,  if  it  appears 
that  certain  prohibited  contracts,  combinations,  practices,  etc., 
exist,  the  court  shall  order  respondents  to  show  cause  why  a  master 
should  not  be  appointed  to  hear  and  report  upon  such  complaint. 
If  cause  be  not  shown,  the  court  is  required  to  appoint  a  master  for 
such  purposes.  The  report,  if  affirmed  by  the  court,  is  required  to 
be  sent  to  the  attorney  general  for  such  action  as  it  may  warrant.^ 

The  South  Dakota  antitrust  act  of  1909  provides  that  any  person 
may  complain  to  any  court  of  competent  jurisdiction  of  violations 
of  this  act,  and  in  such  case  the  court  shall  issue  a  warrant  and  pro- 
ceed the  same  as  though  the  State's  attorney  had  made  the  complaint, 
and  the  court  may  also  permit  any  attorney  whom  the  complainant 
may  employ  to  appear  and  prosecute  such  action  at  any  stage  of  the 
proceedings.^ 

In  Florida  any  citizen  may  institute  and  prosecute  a  suit  in  his 
own  name  to  enforce  the  antitrust  law.^ 

Miscellaneous  provisions. — In  Aiizona  and  Kansas  the  law  pro- 
vides in  substance  that  it  shall  be  the  duty  of  all  State  and  county 
officers  having  knowledge  of  violations  of  the  antitrust  law  to  notify 
county  attorne3^s  in  their  respective  counties,  and  the  attorney  gen- 
eral, and  to  furnish  the  names  of  witnesses.  Upon  failure  to  comply, 
such  officer  shall  be  fined  and  forfeit  office.*  Kansas  imposes  this 
duty  on  municipal  officers  also.^ 

The  law  of  Illinois  provides  that  the  informer  shall  be  paid  one- 
fifth  of  the  fine  recovered.** 

In  Mississippi  it  is  the  duty  of  the  several  circuit  judges  to  specially 
call  the  attention  of  the  grand  juries  to  the  provision  imposing 
penalties  for  violation  of  the  antitrust  law.' 

In  Alabama,  Indiana  and  Tennessee  there  are  somewhat  similar 
provisions.^ 

The  law  of  New  York  provides  that  the  department  of  foods  and 
markets  shall  cause  to  be  initiated  proper  proceedings  to  prevent 
restraint  of  trade  or  unlawful  combinations  to  fix  prices.* 

Section  17.  Evidence,  burden  of  proof,  indictments,  etc. 

In  Illinois  it  is  provided  that  in  all  cases  under  the  provisions  of  the 
antitrust  act  of  June  11,  1891,  a  preponderance  of  evidence  in  favor 

"  Massachusetts,  Laws  1911,  chap.  503. 

2  South  Dakota,  Laws  1909,  chap.  224,  sec.  8. 

3  Florida  General  Stats.  1906,  sec.  3163. 

<  Arizona,  Laws  1912,  chap.  73,  sec.  10;  Kansas,  G.  S.,  sec.  5150. 

6Kansas,G.S.,  sec.  5192. 

sillmois,  act  of  June  11, 1891,  amended  in  1893  and  1907,  sec.  8. 

'  Mississippi,  Code  1906,  sec.  5004,  as  amended  by  Laws  1910,  chap.  222. 

8  Alabama,  Code,  sec.  758?;  Indiana,  Stats,  sec.  3883;  Tennessee,  Laws,  1903  ch.  140,  sec.  5, 

9  New  York,  Laws  1914,  chap.  245,  sec.  20-h. 


TKUST  LAWS  AND  UNFAIR   COMPETITION.  209 

of  the  people  sliall  be  sufficient  to  authorize  a  verdict  and  judgment 
for  the  people.^ 

California,  Michigan,  and  Utah  provide  that  the  character  of  the 
trust  or  combination  alleged  may  be  estabUshed  by  proof  of  its 
general  reputation  as  such.^ 

Mssissippi  Code  of  1906,  section  5007,  as  amended  by  Laws  1912, 
chapter  250,  providing  for  the  recovery  of  $500  and  actual  damages 
by  any  person  injured  or  damaged  by  a  trust  or  combine,  provides 
further  that  '4n  any  suit  under  this  section,  proof  by  any  party  plain- 
tiff that  he  has  been  compelled  to  pay  more  for  any  commodity,  or 
to  accept  less  for  any  commodity,  or  to  pay  more  for  any  service 
rendered  by  any  corporation  exercising  a  pubhc  franchise,  by  reason 
of  the  unla\v1[ul  act  or  agreement  of  the  defendant  trust,  its  officers, 
agents  or  attorneys  than  he  would  have  been  compelled  to  give  or 
accept  but  for  such  unlaAv^ul  act  or  agreement,  shall  be  prima  facie 
evidence  of  damage,  and  in  every  such  case  proof  of  an  unla^vful 
purpose  oi*  agreement  to  raise  or  lower  price  or  cost  shall  be  prima 
facie  evidence  that  such  price  or  cost  was  raised  or  lowered  by  reason 
of  such  purpose  or  agreement." 

Missouri  provides  b}^  section  10313a,  added  to  the  Re%dsed  Statutes 
m  1913,  that  in  any  proceeding  against  or  prosecution  of  any  insurance 
company,  under  the  provisions  of  this  article,  it  shall  be  prima  facie 
evidence  that  such  company  is  a  member  of  a  pool,  trust,  understand- 
ing, etc.,  to  control,  effect,  or  fix  the  price  or  premium  to  be  paid  for 
insuring  property,  if  it  be  shown  that  such  company  or  its  representa- 
tive, in  writing  insurance,  has  used  any  insurance  rate,  or  made  use 
of  or  consulted  any  rate  book,  paper,  or  card  containing  any  insurance 
rate  prepared,  pubUshed,  kept,  or  furnished  by  any  person,  associa- 
tion of  persons,  or  bureau  employed  by,  or  acting  on  behalf  of,  any 
other  insurance  company  or  association  in  and  about  the  making  and 
publishing  of  insurance  rates  for  use  in  any  portion  of  the  State  .^ 

The  Nebraska  antidiscrimination  statute  provides  in  substance 
that  proof  that  any  person,  corporation,  etc.,  has  been  discriminating 
between  different  sections,  etc.,  by  selling  a  commodity  at  a  lower 
rate  in  one  section,  etc.,  than  is  charged  by  said  party  in  another 
section,  after  making  allowance  for  the  difference  in  grade  or  quality 
and  in  cost  of  transportation,  shall  be  prima  facie  evidence  of  unfair 
discrimination.  A  similar  clause,  with  the  necessary  changes, 
apphes  to  the  section  proliibiting  discriminations  in  the  purchase  of 
commodities.* 

1  Illinois,  Laws  1891 ,  p.  206,  sec.  7. 

2  California,  Laws  1907,  chap.  530,  sec.  6;  Michigan,  P.  A.  1899,  No.  255,  sec.  6;  Utah,  Comp.  Laws,  1907, 
sec.  17fi2x5  (an  antidiscrimination  act).  A  similar  section  of  the  Ohio  law  was  declar>^d  void  as  violative 
of  the  due  process  clause  of  the  Constitution  of  the  United  States.    (Hammond  v.  State,  7S  Ohio  St.,  1.5). 

3  Missouri,  Laws  1913,  p.  555. 

*  Nebraska,  Laws  1913,  chap.  117,  sec.  1. 

30035'— 16 14 


210  EEPORT   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

Louisiana  prohibits  discrimination  by  selling  at  a  lower  rate  in 
one  section  than  another,  after  making  due  allowance  for  the  differ- 
ence in  the  grade  or  quahty  and  cost  of  transportation,  and  provides 
that  all  sales  "so  made"  shall  be  prima  facie  e\adence  of  unfair 
discrimination.^ 

In  Mississippi,  under  a  law  substantially  similar,  a  prima  facie  case 
is  established  by  shomng  "a  sale  or  offer  of  sale  of  commodity  at 
a  lower  price  at  one  place  in  this  State  than  another,"  or  by  showing  a 
lower  charge  for  certam  services  therein  mentioned  in  one  locahty 
than  another.^ 

Indiana  provides  that  it  shall  be  a  good  defense  to  any  action  grow- 
ing out  of  any  violation  of  the  antitrust  law  of  1907,  or  any  other  act 
or  common  law  relating  to  the  subject  matter  of  this  act,  if  the 
defendant  shall  plead  and  by  a  fair  preponderance  of  the  evidence 
prove  that  such  violation  is  not  in  restraint  of  trade  or  commerce,  or 
does  not  restrict  trade  or  commerce  or  hmit  or  reduce  the  production 
or  increase  or  reduce  the  price  of  merchandise  or  any  commodity, 
natural  or  artificial,  or  prevent  competition  in  manufacturing.^ 

North  CaroUna  declares  all  contracts,  combmations  in  the  form  of 
trust,  and  conspiracies  in  restraint  of  trade  or  commerce  prohibited 
in  sections  1  and  2  of  chapter  41  of  the  Laws  of  1913  to  be  unreason- 
al)le  and  illegal,  unless  the  persons  entering  mto  such  contract,  etc., 
can  show  affirmatively  upon  an  indictment  or  civil  action  for  violation 
of  said  sections  that  such  contract,  etc.,  does  not  injure  the  business 
of  any  competitor,  or  prevent  anyone  from  becoming  a  competitor 
because  his  or  its  business  will  be  unfairly  injured  by  reason  of  such 
contract,  etc.* 

California  provides  that  in  any  indictment,  etc.,  for  any  offense 
named  in  the  antitrust  act  it  shall  be  suflicient  to  state  the  purpose 
or  effects  of  the  trust  or  combination  and  that  the  accused  is  a  mem- 
ber of,  acted  with  or  in  pursuance  of  it,  or  aided  or  assisted  in  carrying 
out  its  purposes,  without  giving  its  name  or  description,  or  how, 
when,  and  where  it  was  created.'^ 

The  laws  of  Louisiana,  Michigan,  Ohio,  and  North  Dakota  are 
substantially  similar." 

Louisiana  varies  from  the  above  by  substituting  "was"  for  "is" 
before  the  words  "a  member  of,"  and  omitting  the  words  "or  aided 
or  assisted  in  carrying  out  its  purposes  "  after  the  words  "in  pursuance 
of  it." 

1  Louisiana,  Laws  1908,  act  12S,  sec.  1. 

2  Mississippi,  Code  1906,  sec.  5002,  as  amended  by  Laws  190S,  chap.  119,  sec.  1. 

3  Indiana,  Laws  1907,  chap.  243,  sec.  1. 

<  North  Carolina,  Laws  1913,  chap.  41,  sec.  3. 
6  California,  Laws  1907,  chap.  530,  sec.  5. 

6  Louisiana,  Laws  1892,  act  90,  sec.  5;  Michigan,  P.  A.  1899,  No.  255,  sec.  5;  Ohio,  G.  C,  sec.  6398;  North 
Dakota,  Laws  1907,  chap.  259,  sec.  6. 


TRUST   LAWS   AND    UNFAIK    COMPETITION.  211 

North.  Dakota  varies  by  omitting  tlie  words  "or  effects"  after 
"purpose,"  by  omitting  the  words  "or  aided  or  assisted  in  carrying 
out  its  purposes"  after  "in  pursuance  of  (to)  it,"  and  by  omitting  the 
words  "when  and"  and  substituting  "or"  after  the  words  "or how." 

In  this  connection  ]\lissouri  declares  that  it  shall  be  sufficient  to 
allege  that  any  person  or  persons  have  created,  entered  into,  become 
members  of,  or  participated  in  any  pool,  trust,  agreement,  etc., 
without  alleging  the  manner  in  which  such  pool,  etc.,  has  been 
effected,  and  it  shall  not  be  necessary  to  allege  how,  when,  or  where 
such  pool,  etc.,  was  effected.^ 

Oklahoma  provides  that  it  shall  be  sufficient  to  prove  that  a  trust, 
monopoly,  etc.,  existed  without  the  period  not  barred  by  the  statute 
of  limitations,  and  was  continued  in  any  form  into  and  during  any 
portion  of  the  period  not  so  barred,  and  that  defendant  belonged  to 
it,  or  acted  for  or  in  comiection  with  it,  without  proving  all  the 
members  belonging  to  it,  or  proving  or  producing  any  article  or 
agreement,  or  any  written  instrument  on  which  it  may  have  been 
based,  or  that  it  was  evidenced  by  any  written  instrument  at  all.^ 

Michigan  provides  that  it  shall  be  sufficient  to  prove  that  a  trust 
or  combination  exists  and  that  the  defendant  belonged  to  it,  or  acted 
for  or  in  connection  with  it,  without  proving  all  the  members  belong- 
ing to  it,  or  proving  or  producing  any  article  of  agreement,  or  any 
WTitten  instrument  on  which  it  may  have  been  based,  or  that  it  was 
evidenced  by  any  written  instrument  at  all.^ 

Cafifornia,  North  Dakota,  Ohio,  and  Utah  have  similar  provisions.^ 

CaUfornia  substitutes  the  word  "belonged"  for  belonging,  reading, 
"without  proving  all  the  members  belonged  to  it,"  etc. 

North  Dakota  adds  "  and  proof  that  any  person  has  been  acting  as 
agent  of  any  defendant  in  transacting  the  business  of  such  defendant 
in  this  state,  or,  while  agent  of  such  defendant  and  in  the  name, 
behalf  or  interest  of  such  defendant,  violated  any  of  the  provisions 
of  this  chapter,  shall  constitute  prima  facie  proof  that  the  same  was 
the  act  of  such  defendant." 

Section  18.  Penalties. 

The  penalties  for  violating  State  antitrust  statutes  are  in  many 
cases  heavy.  In  addition  to  prison  sentences  up  to  10  years,  per- 
sonal and  corporate  fines  up  to  $25,000,  and  in  a  few  instances  prison 
sentences  and  fines  without  any  fixed  limits,  separate  penalties  for 
each  day  the  violation  is  continued,  and  increased  penalties  for  sec- 
ond and  subsequent  offenses,  there  are  provisions — 


1  Missouri,  R.  S.,  chap.  98,  sec.  10312,  as  amended  in  1913. 

2  Olclalioma,  act  of  June  10,  1908,  sec.  14. 
•I  Michigan,  P.  A.  1S99,  No.  255,  sec.  6. 

*  California,  Laws  1907,  chap.  530,  sec.  G;  North  Dakota,  Comp.  Laws  lyi:i,  I'eual  Code,  sec.  9956;  Ohio, 
G.  C,  sec.  6399;  Utah,  Comp.  Laws,  1907,  sec.  1702x5. 


212  EEPOKT    OF    THE    COMMISSIONER   OF    COKPOKATIONS. 

1.  Prohibiting  persons  from  dealing  with  or  handhng  the  goods  of 
offenders;  enabhng  persons  to  evade  payment,  or  to  recover  the 
price  paid  for  goods  bought  from  parties  transacting  business  in 
violation  of  the  statutes;  allowing  injured  parties  to  recover  actual, 
double  or  treble  damages ;  and  otherwise  encouraging  prosecutions ;  ^ 

2.  Expressly  declaring  void  all  contracts  made  in  violation  of  the 
statutes  and  requiring  the  forfeiture  of  charters  by  convicted  cor- 
porations; 

.  3.  Penalizing  the  persons  who  act  on  behalf  of  corporations,  as 
well  as  the  corporations,  for  corporate  infringements. 

Personal  penalties. — Provisions  regarding  fines,  imprisonment, 
or  both  are  found  in  the  antitrust  statutes  of  the  following  35  States: 
Alabama,  Arizona,  Arkansas,  California,  Colorado,  Connecticut, 
Idaho,  Ilhnois,  Indiana,  Iowa,  Kansas,  Louisiana,  Maine,  Massachu- 
setts, Michigan,  Minnesota,  Mississippi,  Missouri,  Montana,  Ne- 
braska, New  Jersey,  New  Mexico,  New  York,  North  Carolina,  North 
Dakota,  Ohio,  Oklahoma,  Oregon,  South  Carolina,  South  Dakota, 
Tennessee,  Texas,  Utah,  Wisconsin,  and  Wyoming.- 

Both  fine  and  imprisonment  may  be  imposed  for  violations  of  at 
least  some  of  the  provisions  in  all  but  seven  ^  of  these  States ;  but 
Arizona,  Oklahoma,  and  Texas  are  the  only  States  that  make  both 
punishments  appUcable  in  all  cases.  Kansas,  New  Mexico,  and  Ohio 
establish  both  penalties  in  some  instances.  Arizona,  Oklahoma, 
and  Texas  are  also  the  only  States  which  establish  penalties  of  im- 
prisonment for  all  violations,  but  Massachusetts  and  Missouri,  as  well 

1  Special  fees  for  prosecuting  officers  are  frequently  provided.  Illinois  gives  the  informer  one-fifth  of 
the  fine  recovered  (Rev.  St.,  1913,  Crim.  Code,  sec.  269j);  and  in  North  Carolina  (Laws  1911,  chap.  167, 
see.  7i)  "violation  of  any  of  the  provisions  of  this  act  shall  subject  the  offender  to  a  penalty  of  one  hundred 
dollars  per  day,  which  may  be  recovered  for  his  own  benefit  by  any  citizen  of  the  State." 

2Alabama,  Code,  1907,  sees.  7579-7581;  Arizona,  Laws  1912,  chap.  73,  sees.  5,  6;  Arkansas,  Laws  1905,  as 
amended  in  1913  by  Act  161,  sees.  2,  3;  California,  Laws  1907,  chap.  530,  sees.  4,  7,  10,  Laws  1913,  chap. 
276,  sec.  5;  Colorado,  Laws  1913,  chap.  161,  sees.  3,  4,  5;  Connecticut,  Laws  1911,  chap.  185;  Idaho,  Laws 

1909,  p.  297,  sees.  2,  3,  Laws  1911,  chap.  161,  sees.  1,  2,  4,  5,  7,  8;  Illinois,  Rev.  Stats.  1913,  Crim.  Code,  sees. 
269c,269d,269h;  Indiana,  Stats.  1914,  sees.  3866-3868,  3870,  3875,  3879,  3880,  3885,  3886,  3892b;  Iowa,  Stats., 
sees.  5062, 5065,  5066,  Laws  1909,  chap.  225,  see.  3;  Kansas,  Gen.  Stats.,  sees.  5144-5147,  5159,  5165,  5177,  5179, 
5182,  5184,  5187;  Louisiana,  Laws  1890,  No.  86,  sees.  2,  3,  Laws  1892,  No.  90,  see.  4,  Laws  1908,  No.  128,  sees. 
2,  6;  Maine,  Rev.  Stats.,  chap.  47,  see.  55;  Massachusetts,  Laws  1907,  chap.  469,  see.  2,  Laws  1912,  chap. 
651,  sees.  3,  4,  8;  Michigan,  Stats.  1913,  sees.  2950-2966, 14887fl,  Laws  1913,  No.  135,  sees.  2,  6;  Minnesota, 
Gen.  stats.  1913,  sees.  4487,  4488,  8973,  8974,  8980;  Mississippi,  Code  1906,  sees.  5006,  5008,  5010,  5020,  Laws 

1910,  chap.  222;  Missouri,  Rev.  Stats.,  chap.  98  (as  amended  by  Laws  1913,  p.  549),  sees.  10302, 10304, 10315, 
10322;  Montana,  Laws  1909,  chap.  97,  sec.  1,  Laws  1913,  chaps.  7,  8,  Laws  1915,  chap.  69;  Nebraska,  Rev. 
Stats.  1913,  sees.  4020, 4030,  4033-4035,  4045-4060,  8858,  8860;  New  Jersey,  Laws  1913,  chaps.  13  (sees.  2,  3,  4), 
14, 15, 16, 19;  New  Mexico,  Stats.  1915,  sees.  1685, 1686;  New  York,  Gen.  Business  Law,  sec.  341  (as  amended 
by  Laws  1910),  chap.  633;  North  Carolina,  Laws  1911,  chap.  167,  sees.  6,  7,  8,  Laws  1913,  chap.  41,  sees.  1, 
5,  5f,  12;  North  Dakota,  Oomp.  Laws  1913,  sees.  3046,  3049,  9952,  9953;  Ohio,  Gen.  Code,  sees.  6390,  6395, 
Laws  1913,  pp.  254,  405,  424,  425;  Oklahoma,  Laws  1908,  p.  750,  sees.  4,  6,  10,  11,  Laws  1913,  chap.  114: 
Oregon,  Laws  1915,  chap.  344;  South  Carolina,  Civ.  Code,  1912,  sees.  2437,  2438,  2441,  2448,  2452;  South 
Dakota,  Laws  1909,  chap.  224,  sees.  6,  9,  10;  Tennessee,  Laws  1903,  chap.  140,  sees.  2,  3,  Laws  1907,  chap. 
360;  Texas,  Rev.  Civ.  Stats.,  art.  7806,  Rev.  Crim.  Stats.,  arts.  1458,  1464,  1466,  1470,  1471; 'Utah,  Stats., 
sees.  1755,  1756,  1758,  1760,  Laws  1913,  chaps.  12,41;  Wisconsin,  Stats.  1913,  1747e,  1770g,  1791j,  1791n-9, 
1791n-10;  Wyoming,  Laws  1911,  chap.  62,  see.  4,  Laws  1915,  chap.  23. 

3  Kither  fine  or  imprisonment  may  be  imposed  in  Colorado  and  Minnesota.  In  Alabama,  Arkansas, 
Maine,  Mississippi,  and  South  Dakota  fine  only  is  provided. 


TEUST   LAWS  AND   UNFAIR   COMPETITION.  213 

as  Kansas,  New  Mexico,  and  Ohio,  ako  provide  prison  sentences  for 
some  violations. 

The  maximum  penalties  applicable  are  usually  specified  in  the 
laws  and  run  as  high  as  10-year  prison  terms  ^  and  $25,000  fines.^ 
A  majority  of  the  States  listed  also  fix  a  minimum  below  which  the 
penalties  must  not  fall.  A  few  statutes,  however,  prescribe  no  limits 
for  the  penalties i^  Additional  penalties  for  each  day  violations  con- 
tinue are  provided  by  statutes  in  Arizona,  Arkansas,  California, 
Indiana,  Kansas,  Minnesota,  Mississippi,  Montana,  Nebraska,  Ohio, 
Oklahoma,  South  Carohna,  and  Texas;  and  in  all  of  these  States  ex- 
cept Arizona,  Indiana,  and  Texas  each  day's  violation  of  at  least 
some  provisions  is  made  a  separate  offense.  Each  week's  violation 
is  made  a  separate  offense  in  North  Carolina. 

Increased  penalties  for  second  and  subsequent  offenses  are  pre- 
scribed in  Illinois,  South  Dakota,  and  Utah. 

Individuals  who  act  for  corporations  as  well  as  those  acting  on  their 
own  behalf  in  violation  of  the  statutes  are  made  liable  to  individual 
penalties  distinct  from  the  corporate  fines  and  forfeitures,  in  all 
States  that  prescribe  penalties  except  Maine. 

Corporate  fines. — ^The  fines  referred  to  above  are  applicable  to 
corporations  as  well  as  to  persons  who  violate  the  provisions  of  the 
antitrust  statutes  in  all  the  States  listed  above  (see  p.  212,Jootnote  2) 
except  in  Connecticut,  New  Mexico,  and  Tennessee. 

Forfeiture  of  charter  or  right  to  do  business. — Florida  * 
and  aU  of  the  35  States  listed  above  (see  p.  212,  footnote  2)  except 
Alabama,  Connecticut,  Maine,  New  Mexico,  New  York,  and  North 
Carolina  also  provide  for  forfeiture  of  charter  or  franchise,  or  revoca- 
tion of  the  right  to  do  business  as  one  of  the  penalties  for  violation 
of  their  antitrust  statutes. 

Contracts  void. — Many  States  (Arizona,  California,  Colorado, 
Illinois,  Indiana,  Iowa,  Kansas,  Louisiana,  Massachusetts,  Michigan, 
Minnesota,  Mississippi,  Missouri,  Nebraska,  New  Mexico,  New  York, 
North  Dakota,  South  Carolina,  Tennessee,  Texas,  and  Utah)  ex- 
pressly provide  that  contracts  or  agreements  in  violation  of  the  anti- 
trust laws  shall  be  void.^ 

>  In  Oklahoma,  South  Carolina,  Tennessee,  and  Texas. 

2  In  Montana. 

» North  Carolina  prescribes  no  limits  in  its  act  of  1913,  and  the  Wyoming  law  of  1911  fixes  no  maximum. 
Minima  are  frequently  omitted. 

*  Florida,  Comp.  Laws,  1914,  sec.  3161. 

6  Arizona,  Laws  1912,  chap.  73,  sec.  8;  California,  Laws  1907,  chap.  530,  see.  8;  Colorado,  Laws  1913, 
chap.  101,  sec.  G;  Illinois,  Act  June  11,  1S91,  sec.  '>;  Indiana,  Slats.,  sees.  3878,  3881,  3889,  3S92c;  Iowa, 
Stats.,  sec.  5003;  Kansas,  G.  S.,  5148;  Louisiana,  Laws  1892,  act  90,  sec.  7,  Laws,  1908,  act  128,  sec.  3; 
Massachusetts,  Act  of  June  1, 1907,  sec.  2,  Laws  1912,  chap.  651,  sec.  5;  Michigan,  V.  A.  1899,  No.  255,  sec.  8, 
P.  A.  1905,  No.  229,  sec.  2,  P.  A.  1913,  No.  135,  sec.  3;  Minnesota,  Stats.  1913,  sec.  8981;  Mississippi,  Code, 
1906,  sec.  5003;  Missouri,  R.  S.,  chap.  98,  as  amended  in  1913,  sec.  10316;  Nebraska,  R.  S.,  1913,  sec.  4aJl; 
Now  Mexico,  Stats.  1915,  sec.  1087;  New  York,  Consol.  Laws,  Oen.  Bus.  Law,  sec.  340;  North  Dakota, 
Laws  1907,  chap.  259,  sec.  8,  chap.  200,  sec.  3;  South  Carolina,  Civ.  Code  1912,  sec.  2445;  Tennessee,  Laws 
1903,  chap.  140,  sec.  1;  Texas,  Rev.  Civ.  Stats.,  1911,  art.  1405;  Utah,  Stats.,  sec.  1757. 


214  EEPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

In  Idaho,  Louisiana,  Nebraska,  Maine,  and  Wisconsin  every  con- 
tract, combination  in  the  form  of  trust  or  otherwise,  or  conspiracy 
in  restraint  of  trade  or  commerce,  within  the  State  is  declared  illegal.^ 

Maine  provides  that  no  certificate  of  stock,  or  other  evidence  of 
interest,  in  any  trust,  combination,  or  association  shall  have  legal 
recognition  in  any  court  in  the  State,  and  any  deed  of  real  estate 
given  by  any  person,  firm,  or  corporation  for  the  purpose  of  becom- 
ing interested  in  such  trust,  etc.,  or  any  mortgage  given  by  the  latter 
to  the  seller,  as  well  as  all  certificates  growing  out  of  such  transaction, 
shall  be  void.^ 

In  South  Carolina  it  is  provided  that  when  a  foreign  corporation 
is  found  guilty  of  a  violation  of  the  law  the  "effect  of  the  judgment 
of  the  Court  shall  be  to  deny  to  such  corporation  the  recognition  of 
its  corporate  existence  in  any  Court  of  law  or  equity  in  this  State. 
But  nothing  in  this  Section  shall  be  construed  to  affect  any  right  of 
action  then  existing  against  such  corporation."  ^ 

No  RECOVERY  FOR  GOODS,  ETC. — Four  States  (Illinois,  Missouri, 
New  Mexico,  and  North  Dakota)  expressly  provide  that  a  purchaser 
is  not  liable  for  goods,  etc.,  bought  from  any  individual,  corporation, 
etc.,  transacting  business  contrary  to  the  antitrust  law.* 

Colorado  provides  that  any  contract  or  agreement  in  violation  of 
any  of  thcvprovisions  of  the  antitrust  act  shall  be  absolutely  void  and 
not  enforceable  in  any  of  the  courts  of  the  State;  and  when  any  civil 
action  shall  be  commenced  in  any  court  of  the  State  it  shall  be  lawful 
to  plead  in  defense  thereof  that  the  cause  of  action  sued  upon  grew 
out  of  a  contract  or  agreement  in  violation  of  the  provisions  of  the 
act.^     Kansas  also  has  a  similar  provision  in  force." 

Mississippi  proliibits  persons,  corporations,  etc.,  (a)  from  combining 
to  prevent  by  pooling  any  of  such  persons,  corporations,  etc.,  from 
separately  bidding  for  the  performance  of  a  public  work,  and  (b)  from 
preventing  by  persuasion  or  reward  any  other  person,  corporation, 
etc.,  from  bidding  for  the  performance  of  such  public  work;  and 
provides  that  all  money  to  be  paid  on  any  such  contract,  when  such 
pro\dsion  has  been  violated,  shall  not  be  collectible,  nor  shall  the  same 
be  paid.^ 

Recovery  of  consideration. — Kansas,  Indiana,  South  CaroUna, 
and  Tennessee  provide  that  any  person  or  corporation  injured  or 
damaged  by  any  arrangement,  contract,  agreement,  trust,  or  com- 

1  Idaho,  Laws  1911,  chap.  215,  p.  688;  Louisiana,  Laws  1890,  Act  86,  sec.  1;  Nebraska,  Laws  190.'),  chap. 
162,  sec.  1;  Maine,  Laws  1913,  chap.  106,  sec.  1;  Wisconsin,  Stats.  1913,  sec.  174 7e. 

2  Maine,  R.  S.,  chap.  47,  sec.  54. 

3  South  Carolina,  Civ.  Code,  1912,  sec.  2438. 

Ulluiois,  Act  June  11,  1891,  sec.  6;  Missouri,  R.  S.,  chap.  98,  as  amended  in  1913,  sec.  10307;  New 
Mexico,  Stats.  1915,  sec.  1GS7;  North  Dakota,  Laws  1907,  chap.  259,  sec.  9. 
6  Colorado,  Laws  1913,  chap.  161,  sec.  6. 
6  Kansas,  G.  S.,  sees.  5148,  5189. 
'  Mississippi,  Code  1900,  sees.  5008,  5009. 


TRUST   LAWS  AND  UNFAIR   COMPETITION".  215 

bination,  such  as  described  in  their  antitrust  acts,  may  recover  of 
any  person  or  corporation  operating  such  trust,  etc.,  the  full  consider- 
ation or  sum  paid  by  him  or  them  for  goods,  etc.,  the  sale  of  which 
is  controlled  by  such  combination  or  trust.* 

Indiana  provides  that  if  there  shall  be  collusion  or  fraud  among 
bidders  for  any  contract  or  work,  as  described  in  section  3  of  the 
Antitrust  Law  of  1907,  the  principal  who  lets  the  contract  or  work,  or 
for  whom  the  contract  was  let,  shall  not  be  liable  for  such  letting, 
or  on  account  of  work  done,  etc.,  to  the  successful  bidder,  his  successors 
or  assigns,  if  such  bidder  is  a  party  to  the  collusion  or  fraud;  and  if, 
before  notice  of  such  collusion  or  frafud,  payment  or  partial  payment 
shall  have  been  made,  such  principal  may  within  five  years  from  the 
date  of  last  payment  recover  the  full  amount  of  such  payments  with 
interest  and  attorney's  fees  against  such  successful  l^idder.^ 

Prohibitions  against  dealing  in  or  handling  goods  of 
CONVICTED  PARTIES. — The  antitrust  law  of  Texas  provides  that 
when  a  corporation  shall  have  had  its  charter,  francliise,  or  its  right 
to  do  business  forfeited  for  a  violation  of  the  act,  no  other  corpora- 
tion to  wliich  the  defaulting  corporation  may  have  transferred  its 
properties  and  business,  or  which  has  assumed  the  payment  of  its 
obligations,  shall  be  permitted  to  incorporate  or  do  business  in  Texas.^ 

Missouri,  in  substance,  provides  that  it  shall  be  unla^^^^ul  for  any 
person,  corporation,  or  association  of  persons  to  deal  in  or  offer 
for  sale  in  the  State  any  article  or  tiling,  or  policy  of  property  insur- 
ance, made,  produced,  manufactured,  or  dealt  in  by  any  corporation 
whose  rights,  francliises,  or  privileges  have  been  declared  forfeited. 
Tliese  provisions  are  also  made  applicable  in  all  respects  to  the 
successors  or  assigns  of  any  such  corporations.* 

Nebraska,  in  connection  with  the  enforcement  of  its  law  against 
rebates,  })rovides  that  if  any  joint-stock  company,  corporation,  or 
combination,  or  any  agent  thereof,  shall  sohcit,  accept,  or  receive 
any  such  rebate,  concession,  or  service  as  is  declared  to  be  unlawful, 
it  sliaU  be  unlawful  thereafter  to  transport  witliin  the  State  any 
article  owned  or  controlled  by  such  company,  corporation,  or  com- 
bination, or  produced  or  manufactured  by  it,  by  whomsoever  the 
same  may  l)e  owned  or  controlled.  The  same  prohil)ition  applies 
if  any  such  joint-stock  company,  coi-jjoration,  or  combination,  shall 
offer,  grant,  or  give  any  special  prices,  inducements,  or  advantages 
for  the  sale  of  articles  produced,  manufactured,  owned,  or  controlled 
by  it  to  purchasers  in  any  particular  locahty  in  order  to  restrict 
or   destroy   competition.     The    above   proliibition   shall   not   apply 

«  Kansas,  Laws  1889,  chap.  257,  sec.  3;  O.  S.,  sec.  51SS;  Indiana,  Stats.,  sec.  3882;  South  Carolina,  Civ. 
Code,  sec.  2439;  Tennessee,  Laws  1903,  chaj).  110,  sec.  4. 
2  Indiana,  Antitrust  Law,  1907,  sec.  4. 
»  Texas,  C.  L.  1903,  Chap.  XCTV,  sees.  7,  10. 
*  Missouri,  R.  S.,  chap.  98,  as  amended  in  1913,  sec.  10308. 


216  REPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

to  an  article  purchased  bona  fide  before  the  decree  is  made,  nor  even 
after  decree  is  made,  to  an  article  purchased  bona  fide,  without  notice, 
and  within  30  days  after  entry  of  decree.  The  transportation 
company  and  its  officers,  etc.,  are  subject  to  a  fine  of  not  less  than 
$5,000  if  knowingly  concerned  in  the  transportation  of  such  articles.^ 

In  Arizona  and  Kansas  persons,  corporations,  etc.,  their  officers, 
representatives,  or  consignees,  violating  the  antitrust  act  are  denied 
the  right  to  do  business  in  the  State,  and  all  persons,  corjDorations, 
etc.,  their  officers,  representatives,  and  consignees  witliin  the  State, 
are  proliibited  from  handling  the  goods  of  or  dealing  with  any  such 
person,  corporation,  etc.,^  their  officers,  representatives  or  consignees. 

Damages. — The  laws  of  a  number  of  States  (Alabama,  Arizona, 
Colorado,  Iowa,  Kansas,  Michigan,  Mississippi,  New  Mexico,  and 
Wisconsin)*  expressly  j^rovide  for  the  recovery  of  actual  damages  by 
parties  injured  by  any  prohibited  agreement,  combination,  etc.  In 
addition  to  actual  damages,  Alabama  and  Mississippi  allow  the  sum 
of  $500,  and  Kansas  allows  reasonable  attorney's  fees  to  be  fixed  by 
the  court  and  taxed  as  part  of  the  costs. 

Double  damages. — California  and  Michigan  provide  for  the  recov- 
ery of  double  damages  and  costs  of  suit.* 

Treble  damages. — Maine,^  North  Carolina,"  and  Utah '  permit 
the  recovery  of  treble  damages.  Idaho,  Indiana,  Kansas,  Missouri, 
Nebraska,  and  Oklahoma  permit  the  recovery  of  treble  damages,  costs, 
and  reasonable  attorney's  fees.^ 

Section  19.  Stock  watering. 

Constitutional  provisions. — The  constitutions  of  24  States  (Ala- 
bama, Arizona,  Arkansas,  California,  Colorado,  Delaware,  Idaho,  Illi- 
nois, Kentucky,  Louisiana,  Mississippi,  Mssouri,  Montana,  Nebraska, 
New  Hampshire,  North  Dakota,  Oklahoma,  Pennsylvania,  South  Caro- 
lina, South  Dakota,  Texas,  Utah,  Virginia,  Washington)  contain 
provisions  relating  to  the  issuance  of  corporate  stock,  the  majority  of 
such  States  providing  that  all  fictitious  increases  of  stock  or  indebted- 
ess  shall  be  void. 

The  constitution  of  New  Hampshire  (art.  82)  declares  that  "the 
size  and  functions  of  all  coiporations  should  be  so  limited  and  regu- 

1  Nebraska,  R.  S.  1913,  sec.  4059. 

2  Arizona,  Laws  1912,  chap.  73,  sec.  5;  Kansas,  Laws  1897,  chap.  265,  sec.  5. 

3  Alabama,  Stats.,  sec.  2487;  Arizona,  Laws  1912,  chap.  73,  see.  9;  Colorado,  Laws  19lS,  chap.  161,  sec.  7; 
Iowa,  Laws  1909,  chap.  225,  sec.  2;  Kansas,  G.  S.,  sees.  5149,  51S3;  Michigan,  P.  A.  1905,  No.  22y,  sec.  G;  Mis- 
sissippi, Code  1906,  sec.  5007,  as  amended  by  Laws  1912,  chap.  250;  New  Mexico,  Stats.,  1915,  sec.  1687;  Wis- 
consin, Stats.,  1913,  sec.  1747e. 

^  California,  Laws  1907,  chap.  530,  sec.  11;  Michigan,  P.  A.  1899,  No.  255,  sec.  11. 

6  Maine,  Laws  1913,  chap.  106,  sec.  4. 

s  North  Carolina,  Laws  1913,  chap.  41,  sec.  14. 

'Utah,  Stats.,  sec.  1761. 

8  Idaho,  Laws  1911,  chap.  215,  p.  688,  sec.  14;  Indiana,  Laws  1907,  chap.  243,  sec.  7;  Kansas,  Laws  1899, 
chap.  293,  sec.  5;  Missouri,  R.  S.,  chap.  98,  sec.  10305,  as  amended  1913;  Nebraska,  R.  S.,  1913,  sec.  4062; 
Oklahoma,  Laws  1908,  p.  750,  sec.  3,  Laws  1913,  chap.  114,  sec.  6. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  217 

lated  as  to  proliibit  fictitious  capitalization"  and  grants  to  tlie  general 
court  the  power  to  enact  laws  to  prevent  the  same. 

The  constitution  of  Alabama  provides  that  "no  corporation  shall 
issue  stock  or  bonds  except  for  money,  labor  done,  or  property  actu- 
ally received;  and  all  fictitious  increase  of  stock  or  mdebtcdness  shall 
be  void.  The  stock  and  bonded  indebtedness  of  corporations  shall 
not  be  increased  except  in  pursuance  of  general  laws,  nor  without  the 
consent  of  the  persons  holding  the  larger  amount  in  value  of  stock 
first  obtained  at  a  meeting  to  be  held  after  30  days'  notice,  given 
in  pursuance  of  law."^ 

With  the  changes  indicated,  this  provision  has  been  adopted  in 
certain  States  as  follows: 

Arkansas,  California,  and  ]\Iissouri  require  60  days'  notice.^ 

Arkansas  expressly  limits  the  provision  to  private  corporations.^ 

Colorado,  Idaho,  and  Montana  include  services  performed,  omit  ref- 
erence to  increase  of  bonded  indebtedness,  and  "majority"  is  used 
instead  of  "larger  amount  in  value."* 

Louisiana  has  fictitious  "issues"  instead  of  "increase,"  and  adds 
the  following:  "Any  corporation  issuing  such  fictitious  stock  shall 
forfeit  its  charter."  It  also  omits  reference  to  increase  of  bonded  in- 
de])tedness,  but  proliibits  unauthorized  decrease  as  well  as  increase 
of  stock.'^ 

IMissouri  has  "money  paid"  instead  of  "money."  " 

North  and  South  Dakota  and  Pennsylvania  have  the  phrase  "money 
or  property  actually  received"  instead  of  "property  actually  re- 
ceived," omit  "bonded"  before  "indebtedness,"  and  require  60  days' 
notice  instead  of  30.'' 

Oklahoma  omits  the  word  "bonds"  and  adds  after  the  words 
"actually  received"  the  words  "to  the  amount  of  the  par  value 
thereof;"  and  after  the  words  "shall  be  void,"  the  words  "and  the 
Legislature  shall  prescribe  the  necessary  regulations  to  prevent  the 
issue  of  fictitious  stock  or  indebtedness."  ^ 

South  Carohna  requires  "money  or  property  actually  received  or 
subscribed,"  and  South  Carohna  and  Texas  omit  the  reference  to 
increase  of  stock  or  bonded  indebtedness.^ 

Utah  provides  that  corporations  shall  not  issue  stock  except  to 
l)ona  fide  subscribers  thereof  or  their  assignees,  nor  shall  any  corj^ora- 


'  Alabama,  Constitution,  sec.  ZU. 

s  Arkansas,  Constitution,  Art.  XII,  sec.  8;  California,  Constitulion,  Art.  XII,  sec.  11;  Missouri,  Consti- 
tution, Art.  XII,  sec.  S. 

'  Arkansas,  Constitution,  Art.  XII,  sec.  8. 

•1  Colorado,  Constitution,  Art.  XV,  sec.  9;  Idaho,  Constitution,  Art.  XI,  sec.  9;  Montana,  Constitution, 
Art.  XV,  sec.  10. 

'■'  I..ouisiana,  Constitution,  arts.  2GG,  267. 

8  MLs.souri,  Constitution,  Art.  XII,  sec.  8. 

'  North  Dakota,  Constitution,  Art.  VII,  sec.  138;  South  Dakota,  Constitution,  Art.  XVII;  sec.  8;  Penn- 
sylvania, Constitution,  Art.  XVI,  sec.  7. 

*\)klahoma.  Constitution,  .^.rt.  IX,  sec.  39. 

»  South  Carolina,  Constitution,  Art.  IX,  sec.  10;  Texas,  Constitution,  Art.  XII,  sec.  6. 


218  EEPOKT   OF    THE   COMMISSIOISrER   OF   CORPORATIONS. 

tion  issue  any  bond  or  other  obligation  for  the  payment  of  money 
except  for  money  or  property  received  or  hxbor  done.  It  omits  refer- 
ence to  increase  of  bonded  indebtedness  or  to  number  of  days'  notice, 
the  sentence  reading :  ' '  The  stock  of  corporations  shall  not  be  increased 
except  in  pursuance  of  general  law,  nor  shall  any  law  authorize  the 
increase  of  stock  without  the  consent  of  the  person  or  persons  holding 
the  larger  amount  in  value  of  the  stock,  or  without  due  notice  of 
the  proposed  increase  having  previously  been  given  in  such  manner 
as  may  be  prescribed  by  law."  The  constitutions  of  Arizona  and 
Wasliington  contain  provisions  similar  to  that  adopted  in  Utah.^ 

While  the  above  are  the  more  usual  forms  of  constitutional  pro- 
visions relating  to  this  subject,  others  have  been  adopted,  as  indi- 
cated below. 

Tlie  constitution  of  Kentucky  provides  that  "No  corporation  shall 
issue  stocks  or  bonds  except  for  an  equivalent  in  money  paid  or  labor 
done,  or  property  actually  received  and  applied  to  the  purposes  for 
which  such  corporation  was  created,  and  neither  labor  nor  property 
shall  be  received  in  payment  of  stock  or  bonds  at  a  greater  value  than 
the  market  price  at  the  time  such  labor  was  done  or  property  deliv- 
ered, and  all  fictitious  increase  of  stock  or  indebtedness  shall  be 
void."  2 

The  Nebraska  constitution  provides  that  "No  railroad  corporation 
shall  issue  any  stock  or  bonds,  except  for  money,  labor  or  property 
actually  received  and  applied  to  the  purposes  for  which  such  cor- 
poration was  created;  and  all  stock,  dividends,  and  other  fictitious 
increase  of  capital  stock  or  indebtedness  of  any  such  corporation 
shall  be  void.  The  capital  stock  of  railroad  corporations  shall  not  be 
increased  for  any  purpose,  except  after  public  notice  for  sixty  days, 
in  such  manner  as  may  be  provided  by  law."  ^ 

Illinois  has  constitutional  provisions  similar  to  Nebraska,  there 
being  minor  differences  in  the  wording  and  no  comma  is  used  between 
the  words  "stock"  and  "dividends,"  as  in  Nebraska.* 

The  constitution  of  Delaware  declares  that  "  No  corporation  shall 
issue  stock,  except  for  money  paid,  labor  done  or  personal  prop- 
erty, or  real  estate  or  leases  thereof  actually  acquired  by  such  corpo- 
ration ;  and  neither  labor  nor  property  shall  be  received  in  payment  of 
stock  at  a  greater  price  than  the  actual  value  at  the  time  the  said  labor 
was  done  or  property  delivered,  or  title  acquired."^ 

Tlie  constitution  of  Virginia  provides  that  ''The  General  Assembly 
shall  enact  general  laws  regulating  and  controlling  all  issues  of  stock 

1  Utah,  Constitution,  Art.  XII,  see.  5;  Arizona,  Constitution,  Art.  XIV,  sec.  6;  Washiington,  Constitu- 
tion, Art.  XII,  see.  6. 

2  Kentuclcy,  Constitution,  sec.  193. 

3  Nebraska,  Constitution,  Art.  XI,  sec.  5. 
*  Illinois,  Constitution.  Art.  XI,  sec.  13. 

^  Delaware,  Constitution,  Art.  IX,  sec.  3. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  219 

and  bonds  by  corporations.  Wlienever  stock  or  bonds  are  to  be  issued 
by  a  corporation,  it  shall,  before  issuing  the  same,  file  with  the  State 
Corporation  Commission  a  statement  (verified  by  the  oath  of  the 
president  or  secretary  of  the  corporation,  and  in  such  form  as  may  be 
prescribed  or  permitted  by  the  commission)  setting  forth  fully  and 
accurately  the  basis,  or  financial  plan,  upon  which  such  stock  or  bonds 
are  to  be  issued;  and  where  such  basis  or  plan  includes  services  or 
property  (other  than  money),  received  or  to  be  received  by  the  com- 
pany, such  statement  shall  accurately  specify  and  describe,  in  the 
manner  prescribed,  or  permitted,  by  the  commission,  the  services  and 
property,  together  with  the  valuation  at  which  the  same  are  received 
or  to  be  received;  and  such  corporation  shall  comply  with  any  other 
requirements  or  restrictions  which  may  be  imposed  by  law.     *     *     *"^ 

The  Mississippi  constitution  provides  that  "No  transportation 
corporation  shall  issue  stocks  or  bonds  except  for  money,  labor  done 
(or  in  good  faith  agreed  to  be  done),  or  money  or  property  actually 
received;  and  all  fictitious  increase  of  stock  or  indebtedness  shall  be 
void."  2 

Statutory  provisions. — Nearly  all  the  States  have  statutoiy 
provisions  intended  to  prevent  the  issuance  of  watered  stock. 

For  what  stocJc  may  he  issued. — The  statutes  of  11  States  ^  (Connecti- 
cut, Michigan,  New  Hampshire,  New  Mexico,  Oregon,  Rhode  Island, 
South  Dakota,  Tennessee,  Utah,  West  Virginia,  and  Wyoming),  Porto 
Rico"*  and  the  District  of  Columbia^  provide  that  capital  stock,  etc., 
shall  be  issued  for  money  or  property.  Iowa  provides  that  it  may 
be  issued  for  money,  property,  or  "other  thing."** 

It  is  provided  in  17  States  ^  (Arizona,  California,  Delaware,  Illinois, 
Indiana,  Kentucky,  Minnesota,  Missouri,  Montana,  Nevada,  New  Jer- 
sey, New  York,  North  Dakota,  Pennsylvania,  South  Carolina,  Texas, 
and  Wisconsin)  and  Alaska^  that  capital  stock,  etc.,  may  be  issued  for 
money,  labor,  or  property.     Delaware  and  Nevada  provide  that  prop- 

1  Virginia,  Constitution,  Art.  XII,  sec  107. 

2  Mississippi,  Constitution,  sec.  196. 

•I  Connecticut,  P.  A.  1903,  chap.  194,  sec.  12;  Michigan,  HoweU's  Stats.,  sec.  9533;  New  Hampshire,  Laws 
1911,  chap.  104,  sec.  14  (e);  New  Mexico,  Laws  190.5,  chap.  79,  sees.  54,  55;  Lord's  Oregon  Laws,  sec.  6090; 
Rhode  Island,  G.  L.  1909,  cliap.  214,  sec.  8;  South  Dakota,  Laws  1913,  chap.  145,  sec.  8;  Tennessee,  Code, 
1890,  sees.  2300,  2351,  2335;  Utah,  Comp.  Laws,  1907,  sec.  316;  West  Virginia,  Code,  chap.  53,  sec.  24;  Wyo- 
ming, Laws  1907,  chap.  70,  sec.  8. 

*  Vorto  Rico,  Rev.  Stats.,  sec.  424. 

6  District  of  Columbia,  Code,  sec.  613. 

«  Laws,  1907,  chap.  71. 

'  Arizona,  Laws  1912,  chap.  90,  sec.  52  (b);  California,  Civil  Code,  1910,  supp.,  sec.  359;  Delaware,  Laws, 
1903,  chap.  394,  sec.  14,  as  amended,  23  Del.  Laws,  chap.  155;  Illinois,  Laws  1913,  p.  471;  Indiana,  Laws  1913, 
chap.  70,  sec.  80;  Kentucky,  Carroll,  1915  Stats.,  sec.  508;  Minnesota,  1915  Stats.,  sees.  6187,  6233;  Missouri, 
Annotated  Stats.,  1909,  sec.  2981,  and  Laws  1913,  pp.  594,  612,  631;  Montana,  Civil  Code,  1907,  see.  3894, 
Nevada,  Laws  1903,  chap.  88,  sec.  54;  New  Jersey,  Laws  1913,  chap.  15;  New  York  Stock  Corp.  Law,  sec. 
55;  North  Dakota,  Comp.  Laws,  1913,  sec.  4528;  Pennsylvania,  Act  of  1874, sec.  17,as  amended.  Laws  1870; 
p.  32,  Act  1874,  sec.  18,  and  Laws  1913,  No.  854,  Art.  Ill,  sec.  4;  South  Carolina,  Code,  1912,  sees.  2799,  2836. 
Texas,  Rev.  Civil  Stats.,  1911,  arts.  1145,  1146;  Wisconsin,  Slats.  1913,  sees.  1753-1,  1753-7. 

8  Alaska,  Comp.  Laws,  913,  sec.  811. 


220  REPOET   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

erty  shall  consist  of  real  or  personal  ])roperty  and  leases,  while  in 
Pennsylvania  it  may  be  real  or  personal,  mineral  rights,  patent 
rights,  and  ''other  property."  In  Arizona,  Illinois,  and  Indiana  this 
provision  applies  only  to  public-service  corporations.  In  New  York 
this  provision  does  not  apply  to  investment,  safe  deposit,  trust,  and 
personal  loan  companies  and  banks.  These  are  required  to  pay  all 
their  capital  stock  in  cash.^ 

Maine,  Maryland,  Kansas,  and  the  District  of  Columbia  provide 
that  stock  may  be  iss'.ied  for  money,  services,  or  property,^  but  Kansas 
adds  "other  consideration."  In  Kansas  and  the  District  of  Columbia 
this  provision  applies  only  to  public-service  corporations.  Maryland 
public-service  corporations  may  issue  stock  for  earnings  expended 
prior  to  April  1,  1914,  for  certain  pui;poses,  if  apphcation  for  authori- 
zation by  the  public-service  commission  be  made  on  or  before  April 
1,  IQIS.^' 

In  five  States  *  (Alabama,  Colorado,  Florida,  Idaho,  and  North 
Carolina)  capital  stock  may  be  issued  for  money,  labor,  services,  or 
property. 

It  is  provided  in  Vermont  that  stock  may  be  issued  for  cash,  real 
or  personal  property,  rights  or  f rancliises ;  ^  in  Massachusetts,  for 
casli,  property,  tangible  or  intangible,  services  or  expenses,  except 
that  gas  and  electric  companies  are  limited  to  cash,  real  and  personal 
property,  and,  where  a  company  is  organized  to  take  over  a  bankrupt 
or  insolvent  company,  to  the  claims  against  the  insolvent  company; " 
in  Virginia,  for  money,  land  or  other  property  real  or  personal,  leases, 
options,  mines,  minerals,  mineral  rights,  patent  rights,  rights  of  way, 
or  other  rights  or  easements,  contracts,  labor  or  services;^  and  in 
Oliio,  by  public-service  corporations,  for  money,  property,  consid- 
eration, or  labor.* 

Three  States  (Mississippi,  Oldahoma,  and  Wasliington)  that  have 
some  provisions  against  stock  watering  fail  to  specify  for  what 
capital  stock  may  be  issued. 

Control  of  valuation. — The  statutes  of  a  majority  of  the  States  desig- 
nate who  shall  determine  the  valuation  of  property,  labor,  services, 
etc.,  for  which  stock  is  issued. 

1  New  York,  Laws  1914,  chap.  .309,  sees.  103,  183,  291,  310,  341. 

2  Maine,  R.  S.,  chap.  47,  sec.  50;  Maryland,  Laws  190S,  p.  3S,  sec.  35;  Kansas,  Laws  1911,  chap.  238,  sec. 
25;  District  of  Columbia,  U.  S.  Stats.,  vol.  37,  p.  990. 

3  Maryland,  Laws  1914,  chap.  445,  pp.  720  and  721. 

4  Alabama,  Civil  Code,  1907,  sec.  3467;  Colorado,  Stats.,  1914,  sec.  863;  Florida,  Comp.  Laws  1914,  sec. 
2653;  Idaho,  Laws  1909,  p.  160,  sec.  6;  North  Carolma,  Revisal  1908,  chap.  21,  sec.  1172. 

'■>  Vermont,  Laws  1910,  No.  143,  sec.  6. 

6  Massachusetts,  Business  Corp.  Law,  1903,  as  amended,  sec.  14,  Laws  1914,  chap.  742,  sees.  36,  49. 
'  Virgiiii;^,  Corp.  Act,  1903,  chap.  5,  sec.  9. 

8  Ohio,  Gen.  Code,  sec.  614-53,  as  amended  by  Laws  1913,  pp.  841  and  Code  sec.  614-55, added  by  Laws 
1911, p.  566. 


TEUST   LAWS   AND   UNFAIR    COMPETITION.  221 

Twenty- two  States^  (Arizona,  California,  Colorado,  Georgia,  Illinois, 
Indiana,  Iowa,  Kansas,  Maine,  Maryland,  Massachusetts,  Mchigan, 
Minnesota,  Missouri,  New  Hampshire,  New  York,  New  Jersey,  Ohio, 
Oregon,  Pemisylvania,  Rhode  Island,  and  Wisconsin)  and  the  District 
of  Columbia^  requu-e  either  that  the  valuation  of  property  for  which 
stock  is  issued  shall  be  passed  on  by  some  designated  commission  or 
public  official  or  that  the  approval  of  such  commission  or  official 
shall  be  had  prior  to  the  issuance  of  stock.  In  i^izona,  Cahfornia, 
Colorado,  Georgia,  Illinois,  Indiana,  Kansas,  Maine,  Maryland,  ^Miclii- 
gan,  Missouri,  New  Hampshire,  New  Jersey,  Ohio,  Pennsylvania,  Wis- 
consin, and  the  District  of  Columbia  this  requirement  is  confined  to 
public-utilities  companies,  and  in  New  York  to  public  utility  and 
moneyed  corporations,  but  in  the  case  of  reductions  of  capital  stock 
all  corporations  in  New  York  are  required  to  get  such  approval.  Of 
these  States,  Illinois,  Indiana,  Missouri,  and  Wisconsin  authorize  the 
commission  to  make  a  valuation  of  the  property  before  stock  shaU 
be  issued.  Arizona,  California,  Colorado,  Georgia,  Kansas,  Maine, 
Maryland,  Michigan,  and  New  Jersey  require  the  approval  of  the 
public-service  commission  before  stock  is  issued,  and  authorize 
the  commission  to  make  inquiry  to  satisfy  itself  as  to  the  valu- 
ation of  the  property.  New  York,  New  Ilampshii-e,  and  Mnne- 
sota  require  the  approval  of  the  proper  commission  before  issuing 
stock.  In  the  latter  State,  however,  this  applies  only  to  railroad 
corporations.  Ohio  authoiizes  the  valuation  of  property  by  the 
commission  for  any  purpose  requu*ed  by  law,  and  this  State,  together 
■wdth  the  District  of  Columbia,  requires  the  approval  of  the  commission 
before  stock  is  issued.  Pemisylvania  requires  pubHc-service  com- 
panies either  to  apply  to  the  commission  for  a  certificate  of  valuation 
of  property  for  which  stock  is  to  be  issued  or  to  file  with  the  com- 
mission a  certificate  of  notification  of  such  issuance  containing 
detailed  information  required  by  law.  In  Massachusetts  the  requu-e- 
ment  for  approval  of  the  issuance  of  stock  or  valuation  of  property 
appUes  to  business  corporations,  gas  and  electric  companies  and 
certain  classes  of  railroad  corporations,  the  first  being  subject  to  the 
commissioner  of  corporations,  the  second  to  the  board  of  gas  and 
electric  fight   commissioners,   and  the   third  to  the  pubhc-utihties 

1  Arizona,  Laws  1912,  chap.  90,  sec.  52;  California,  Laws  19]  1,  first  extra  sess.,  chap.  14,  sec.  52;  Colorado, 
Laws  1913,  chap.  127,  sec.  37;  Georgia,  Code,  1914,  sec.  2G05;  Illinois,  Laws  1913,  P.  UtU.  Com.  Act,  sec. 
21, p.  470;  Indiana,  Laws  1913,  chap.  70,  sec.  89;  Iowa,  32  G.  A.,  chap.  71,  sec.  1;  Kansas,  Laws  1911,  chap. 
2:3s,  sec.  25;  Maine,  Laws  1913,  chap.  216;  Maryland,  Laws  1910,  chap.  180,  sees.  27,  34,  41,  42,  Laws  1914, 
chap.  445,  pp.  720-721;  Massachusetts,  Bus.  Corp.  Law,  1903,  as  amended,  sec.  14,  Laws  1913,  chap.  784, 
sees.  14, 15, 16,  Laws  1914,  chap.  742,  sees.  36,  39,  49,  168;  Michigan,  Howell's  Stats.,  sec.  9610;  Minnesota, 
1915  Stats.,  sec.  6187;  Missouri,  Laws  1913,  pp.  594,  612,  631;  New  Hampshire,  Laws  1911,  chap.  164,  sec. 
14;  New  York,  Stock  Corp.  Laws,  sec.  64,  as  amended  by  Laws  1913,  chap.  305,  Pub.  Serv.  Com.  Law, 
sees.  55, 09  and  sec.  101,  added  by  Laws  1910,  chap.  673;  New  Jersey,  Laws  1911,  chap.  195,  sec.  18(e); 
Ohio,  Gen.  Code,  sec.  499-8  to  U  and  sec.  614-53,  as  amended  by  Laws  1913,  pp.  807,841;  Oregon,  Laws 
1913,  chap.  341,  sees.  15,  22;  Pemisylva.iia,  Laws  1913,  No.  854,  p.  1389;  Rhode  Island,  G.  L.  1909,  chap. 
214,  sec.  8;  Wisconsin,  Stats.,  1913,  sec.  1753-1  to  22. 

a  U.  S.  Stats.,  vol.  37.  p.  990 


222  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

commission.  In  Rhode  Island  the  requirement  applies  to  manu- 
facturing companies,  and  in  Oregon  to  investment  companies.  In 
Iowa  the  provision  applies  to  all  classes  of  corporations  except  build- 
ing and  loan  associations. 

Virginia  provides  that  a  statement  shall  be  filed  with  the  State 
corporation  commission,  which  statement  shall  contain  such  descrip- 
tion of  the  property,  labor,  etc.,  as  may  be  required  by  the  said  com- 
mission and  the  valuation  put  upoji  said  property,  etc.  This  state- 
ment has  to  be  filed  before  the  stock  may  issue,  but  the  judgment 
of  the  du'ectors  as  to  the  value  of  the  property,  etc.,  is  conclusive  in 
the  absence  of  fraud.* 

Utali  requires  the  affida^dt  of  three  persons  familiar  vdth.  the  prop- 
erty, except  in  case  of  corporations  organized  for  mining  and  irriga- 
tion purposes. 2 

In  12  States  ^  (Connecticut,  Delaware,  Idaho,  Maine,  Nevada,  New 
Jersey,  New  Mexico,  New  York,  North  Carolina,  Oregon,  South 
Dakota,  and  Wyoming)  the  decision  of  the  directors  controls ;  but, 
in  Maine  and  New  Jersey,  public-service  corporations,  in  New  York, 
public-service  and  moneyed  corporations,  and,  in  Oregon,  investment 
companies,  are  required  to  obtain  the  permission  of  the  proper  com- 
mission before  the  issuance  of  stock. 

In  Florida,  West  Virginia,  and  Micliigan  the  dkectors  or  stock- 
holders determine  the  valuation.^  This  provision  does  not  apply  to 
public  utilities  in  Micliigan. 

Maryland  provides  that  the  stockliolders  shall  determine  the  valua- 
tion, while  in  South  Carolina  and  Vermont  it  is  determined  by  the 
incorporators.  In  the  latter  State,  however,  after  incorporation  the 
valuation  rests  with  the  stockholders.^ 

In  North  Dakota  the  officers  of  the  corporation  apparently  pass  on 
the  valuation.^ 

Thirteen  States  (Cahfornia,  Colorado,  Kansas,  Kentucky,  Missis- 
sippi, Missouri,  Montana,  Oklahoma,  Pennsylvania,  Tennessee,  Texas, 
Washington,  and  Wisconsin),  havuig  some  limitations  on  stockwater- 
mg,  have  no  specific  provisions  as  to  valuation.  In  three  of  these 
(Missoiu-i,  Pennsylvania,  and  Wisconsin),  however,  the  valuation  of 

I  Virginia,  Corp.  Act,  1903,  chap.  5,  sec.  9. 

s  Utah,  Comp.  Laws,  1907,  sec.  31G. 

3  Connecticut,  P.  A.  1903,  chap.  194,  sec.  12;  Delaware,  Laws  1903,  cliap.  394,  sec.  14,  as  amended  by 
23  Del.  Laws,  chap.  155;  Idaho,  Laws  1909,  p.  164,  sec.  10;  Maine,  R.  S.,  chap.  47,  sec.  50,  Laws  1913,  chap. 
216;  Nevada,  Laws  1903,  chap.  88,  sec.  54;  New  Jersey,  Laws  1913,  chap.  15;  New  Mexico,  Laws  1905, 
chap.  79,  sec.  55;  New  York,  Stock  Corp.  Law,  sec.  55;  North  Carolina,  Revisal  1908,  chap.  21,  sec.  1172; 
Lord's  Oregon  Laws,  sec.  6696;  South  Dakota,  Laws  1907,  chap.  104,  see.  4;  Wyoming,  Laws  1907,  chap. 
70,  sec.  8. 

*  Florida,  Comp.  Laws  1914,  sec.  2653;  West  Virginia,  Code,  chap.  53,  sec.  24;  Michigan,  Howell's  Stats., 
sees.  9533,  9545. 

s  Maryland,  Laws  1908,  p.  38,  sec.  35;  South  Carolina,  Code,  1912,  sec.  2836;  Vermont,  Laws  1910,  No. 
143,  sec.  6. 

« North  Dakota,  Comp.  Laws  1913,  sees.  4527,  4528. 


TEUST  LAWS  AND  UNFAIR   COMPETITION.  223 

property  taken  by  public-service  companies  is  under  the  control  of  a 
State  commission.^ 

Fictitious  increases  void. — Eleven  States  ^  (Arizona,  California,  Colo- 
rado, Kentucky,  Minnesota,  Missouri,  Montana,  Peimsylvania,  South 
Cai-ohna,  Texas,  and  Wisconsin)  provide  that  fictitious  increases  of 
stock  shall  be  void.  In  Texas  it  is  provided  "that  all  fictitious  divi- 
dends and  other  fictitious  increase  of  the  capital  stock  or  indebted- 
ness of  any  such  corporation  shall  be  void."  The  New  Jersey  law 
reads  "no  fictitious  stock  shall  be  issued."^  In  Iowa,  stock  issued 
in  violation  of  law  by  any  corporation  organized  for  pecuniary  profit 
is  declared  to  be  void.* 

Provisions  for  enforcement. — A  number  of  States  punish  as  crimes 
the  fraudulent  or  imlawful  issuance  of  corporate  securities,  or  the 
filing  of  false  affidavits  regarding  the  valuation  of  property  for  which 
stock  is  issued.  In  some  States  the  officers  or  directors  are  made 
personally  liable  in  cases  of  overvaluation  of  property.  Several 
States  provide  for  the  dissolution  of  the  corporation  issuing  stock  in 
violation  of  law,  or  for  the  forfeiture  of  its  charter  or  right  to  do 
business.  Other  States  require  a  description  of  the  property  against 
which  stock  is  issued  to  be  filed  for  the  inspection  of  the  pubhc  or 
interested  parties. 

Twenty  States^  (Arizona,  California,  Colorado,  lUinois,  Iowa,  Mame, 
Maryland,  Massachusetts,  Minnesota,  Mssouri,  Nevada,  New  Jersey, 
New  York,  Ohio,  Oregon,  Pennsylvania,  Tennessee,  Utah,  Waslungton, 
and  Wyoming)  and  the  District  of  Columbia"  punish  parties  who  make 
false  statements  in  regard  to  the  affairs  of  corporations.  In  several 
of  these  the  penalty  applies  specifically  to  statements  regarding  the 
value  of  property,  etc.,  for  which  stock  is  issued,  while  in  others  the 
wording  of  the  law  is  general,  covering  any  false  statement.  The 
penalty  in  most  cases  is  fine  or  imprisonment.  Ai'izona,  California, 
Illinois,  and  Utah,  however,  provide  for  imprisonment  only.  Mary- 
land, New  Jersey,  and  Tennessee  punish  violations  of  this  class  as 

'  Missouri,  Laws  1913,  pp.  594, 612, 631;  Pennsylvania,  Laws  1913,  No.  854,  p.  13S9;  Wisconsin,  Stats.,  1913 
sec.  1753-1  to  22. 

'  Arizona,  Laws  1912,  gen.  sess.,  chap.  49,  sec.  10,  as  amended  in  Laws  1912,  spec,  sess.,  chap.  65,  sec.  1; 
California,  Civil  Code,  1910,  supp.,  sec.  359;  Colorado,  Stats.,  1914,  sec.  863;  Kentucky,  Carroll,  1915,  Stats., 
sec.  568;  Minnesota,  1915  Stats.,  sec.  0233;  Missouri,  Annotated  Stats.,  1909,  sec.  2981;  Montana,  Civil  Code, 
1907,  sec.  3894;  Pennsylvania,  act  1S74,  sec.  17,  as  amended  by  Laws  1876,  p.  32;  South  Carolina,  Code, 
1912,  sec.  2799;  Texas,  Rev.  Civil  Stats.  1911,  art.  6470;  Wisconsin,  Stats.,  1913,  sec.  1753. 

5  New  Jersey,  Laws  1913,  chap.  15. 
*  Iowa,  33  G.  A.,  chap.  104,  sec.  4. 

s  Arizona,  Penal  Code,  sec.  543;  California,  Penal  Code,  sec.  558;  Colorado,  Laws  1913,  chap.  127,  sec. 
37(f);  Illinois,  Laws  1913,  Pub.  L^til.  Comm.  Act,  sec.  25,  p.  473;  Iowa,  32  G.  A.,  chap.  71,  sec.  5,  and  chap. 
72;  Maine,  Laws  1913,  chap.  129,  sec.  66;  Maryland,  Laws  1908,  p.  39,  sec.  36;  Massachusetts,  Laws  1914, 
chap.  601;  Minnesota,  1915  Stats.,  sec.  8917;  Missouri,  Laws  1913,  Pub.  Serv.  Comm.  Act,  sec.  59-4,77-4, 
100-4;Nevada,  Laws  1907,  chap.  60,  sec.  1;  New  Jersey,  Laws  1913,  chap.  15;  New  York,  Penal  Law,  sees. 
951,952;  Ohio,  Gen.  Code,  sec.  614-57;  Oregon,  Laws  1913,  chap.  341,  sec.  23;  Pennsylvania,  Laws  1913, 
No.  8.54,  sec.  37,  p.  1430;  Tennessee,  Code,  1896,  sec.  2067;  Utah,  Penal  Code,  sec.  4409;  Washington, 
Remington  &  Ballinger  Code,  sec.  2639;  Wyoming,  Laws  1909,  chap.  162,  sec.  1. 

6  U.  S.  Stats.,  vol.  37,  p.  991. 


224  EEPOET  OF   THE   COMMISSIONER   OF   CORPOKATIONS. 

misdemeanors.  In  Colorado  when  made  before  the  pubHc  utilities 
commission,  they  are  punished  as  felonies. 

Michigan  and  Mmnesota  provide  that  any  person  who  shall  fraudu- 
lently issue  any  stock,  etc.,  or  sell  or  offer  for  sale  said  stock,  etc.,  shall 
be  guilty  of  a  felony.^ 

The  statutes  of  15  States  ^  (Arizona,  California,  Colorado,  Georgia, 
Ilhnois,  Indiana,  Kansas,  Maine,  Maryland,  ]\Iassachusetts,  Michigan, 
Mssouri,  Ohio,  Wisconsin,  Pennsylvania)  and  the  District  of  Columbia^ 
which  require  the  approval  of  the  public-service  commissions  before 
stock  shall  be  issued  for  property,  etc.,  provide  for  the  punishment 
of  violations  of  said  acts. 

Connecticut  provides  that  the  du-ectors  concurrmg  in  the  valuation 
of  property,  etc.,  for  which  stock  is  issued,  shall,  in  case  of  fraud  in  the 
over-valuation,  be  jointly  and  severally  liable  to  the  corporation  for 
the  difference  between  the  actual  value  and  the  value  for  which  the 
stock  is  issued."* 

Massachusetts  makes  the  president,  treasurer,  and  directors  of 
certain  corporations  jointly  and  severally  liable  for  actual  damages 
if  they  assent  to  an  unla\vful  issue  of  stock.^  North  Dakota  has  a 
similar  provision,  except  tl^at  it  applies  to  officers  and  aU  corporations 
and  the  liability  is  the  difference  between  the  actual  cash  value  of  the 
property,  etc.,  and  the  par  value  of  the  stock  issued."  Massachusetts 
also  provides  that  if  a  foreign  corporation  which  controls  a  majority 
of  the  capital  stock  of  a  domestic  gas  or  electric  company  issues  stock, 
etc.,  not  authorized  by  the  law  of  the  State,  based  upon  or  secured  by 
stock,  etc.,  of  such  domestic  corporation,  the  supreme  judicial  court 
shall  have  jm*isdiction  in  equity  to  dissolve  the  domestic  corporation.'^ 

Iowa  provides  that  any  officer,  agent,  or  representative  who  vio- 
lates any  provisions  of  the  act  in  regard  to  the  issuance  of  stock,  etc., 
of  a  corporation  for  pecuniary  profit  may  be  fined  and  imprisoned.^ 

^luuiesota  provides  that  any  officer  of  a  raihoad  corporation  who 
shall  issue,  sell,  pledge,  or  dispose  of  any  shares  or  certificates  of  shares 
of  capital  stock  contrary  to  the  law  shall  be  guilty  of  a  felony,^  and 
Texas  provides  that  any  officer  or  director  of  a  railroad  company  who 

1  MicMgan,  Howell's  Stats.,  sec.  14872;  Minnesota,  1915  Stats.,  sec.  6452. 

2  Arizona,  Laws  1912,  chap.  90,  sec.  52;  California,  Laws  1911,  first  extra  sess.,chap.  14,  sec.  52;  Colorado, 
Laws  1913,  p.  4S5,  sec.  37  (e);  Georgia,  Code,  1911,  sees.  2667,  2668;  Illinois,  Laws  1913,  Pub.  Util.  Com. 
Act, sees.  24, 25;  Indiana,  Laws  1913,chap.  76,sec.  US;  Kansas,  Laws  1911,  chap.  238,  sec.  20;  Maine,  Laws 
1913,  chap.  129,  sees.  66,67;  Maryland,  Laws  1910,  chap.  ISO,  sec.  28;  Massachusetts,  Laws  1913,  chap.  784, 
sec.  16,  Laws  1914,  chap.  742,  sees.  37,  42;  Michigan,  Uowell's  Stats., sec. 9612;  Missouri, Laws  1913,  Pub.  Serv. 
Com.  Act,  sees.  59-3,  77-3,  100-3;  Ohio,  Laws  1911,  pp.  567,  569,  570;  Wisconsin,  Stats.,  1913,  sec.  1753-17; 
Pennsylvania,  Laws  1913,  No.  S54,  art.  6,  sec.  37. 

3  U.  S.  Stats.,  vol.  37,  pp.  990-991. 

4  Connecticut,  P.  A.  1903,  chap.  194,  sec.  12. 

s  Massachusetts,  Business  Corp.  Law,  1903,  sec.  14. 
6  North  Dakota,  Rev.  Code,  1905,  sec.  4195. 
'  Massachusetts,  Laws  1914,  chap.  742,  sec.  172. 

8  Iowa,  32  G.  A.,  chap.  71,  sec.  5. 

9  Mumesota,  Gen.  Stats.  1913,  sec.  6233. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  225 

shall  violate  the  law  regardmg  the  issuance  of  stock,  etc.,  shall  be 
personally  liable  to  the  stocldiolders  and  creditors  for  the  full  par  value 
of  the  illegal  stock  or  full  amount  of  fictitious  dividends,  etc.,  as  the 
case  may  be.^ 

Three  States  ^  (Iowa,  Texas,  and  Wyoming)  expressly  provide  for 
the  dissolution,  forfeiture  of  charter,  license,  etc.,  of  corporations 
violating  certain  statutes  relating  to  issuance  of  stock,  etc. 

Michigan  requhes  an  affidavit  of  at  least  three  of  the  mcorporators 
as  to  the  valuation  of  property  for  which  stock  is  issued,  this  affi- 
davit to  be  attached  to  the  articles  of  association;^  Utah  requires 
the  affidavit  of  three  persons  acquainted  with  the  property, 
except  in  case  of  mmmg  or  irrigation  companies;*  and  Vermont 
requires  an  affidavit  of  the  president  and  treasurer,  or  a  majority  of 
the  mcorporatoi's  or  directors  of  the  corporation,  setting  forth  the 
amount  of  stock  proposed  to  be  issued  and  the  property  or  consid- 
eration which  is  to  be  received  for  such  stock.  The  description  of 
the  property  or  consideration  is  to  be  in  sufiicient  detail  to  satisfy 
the  secretary  of  state,  with  whom  said  affidavit  shall  be  filed,  that  the 
same  can  be  readily  identified.  ^ 

Texas  authorizes  the  attorney  general  when  convinced  that  a 
corporation  has  issued  any  stock,  etc.,  in  violation  of  the  law  to 
institute  quo  warranto  or  other  appropriate  judicial  proceedmgs  to 
have  such  stocks  or  bonds  canceled,  expunged,  and  held  for  naught.'' 

Fourteen  States^  (Alabama,  Connecticut,  Indiana,  Maryland,  ^las- 
sachusetts,  Michigan,  Missouri,  Nevada,  Ohio,  South  Carolma,  Utah, 
Vermont,  Vii'gmia,  and  West  Virguiia)  require  a  detailed  description 
of  the  property  for  which  capital  stock  is  issued  to  be  filed  for  the 
uispection  of  the  public  or  mterested  parties.  In  Indiana  and  Ohio 
this  requirement  applies  only  to  public-service  corporations. 

Five  States  ^  (New  Mexico,  New  York,  North  Carolma,  Oregon, 
and  Wyoming)  provide  in  substance  that  when  stock  is  issued  for 
property,  no  statement,  re])ort,  etc.,  published  or  filed  shall  report 

1  Texas,  Rev.  Civil  Stats.,  1911,  art.  6471. 

«Io\va,  32  G.  A.,  chap.  71,  sec.  i;  Texas,  Kcv.  Civil  Stats.,  1911,  arts.  1116,  1167;  Wyoming,  Laws  1909, 
chap.  162,  sec.  2. 

«  Michigan,  Howell's  Stats., sec.  9533. 

4  Utah,  Comp.  Laws,  1907,  sec.  316. 

sVcrmont,  Laws  1910,  No.  113,  sec.  6. 

6  Texas,  Rev.  Civil  Stats.,  1911,  art.  1147. 

'  Alabama,  Civil  Code,  1907,  sec.  3467;  Connecticut,?.  A.  1903,chap.  194, sec.  12;  Indiana,  Laws  1913,  chap. 
76,  sec.  91;  Maryland,  Laws  1908,  chap.  240,  sec.  36;  Massachusetts,  Business  Corp.  Law,  1903,  sec.  14; 
Michigan,  Howell's  Stats.,  sec.  9533;  Missouri,  Laws  1011,  p.  14S;  Nevada,  Laws  1903,  chap.  88,  sec.  55; 
Ohio,  Gen.  Code,  sec.  614-54,  added  by  Laws  1911,  p.  5G:);  South  Carolina,  Code,  1912,  sec.  28.36;  Utah, 
Comp.  Laws  1907,  sec.  316;  Vermont,  Laws  1910,  No.  143,  sec.  6;  Virginia,  Corp.  Act,  1903,  chap.  5,  sec.  9; 
AVest  Virgina,  Code,  chap.  53,  sec.  24. 

8  New  Mexico,  Laws  193"),  chap.  79,  sec.  55;  New  York,  Stock  Corp.  Law,  sec.  55;  North  Carolina,  Revisal 
1908,  sec.  1172;  Lord's  Oreg.  Laws,  sec.  6696;  Wyoming,  Laws  1907,  chap.  70,  sec.  8. 

30035°— 10 W 


226  EEPORT  OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

this  stock  issued  for  cash  paid,  but  it  shall  be  recorded  m  this  respect 
accordmg  to  the  facts. 

The  issumg  of  watered  stock  is  further  deterred  by  other  provisions 
ill  a  number  of  the  public-utility  acts,  which  carefully  Imiit  the  pur- 
poses for  which  stock  may  be  issued  and  requue  the  companies  to 
accomit  to  the  proper  commission  for  the  disposition  of  the  proceeds 
of  sales  of  stock,  bonds,  etc. 

Selected  i^rovisions. — California,  Illmois,  Indiana,  Iowa,  Maryland, 
Massachusetts,  Michigan,  Minnesota,  Missouri,  New  York,  Ohio, 
Pennsylvania,  Texas,  and  Wisconsui  constitute  a  group  of  States  that 
have  enacted  comprehensive  laws  to  prevent  stock  watering. 

In  some  of  these  States  the  statutes  apply  to  practically  aU  classes 
of  corporations  while  in  others  only  to  certain  classes,  such  as  pubhc- 
service  or  railroad  corporations.  Of  the  former  class  Massachusetts 
and  Iowa  may  be  mentioned  as  having  apparently  effective  laws;  and 
of  the  latter,  the  Wisconsin  act  is  an  extensive  and  carefully  drawn 
statute.  The  scope  of  this  chapter  will  not  permit  the  presentation 
of  the  various  laws  in  detail,  and  the  substance  of  the  provisions  of  the 
Iowa  and  Wisconsin  statutes  relating  to  tliis  subject  is  therefore 
given,  together  with  the  substance  of  a  law  of  New  York  regarding 
shares  of  stock  without  par  value. 

Iowa  Law:  Chapter  71,  section  1,  of  the  General  Acts  of  1907,  and 
chapter  76,  of  the  General  Acts  of  1911,  provide  as  follows: 

No  domestic  corporation  (building  and  loan  associations  excepted)  "shall  issue  any 
capital  stock  or  any  certificate  or  certificates  of  shares  of  capital  stock,  or  any  substitute 
therefor,  until  the  corporation  has  received  the  par  value  thereof.  If  it  is  proposed 
to  pay  for  said  capital  stock  in  property  or  any  other  thing  than  money,  the  corporation 
I^roposing  the  same  must,  before  issuing  capital  stock  in  any  form,  apply  to  the  execu- 
tive council  of  the  state  of  Iowa  for  leave  so  to  do.  Such  application  shall  state  the 
amoimt  of  capital  stock  proposed  to  be  issued  for  a  consideration  other  than  money,  and 
set  forth  specifically  the  property  or  other  thing  to  be  received  in  payment  for  such 
stock.  Thereupon,  it  shall  be  the  duty  of  the  executive  council  to  make  investi- 
gation, under  such  rules  as  it  may  prescribe,  and  to  ascertain  the  real  value  of  the 
property  or  other  thing  which  the  corporation  is  to  receive  for  the  stock;  and  shall 
enter  its  finding,  fixing  the  value  at  which  the  corporation  may  receive  the  same  in 
payment  for  capital  stock;  and  no  corporation  shall  issue  capital  stock  for  the  said 
property  or  thing  in  a  greater  amount  than  the  value  so  fixed  and  determined  by  the 
executive  council."  ^ 

"  Provided  that  for  the  purpose  of  encouraging  the  construction  of  new  steam  or 
electric  railways,  and  manufacturing  industries  within  this  state,  the  labor  performed 
in  effecting  the  organization  and  promotion  of  such  corporation,  and  the  reasonable 
discount  allowed  or  reasonable  commission  paid  in  negotiating  and  effecting  the  sale 
of  bonds  for  the  construction  and  equipment  of  such  railroad  or  manufactiu-ing  plant, 
shall  be  taken  into  consideration  as  elements  of  value  in  fixing  the  amount  of  capital 
stock  that  may  be  issued."  ^ 

Other  sections  of  the  law  provide  for  the  cancellation,  at  the  suit 
of  the  State,  of  stock  issued  in  violation  of  the  act,  and  the  return 

1  Iowa,  32  G.  A.  (1907),  chap.  71,  sec.  1.  2  Iowa,  34  G.  A.  (1911),  chap;  76. 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  227 

by  tlie  corporation  of  the  consideration  received  for  tlie  stock. ^  A 
corporation  may  also  be  dissolved  for  such  violation  and  the  officer, 
agent,  or  representative  who  violates  any  of  the  provisions  of  the  act 
may  be  fined  and  imprisoned. ^ 

Wisconsin  Law:  The  relevant  provisions  of  the  Wisconsin  law 
appljdng  to  piibhc-service  corporations  are  substantially  as  follows: 

A  public-service  corporation  may  issue  stocks,  certificates  of  stock, 
bonds,  notes,  or  other  evidences  of  indebtedness,  when  necessary  for 
any  one  or  more  of  the  following  purposes : 

(a)  For  organization  expenses  and  all  other  expenses  reasonably 
required  in  connection  with  the  financing  and  construction  of  its 
property. 

(&)  For  the  construction,  acquisition,  extension,  or  improvement 
of  its  plants,  distributing  system,  or  facilities,  or  for  the  improve- 
ment of  its  service. 

(c)  For  the  discharge  or  refunding  of  its  legal  obligations. 

(d)  For  so  increasing  the  total  amount  of  its  stocks,  certificates  of 
stock,  bonds,  notes,  and  other  e^adences  of  indebtedness,  where  such 
total  is  less  than  the  value  of  its  property,  as  found  by  the  com- 
mission, as  to  equal  or  more  nearly  equal  such  value. 

(e)  In  case  of  railroad  corporations  for  any  of  the  purposes  stated 
in  section  1826  or  subsection  10  of  section  1828  of  the  statutes.^ 

Except  as  authorized  in  section  1753-14,  (see  p.  229)  no  pubhc- 
service  corporation  shall  issue  any  stocks  or  certificates  of  stock 
except  in  consideration  of  money,  or  of  labor  or  property,  at  its  true 
money  value,  as  found  and  determined  by  the  commission  as  pro- 
vided in  sections  1753-1  to  1753-22,  inclusive,  actually  received  by  it, 
and  equal  to  the  face  value  thereof,  nor  any  bonds,  notes,  or  other 
evidences  of  indebtedness  except  for  money  or  for  labor  or  property 
estimated  at  its  true  money  value,  as  found  and  determined  by  the 
commission  as  in  said  sections  provided,  actually  received  by  it  and 
equal  to  a  sum  not  less  than  75  per  cent  of  the  face  value  thereof, 
provided,  however,  that  no  bonds,  notes,  or  other  evidences  of 
indebtedness  of  any  such  corporation  issued  for  the  purpose  of 
refunding,  retiring,  or  discharging  any  of  its  bonds,  notes,  or  other 
evidences  of  indebtedness,  shall  be  issued  at  less  than  75  per  cent  of 
the  face  value  thereof,  plus  the  amount  of  any  discount  hereafter  paid 
or  incurred  by  such  corporation  upon  the  issuance  of  the  bonds,  notes, 
or  other  evidences  of  indebtedness  to  be  refunded,  retired,  or  dis- 
charged. All  stocks,  certificates  of  stock,  bonds,  notes,  and  other 
evidences  of  indebtedness,  of  any  pubHc-service  corporation  issued 
contraiy  to  the  provisions  of  said  sections  shall  be  void.* 

No  public-service  corporation  shall  hereafter  issue  any  stocks, 
certificates  of  stock,  bonds,  notes,  or  any  other  evidences  of  indebted- 

1  Iowa,  33  G.  A.  (1909),  chap.  104,  sec.  4.  »  Wisconsin,  Stats.,  1913,  sec.  1753-5. 

3  Iowa,  32  G.  A.  (1907),  chap.  71,  sees.  4,  5.  *  Wisconsin,  Stats.,  1913,  sec.  1753-7. 


228  EEPORT   OF    THE   COMMISSIONER  OF   CORPOEATIONS. 

iiess,  except  such  as  arc  issued  for  money  only  and  payable  one  year 
or  less  from  the  date  thereof,  until  it  shall  have  first  obtained  authority 
for  such  issue  from  the  commission.^ 

In  case  stocks,  certificates  of  stock,  bonds,  notes,  or  other  evidences 
of  indebtedness,  payable  more  than  one  year  after  the  date  thereof, 
are  to  be  issued  for  the  purpose  authorized  in  paragraph  (d)  of  sub- 
section 1  of  section  1753-5  (see  p.  227),  the  corporation  shall  file  with 
the  commission  a  statement  signed  and  verified  by  its  president,  or 
vice  president,  and  secretary  stating  the  fact  that  the  issue  is  to  be 
made  for  such  purpose  and  setting  forth — 

(a)  The  amount  and  character  of  the  stocks,  certificates  of  stock, 
bonds,  notes,  or  other  evidences  of  mdebtedness  proposed  to  be 
issued. 

(&)  The  terms  on  which  they  are  to  be  issued. 

(c)  The  application  which  is  to  be  made  of  the  proceeds,  if  any, 
derived  therefrom. 

(d)  The  total  assets  and  liabilities  and  the  previous  financial 
operations  and  busmess  of  the  corporation,  m  such  detail  as  the  com- 
mission may  require. 

If  the  commission  shall  determine  that  the  proposed  issue  com- 
plies with  the  provisions  of  this  act,  such  authority  shall  thereupon 
be  granted  and  it  shall  issue  to  the  corporation  a  certificate  of  au- 
thority stating  (a)  the  amount  of  such  stocks,  certificates  of  stock, 
bonds,  notes,  or  other  evidences  of  mdebtedness  reasonably  neces- 
sary for  the  purpose  for  which  they  are  to  be  issued,  and  the  charac- 
ter of  the  same;  (&)  the  purpose  for  which  they  are  to  be  issued;  (c) 
the  terms  upon  which  they  are  to  be  issued;  (d)  the  application  which 
is  to  be  made  of  the  proceeds,  if  any,  derived  therefrom;  and  (e)  the 
true  value  of  the  property  upon  which  such  issue  is  based.  Such 
corporations  shall  not  dispose  of  such  stocks,  certificates  of  stock, 
bonds,  notes,  or  other  evidences  of  uidebtedness,  or  apply  the  pro- 
ceeds derived  therefrom,  on  any  terms  or  in  any  manner  not  speci- 
fied in  such  certificate.^ 

No  public-service  corporation  shall  issue  any  stocks,  certificates 
of  stock,  bonds,  notes,  or  other  evidences  of  indebtedness  for  money, 
property,  or  services,  or  for  the  purpose  authorized  in  paragraph  (d) 
of  subsection  1  of  section  1753-5  (see  p.  227),  until  there  has  been  re- 
corded upon  the  books  of  such  corporation  the  certificate  of  the 
raihoad  commission.^ 

The  commission  shall  have  the  power  to  require  public-service 
corporations  to  account  for  the  disposition  of  all  stocks,  certificates 
of  stock,  bonds,  notes,  and  other  evidences  of  indebtedness,  and  of 
the  proceeds  of  all  sales  of  stocks,  certificates  of  stock,  bonds,  notes, 
and  all  other  evidences  of  mdebtedness  issued  pursuant  to  sections 

1  Wisconsin,  Stats.,  1913,  sec.  1753-9,  subsec.  1.  a  Wisconsin,  Stats.,  1913,  sec.  1753-12. 

-  Wisconsin^  Stats.,  1913,  sec.  1753-9;  subsec.  8. 


TEUST   LAWS  AND  UlSrPAIR  COMPETITION.  229 

1753-1  to  1753-22,  inclusive,  in  such  form  and  detail  as  it  may  deem 
advisable,  and  to  do  and  perform  any  and  all  acts  necessary  to  carry 
out  the  provisions  of  said  sections.^ 

No  public-service  corporation  shall  declare  any  stock  or  bond 
dividend,  or  divide  the  proceeds  of  the  sale  of  any  stock  or  bonds 
among  its  stockholders;  provided  that  where  stocks,  certificates  of 
stock,  bonds,  notes,  or  other  evidences  of  indebtedness  shall  be 
issued  for  the  purposes  authorized  in  paragraph  (d)  of  subsection  1 
of  section  1753-5  (see  p.  227),  such  new  stocks,  certificates  of  stock, 
bonds,  notes,  or  other  evidences  of  indebtedness,  or  any  part  thereof, 
or  the  proceeds  or  any  part  of»thc  proceeds  derived  therefrom,  may 
be  distributed  equally,  share  for  share,  among  the  holders  of  stock 
or  certificates  of  stock  of  such  corporation  already  issued.^ 

Other  sections  of  the  law  provide  that  any  corporation,  its  agent, 
director,  or  officer  who  shall  cause  to  be  issued  any  stock,  bonds,  or 
other  evidences  of  indebtedness  in  violation  of  the  law,  or  who  shall 
ai)])ly  the  proceeds  of  the  sale  thereof  to  any  purposes  other  than 
specified  in  the  certificate  of  the  commission,  shall  be  fined  not  less 
than  S500  nor  more  than  $10,000  for  each  offense,  and  all  stoclvs, 
bonds,  etc.,  so  issued  shall  be  void.^ 

New  York  Law — Stock  Without  Par  Value:  New  York  has  a  law 
providmg  for  the  issuance  by  certain  corporations  of  shares  of  stock 
without  any  nominal  or  par  value.  This  is  a  provision  not  found  in 
the  laws  of  any  other  State.  That  part  of  the  law  relating  to  the 
issuance  of  the  stock  is  substantially  as  follows: 

Upon  the  formation  or  the  reorganization  of  any  stock  corpora- 
tion, other  than  a  moneyed  corporation,  or  a  corporation  under  the 
jurisdiction  of  any  public-service  commission,  the  certificate  of  incor- 
poration may  provide  for  the  issuance  of  the  shares  of  stock  of  such 
corporation,  other  than  preferred  stock  having  a  preference  as  to 
prmcipal,  without  any  nommal  or  par  value  by  stating  in  such 
certificate — 

1.  The  number  of  shares  that  may  be  issued  by  the  corporation, 
and  if  any  of  such  shares  be  preferred  stock,  the  preferences  thereof. 
If  such  preferred  stock  or  any  part  thereof  shall  have  a  preference  as 
to  principal,  the  certificate  shall  state  the  amount  of  such  preferred 
stock  having  such  preference,  the  particular  character  of  sucli  prefer- 
ences, and  the  amount  of  each  share  thereof,  which  shall  be  $5  or 
some  multiple  of  $5,  but  not  more  than  SIOO. 

2.  The  amount  of  capital  with  which  the  corporation  will  carry  on 
business,  which  amount  shall  be  not  less  than  the  amount  of  preferred 
stock  (if  any)  authorized  to  be  issued  witli  a  preference  as  to  principal, 
and  m  addition  thereto  a  sum  equivalent  to  $5  or  to  some  multiple 

»  Wisconsin,  Stats.,  1913,  sec.  1733-13.  »  Wisconsin,  Stats.,  1913,  sees.  1753-17  and  1753-19. 

2  Wisconsin,  Stats.,  1013,  soc.  n.W-U. 


230  REPORT   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

of  $5  for  every  share  authorized  to  be  issued  other  than  such  preferred 
stock;  but  in  no  event  shall  the  amount  of  such  capital  be  less  than 
$500. 

Such  statements  in  the  certificate  shall  be  in  lieu  of  any  statements 
prescribed  by  the  law  under  which  the  corporation  shall  have  been 
formed  or  reorganized  as  to  the  amount  or  the  maximum  amount  of 
its  capital  stock  or  the  number  of  shares  into  which  the  same  shall  be 
divided,  or  of  the  amount  or  the  par  value  of  such  shares. 

Each  share  of  such  stock  without  nominal  or  par  value  shall  be 
equal  to  every  other  share  of  such  stock,  subject  to  the  preferences 
given  to  the  preferred  stock,  if  any,  authorized  to  be  issued.  Every 
certificate  for  such  shares  without  nominal  or  par  value  shall  have 
plahily  written  or  printed  upon  its  face  the  numl^er  of  such  shares 
which  it  represents  and  the  number  of  such  shares  which  the  corpora- 
tion is  authorized  to  issue,  and  no  such  certificate  shall  express  any 
nominal  or  par  value  of  such  shares.  TJie  certificates  for  preferred 
shares  having  a  preference  as  to  principal  shall  state  briefly  the 
amount  which  the  holders  of  each  of  such  preferred  shares  shall  be 
entitled  to  receive  on  account  of  principal  from  the  surplus  assets  of 
the  corporation  in  preference  to  the  holders  of  other  shares,  and  shall 
state  briefly  any  other  rights  or  preferences  given  to  the  holders  of 
such  shares. 

Such  corporation  may  issue  and  may  sell  its  authorized  shares, 
from  time  to  time,  for  such  consideration  as  may  be  prescribed  in  the 
certificate  of  incorporation,  or  as  from  time  to  time  may  be  fixed  by 
the  board  of  directors  pursuant  to  authority  conferred  in  such  certifi- 
"  cato,  or  if  such  certificate  shall  not  so  provide,  then  by  the  consent  of 
the  holders  of  two-tliirds  of  each  class  of  shares  then  outstanding 
given  at  a  meeting  called  for  that  purpose  in  such  manner  as  shall  be 
prescribed  by  the  by-laws.  Any  and  all  sliarcs  issued  as  permitted 
by  this  section  shall  be  deemed  fully  paid  and  nonassessable  and  the 
holder  of  such  shares  shall  not  be  liable  to  the  corporation  or  to  its 
creditors  in  respect  thereof.^ 

The  act  also  provides  that  in  case  the  amount  of  capital  stated  in 
its  certificate  of  incorporation  shall  be  increased,  such  corporation 
shall  not  increase  the  amount  of  its  indebtedness  then  existing  until 
it  shall  have  received  in  money  or  property  the  amount  of  such  in- 
crease. The  directors  assenting  to  the  creation  of  any  debt  in  vio- 
lation of  this  provision  shall  be  hable  jointly  and  severally  for  such 
debt,  and  no  such  corporation  shall  declare  any  dividend  which  will 
reduce  the  amount  of  its  capital  below  that  stated  in  its  certificate. 
Provision  is  also  made  for  the  increase  or  reduction  of  the  capital  of 
such  corporations.^ 

1  New  York  Stock  Corp.  Law,  sec.  19.  ^  New  York  Stock  Corp.  Law,  sees.  20,  22. 


CHAPTER  V. 
TRUST  LAWS  IN  FOREIGN  COUNTRIES. 

Section  1.  Introductory. 

The  laws  in  foreign  countries  concerning  trusts,  or  combinations  to 
control  the  market,  present  a  great  variety  of  governmental  policy, 
extending  from  prohibition  under  the  criminal  law  to  compulsory 
obligation  to  form  such  combinations  in  certain  specific  cases.  The 
three  chief  types  of  policy,  however,  with  regard  to  the  legal  status  of 
such  combinations  aj'e  (1)  prohibition  under  the  criminal  law, 
(2)  invalidity  under  civil  law,  and  (3)  validity  under  the  civil  law. 
Wliere  combinations  are  prohibited  under  the  criminal  law  they  are 
generally  invahd  under  the  civil  law  also.  Among  the  countries  in 
wliich  such  combinations  are  prohibited  by  the  criminal  law  may  be 
specially  mentioned  Canada,  AustraUa,  New  Zealand,  France,  and 
Russia;  among  those  in  which  such  combinations  are  invalid  under 
the  civil  law  merely,  Austria  should  be  specially  noted ;  wliile  among 
those  which  generally  give  free  scope  to  monopolistic  combinations 
Germany,  Belgium,  Switzerland,  and  Italy  are  the  most  important. 
According  to  the  EngUsh  law  combination  agreements  may  or  may 
not  be  invahd,  according  to  the  circumstances.  Laws  of  a  compulsory 
character,  tending  to  the  establishment  of  monopolistic  conditions  in  a 
particular  industry,  are  found  in  Germany,  Italy,  Roumania,  Russia, 
Brazil,  and  recently,  for  a  brief  period,  in  Austria  also.  It  may  be 
noted  further  that  some  countries  which  have  laws  generally  per- 
mitting monopolistic  combinations,  such  as  Germany,  proliibit  under 
the  criminal  law  particular  forms,  such  as  combinations  with  respect 
to  bidding  on  contracts.  Some  countries  have,  apparently,  no  gen- 
eral legislation  on  this  subject. 

With  respect  to  the  particular  provisions  of  the  laws  which  are 
quoted  or  referred  to  below,  it  should  be  noted  that  in  some  cases 
they  are  special  statutes  expressly  relating  to  combinations  of  com- 
petitors, etc.,  while  in  other  cases  they  are  merely  parts  of  the  general 
criminal  and  civil  law.  Provisions  of  the  general  criminal  law  which 
are  relevant  to  such  combinations  are  usually  so  expressed  as  to  make 
their  application  obvious.  The  relevant  j^rovisions  of  the  general 
civil  law,  however,  are  chiefly  those  regarding  the  validity  of  agree- 
ments, and  these  do  not  usually  refer  expressly  to  such  combinations. 
Their  application  to  this  su])j(H't  depends,  therefore,  on  judicial 
interpretation.     In  most  countries  where  such  provisions  are  cited 

231 


232  RErORT   OF    THE   COMMISSIONER   OF   CORPOEATIONS. 

judicial  interpretations  have  boon  found  and  some  of  the  cases  are 
referred  to  in  the  text.  In  other  countries  where  substantially 
identical  provisions  exist  such  judicial  interpretation  does  not  appear 
io  have  been  made.  Inasmuch  as  the  judicial  interpretations  of 
sunilar  provisions  of  law  in  different  countries  are  often  unlike,  the 
meaninir  and  effect  of  the  law  is  sometimes  doubtful  where  the  courts 
have  not  defined  it. 

In  most  foreign  countries  monopolistic  combinations  are  generally- 
formed  on  the  basis  of  agreements  between  competitors  for  fixed 
periods  (ca,rtels) ;  consolidations  of  competitors  by  means  of  a  holding 
company  or  merger  are  comparatively  rare.  For  this  reason  the  laws 
respecting  the  right  of  one  company  to  hold  the  stock  of  a  competing 
company  or  the  right  to  merge  competing  companies,  are  not  of  great 
practical  significance  m  this  connection  and  are  not  included  in  the 
following  discussion.  No  instances  have  been*  noted  where  a  combi- 
nation has  been  declared  unlawful  on  either  of  these  grounds. 

In  foreign  countries  wliich  forbid  combinations  that  restrict  com- 
petition the  prohibition  generally  does  not  extend  to  those  which  are 
regarded  as  reasonable  in  extent  or  in  their  practical  operation.  The 
fact,  therefore,  that  such  combinations  frequently  exist  in  most  of  the 
countries  mentioned  does  not  afford  a  safe  basis  for  judging  of  the 
effectiveness  of  the  laws. 

A  proper  appreciation  of  the  effectiveness  and  the  results  of  the 
legislative  policies  of  foreign  countries  would  require,  of  course,  a  veiy 
comprehensive  knowledge  of  the  economic  facts  and  the  way  in  which 
the  laws  arc  administerecL  No  attempt  is  made  to  discuss  these 
aspects  of  the  subject. 

The  following  discussion  of  legislation  regarding  trusts  or  other 
monopolistic  organizations  is  hmited  to  private  industry,  and  the^ 
subject  of  Government  monopolies  is  not  considered.  Various  coun- 
tries have  estabhshed  such  mono2:)olios  in  particular  industries,  as,, 
for  example,  France  for  tobacco.  This  discussion,  moreover,  does: 
not  cover  legislation  according  to  which  various  Governments  have; 
engaged  in  industry  in  competition  with  private  concerns,  though 
tliis  may  have  had  for  one  of  its  purposes  the  placing  of  a  check  on 
monopohstic  tendencies  of  private  industry.  Furthermore,  no  attempt, 
has  been  made  to  include  any  special  measures  adopted  by  belligerent, 
countries  since  the  outbreak  of  the  present  war,  which  relate  to  this 
general  subject. 

While  the  legislation  and  judicial  decisions  on  unfair  competition  do 
not  have  necessarily  any  relation  to  the  question  of  combinations  and 
are  treated  separately  in.  this  report  (for  foreign  countries,  see  Chap.  X,, 
p.  529),  yet  in  some  instances  certain  combination  practices  directly 
tending  to  destroy  competition  have  been  declared  unlawful  and  are; 
therefore  noted  in  this  connection. 


TRUST  LAWS  AND  UNFAIR   COMPETITION.  233 

Section  2.  England. 

Some  aspects  of  ancient  legislation  in  England  regarding  monopo- 
lies or  combinations  to  control  the  market  have  been  discussed  in 
Chapter  I.  (See  pp.  2-3.)  So  far  as  the  practices  of  engrossing 
regrating,  and  forestalling  are  concerned,  they  are  no  longer  criminal, 
although  attempts  to  affect  prices  by  spreading  false  rumors  or  by 
preventmg,  by  force  or  threats,  goods  from  being  brought  to  market 
are  still  prohibited.  So,  also,  as  already  noted,  the  criminal  statutes 
against  combmations  to  fix  prices  or  wages  have  been  repealed, 
while  the  ancient  common-law  rules  which  made  them  criminal  have 
been  abrogated  by  statute. 

Common  law. — The  only  law  in  England  at  the  present  time  affect- 
ing combinations  to  control  the  market  is  the  common  law.  Accord- 
ine:  to  the  common  law  contracts  or  combinations  in  restraint  of  trade 
may  or  may  not  be  void;  they  are  upheld  b}'  the  com'ts  if  shown  to  be 
reasonable  as  between  the  parties,  and  not  against  pubhc  policy.  In 
the  interpretation  of  ordinary  contracts  for  the  sale  of  property 
and  business  the  courts,  as  stated  elsewhere  (see  p.  27),  have  in 
recent  years  given  them  a  somewhat  more  liberal  construction 
than  has  generally  prevailed  in  the  United  States  in  cases  where 
common-law  rules  have  been  apphed.  Furthermore,  in  the  inter- 
pretation of  the  law  regarding  combinations  in  restraint  of  trade, 
or  to  control  the  market,  the  Enghsh  courts  have  generally  been 
wilhng  to  aid  in  their  enforcement  in  cases  where  the}'  would  appar- 
ently have  been  declared  contrar}^  to  public  pohcy  at  common  law 
in  the  United  States.  The  policy  of  the  English  law  is  to  encom'age 
competition,  but  it  apparently  places  no  serious  obstacles  to  combi- 
nation. As  observed  in  a  recent  decision,  "the  public  interest  in  the 
one  case  may  be  on  the  side  of  freedom  of  contract,  while  on  the 
other  it  is  on  the  side  of  freedom  of  trade."  ^  The  English  courts 
seem  to  incline  generally  to  the  side  of  freedom  of  contract.  The 
vahdity  of  permanent  consolidations  of  competing  industrial  enter- 
prises has  apparently  never  been  questioned  in  the  courts.  There 
have  been  only  a  few  cases  in  the  Enghsh  courts  regarding  combi- 
nations, which  are  briefly  noted  below. 

In  1829  an  agreement  for  a  division  of  markets  between  three  box 
manufactm^ers  was  declared  enforceable  as  not  imreasonable  between 
the  parties,  and  not  a  monopoly,  as  other  manufacturers  were  not 
restrained  from  competing.^ 

In  1855  an  agreement  of  manufacturers  to  oppose  combination 
among  their  employees  by  wliich  each  manufacturer  obhgatcd  himself 

1  Mason  v.  Trovident  Clothing  &  Supply  Co.  (Ltd.),  (House  of  Lords),  Law  Reports,  Appeal  Cases,  1913, 
pp.  721,  73S. 

2  Wickens  v.  Evans,  3  Y.  &  J.,  318. 


-  234         repokt  of  the  commissioner  of  corporations. 

to  conduct  his  business  in  accordance  with  rules  laid  down  by  the 
majority  concerning  wages,  hours  of  work,  and  the  closing  down  of 
mills,  if  need  be,  was  held  invahd  as  against  pubHc  pohcy.^ 

In  1875  an  agreement  between  four  quarrymen  that  one  of  them 
should  not  bid  on  a  pubUc  contract  and  that  two  of  the  others  should 
bid  higher  than  the  fourth  was  held  a  vaUd  contract  and  not  a  con- 
spiracy.2 

In  1879  an  agreement  between  four  stevedores  as  to  a  division  of 
the  business  in  the  port  of  Melbourne  was  held  reasonable  and  vahd, 
except  where  (by  reason  of  an  apparent  oversight  in  the  agreement) 
a  vessel  owner's  refusal  to  employ  one  stevedore  prevented  aU  the 
others  from  doing  the  work  and  left  him  without  the  services  of  any,^ 

A  price  agreement  of  mineral-water  manufacturers,  binding  them 
for  10  years  to  maintain  a  fixed  price,  was  declared  void  as  being 
unreasonable  both  as  to  the  period  of  time  and  the  area  involved.* 
In  this  same  case  the  lower  court  held  the  agreement  void  as  having 
no  legal  consideration.^ 

An  important  case  in  English  jurisprudence  in  tliis  connection  is 
Mogul  Steamsliip  Co.  v.  McGregor  Gow  &  Co.^  The  defendants  were 
a  "conference"  or  combination  of  shipping  companies  which  endeav- 
ored to  exclude  the  plaintiffs  from  the  Hankow  tea  trade  by  offering 
rebates  to  shippers  who  patronized  conference  hues  exclusively,  and 
by  cutting  rates.  Damages  were  sought  for  conspiracy  to  injure 
plaintiffs,  and  it  was  alleged  that  the  conference  was  unlawful,  being 
in  restraint  of  trade.  The  court  held  unanimously  that  such  an 
agreement  would  not  give  the  plaintiffs  ground  for  an  action  for 
damages.  Some  of  the  judges  regarded  the  conference  agreement 
as  unenforceable.  This  case  is  often  misstated  as  holding  that  the 
combination  itself  was  lawful,  a  point  which  was  not  in  issue  and 
upon  wliich  the  various  opinions  apparently  differed. 

An  association  of  butchers  in  Glasgow  informed  the  cattle  salesmen 
on  a  public  wharf,  wiiich  was  the  only  wharf  in  Scotland  where 
American  and  Canadian  cattle  were  licensed  to  be  sold,  that  they 
would  not  buy  from  them  if  they  accepted  bids  from  cooperative 
stores.  The  cooperative  stores  brought  an  action  for  damages  against 
the  association  and  prayed  for  an  injunction  against  the  cattle  sales- 
men to  prevent  such  discrimination.     The  court  held  that  the  cattle 

1  Hilton  V.  Eckersley,  G  E.  &  B.,  47. 

2  Jones  V.  North,  L.  R.  19  Eq.,  420. 

3  Collins  V.  Locke,  4  A.  C.,674. 

«  Urmiston  v.  Wliilelogg,  7  Times  Law  Reports,  20'),  Court  of  Appeals,  1S91, 

6G3L.  T.,455. 

6  House  of  Lords,  1892,  Appeal  Cases,  25. 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  235 

salesmen  were  entitled  to  make  such  discrimination  and  that  the 
butchers  were  not  liable  for  damages.* 

Certain  members  of  a  liquor  dealers  association  executed  a  deed 
which  provided  that  the  parties  thereto  should  not  sell  below  a  certain 
schedule  of  prices  (which  was  the  ordinary  maximum  schedule)  m  speci- 
fied districts,  includmg  Cork,  and  fixed  penalties  for  breach  thereof, 
but  also  provided  that  they  could  withdraw  from  the  agreement  on 
six  months'  notice.  A  dealer,  who  did  not  give  the  stipulated  notice, 
sold  at  lower  prices  than  those  agreed  on.  Plaintiff  sued  for  an 
injunction  to  prevent  further  violation  of  the  agreement,  for  the  pay- 
ment of  the  penalties  provided,  etc.  The  court  held  that  the  agree- 
ment was  not  unreasonable  between  the  parties,  that  the  prices  were 
not  unreasonable,  and  that  publicans  were  not  prevented  from  pur- 
chasing supplies  elsewhere,  and  granted  the  injunction  and  damages 
for  breach  of  agreement.^ 

One  of  the  rules  of  a  cooperative  creamery  society  provided  that 
any  milk-supplying  member  should  deliver  to  the  society  on  every 
working  clay  all  the  milk  produced  from  his  cows,  except  that  required 
for  his  household  use,  and  that  any  member  fading  to  do  so  should 
pay  to  the  society  certain  penalties.  The  rules  did  not  provide  for 
the  voluntary  withdrawal  of  a  member  except  by  transfer  of  his 
shares  for  which  the  consent  of  a  conunitteo  was  necessary.  The 
court  of  appeal,  reversing  the  judgment  of  the  King's  Bench  Divi- 
sion, held  that  the  rule  requiring  the  deUvery  of  milk  was  void  as  an 
illegal  restraint  of  trade.^ 

The  Northwestern  Salt  Co,  entered  into  an  agreement  with  the 
Electrolytic  Alkali  Co.  whereby  the  former  practically  bound  itself  to 
sell  its  output  of  salt  to  the  latter  for  a  term  of  years  and  also  limited 
its  commercial  activities  in  other  ways.  Sued  for  a  violation  of  this 
agreement  the  Northwestern  Salt  Co.  purposely  avoided  raismg  the 
question  of  the  vahdity  of  the  agreement  in  the  pleadings  but  sought 
to  show  during  the  trial  that  the  Electrolytic  Salt  Co.  had  similar 
contracts  with  other  producers  and  was  guilty  of  an  unla^vful  restraint 
of  trade.  Olijection  to  such  evidence  was  sustained  by  the  court  and 
judgment  rendered  for  the  plaintiff.  On  appeal  the  House  of  Lords 
held  that  having  regard  to  the  form  of  the  pleadings  such  circum- 

i  Scottish  Cooperative  Wholesale  Society  v.  Glasgow  Fleshers'  Trade  Defence  Association,  35  Scottish 
Law  Rep.,  645  (189S). 

In  connection  with  this  case  it  is  of  interest  to  note  that  the  local  authorities  on  Juno  7,  1898,  passed  a 
by-law  which,  among  other  things,  provided  that  the  sales  rings  on  the  wharf  in  question  "shall  not  be 
used  for  private  sales,  or  for  sales  to  any  limited  number  of  persons,  or  for  sales  in  wliich  any  class  of  tlio 
public  are  excluded  from  bidding  or  buying."  This  by-law  was  upheld  in  Scott  and  Others  v.  Magis- 
trates of  Glasgow;  30  Scottish  Law  Rep.,  p.  458  (1,S99). 

a  Cade  v.  Paly,  Irish  Reports,  Chancery  1910,  p.  306. 

«  Tipperary  Cooperative  Creamery  Society  v.  Uauley,  Irish  Reports,  King's  Bench  1912,  p.  586. 


^36  IIEPOET  OF    THE   COMMISSIONER  OF   CORPORATIONS. 

stances  could  not  be  looked  into  for  determining  tlie  legality  of  the 
aoreement  and  that  the  agreement  was  on  its  face  a  legal  one.^ 

A  recent  and  miportant  case  ^  on  this  subject  was  decided  by 
the  Privy  Council  on  appeal  from  the  High  Court  of  the  Common- 
wealth of  Australia.  The  facts  of  the  case  will  be  set  forth  in  more 
detaU  in  connection  with  the  discussion  of  the  laws  of  Australia, 
together  with  those  parts  of  the  decision  and  opinion  especially 
pertment  to  the  Australian  statutes.  (See  pp.  245-246.)  The  case 
involved,  however,  an  interpretation  of  the  English  common  law 
with  respect  to  restraint  of  trade  and  monopoly.  Very  briefly  stated, 
the  facts  were  as  follows:  Certain  colliery  companies  in  Australia 
combmed  in  a  vending  agreement  which  apportioned  the  production 
and  fixed  the  prices  of  coal,  and  made  another  agreement  witli  certain 
shipping  companies  which  provided  for  mutual  exclusive  dealing 
and  fixed  the  maxunum  resale  prices  of  coal  to  be  charged  by  the 
shii:)ping  companies.  Under  the  Australian  law  (see  p.  243)  it  was 
necessary  for  the  Government  to  prove  that  the  combination  com- 
jDlamed  of  had  restrained  or  monopolized  trade,  etc.,  "to  the  detriment 
of  the  public."  The  Crown  contended  that  such  detriment  must 
be  legally  presumed  in  the  case  of  contracts  which  are  void  as  in  re- 
straint of  trade.  The  court  rejected  this  claim  and  in  this  connection 
stated  the  nature  of  the  common  lav/  in  England  both  as  to  restraint 
of  trade  and  monopoly.     The  court  said  m  part  (pp.  793-797) : 

At  common  law  every  member  of  the  community  is  entitled  to  carry  on  any  trade 
or  business  he  chooses  and  in  such  manner  as  he  thinks  most  desirable  in  his  own 
interests,  and  inasmuch  as  every  right  connotes  an  obligation  no  one  can  lawfully 
interfere  with  another  in  the  free  exercise  of  his  trade  or  business  unless  there  exist 
some  just  cause  or  excuse  for  such  interference.  Just  cause  or  excuse  for  interference 
with  another's  trade  or  ])usiness  may  sometimes  be  found  in  the  fact  that  the  acts 
complained  of  as  an  interference  have  all  been  done  in  the  bona  fide  exercise  of  the 
doer's  own  trade  or  business  and  with  a  single  view  to  his  own  interests  (the  Mogul 
Steamship  case  ^).  But  it  may  also  be  found  in  the  existence  of  some  additional 
or  sul)stantive  right  conferred  by  letters  patent  from  the  Crown  or  by  contract  between 
individuals.  In  the  case  of  letters  patent  from  the  Crown  this  additional  or  substan- 
tive right  is  generally  descvilsed  as  a  monopoly.  In  the  latter  case  the  contract  on 
which  the  additional  or  substantive  right  is  founded  is  generally  described  as  a  con- 
tract in  restraint  of  trade.  Monopolies  and  contracts  in  restraint  of  trade  have  this  in 
common,  that  they  both,  if  enforced,  involve  a  derogation  from  the  common  law 
right  in  virtue  of  which  any  member  of  the  community  may  exercise  any  trade  or 
business  he  pleases  and  in  such  manner  as  he  thinks  best  in  his  own  interests. 

The  right  of  the  Crown  to  grant  monopolies  is  now  regidated  by  the  Statute  of  Mon- 
opolies, but  it  was  always  strictly  limited  at  common  law.  A  monopoly  being  a 
derogation  from  the  common  right  of  freedom  of  trade  could  not  be  granted  without 
consideration  moving  to  the  public,  just  as  a  toll  being  a  derogation  from  the  public 

1  North  Western  Salt  Co.  v.  Electrolytic  Alkali  Co.,  House  of  Lords,  Law  Reports,  Appeal  Cases,  1911, 
p.  461. 

2  Attorney  General  of  the  CommonweaUli  of  .\ustralia  v.  Adelaide  Steamship  Co.  (Ltd.)  et  al.  (Privy 
Council),  Law  Reports,  Appeal  Cases,  191-3,  p.  7X1. 

3  23  Q.  B.  D.  598;  (1892)  A.  C.  25. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  237 

right  of  passage  could  not  be  granted  witlKJut  tlie  like  consideration.  In  the  case 
of  new  inventions  the  consideration  was  found  either  in  the  interest  of  the  public  to 
encourage  inventive  ingenuity  or  more  probably  in  the  disclosure  made  to  the  public 
of  a  new  and  useful  article  or  process.     *    *    * 

Contracts  in  restraint  of  trade  were  subject  to  somewhat  different  considerations. 
There  is  little  doubt  that  the  common  law  in  the  earlier  stages  of  its  growth  treated  all 
such  contracts  as  contracts  of  imperfect  obligation,  if  not  void  for  all  purposes;  they 
were  said  to  be  against  public  policy  in  the  sense  that  it  was  deemed  impolitic  to 
enforce  them  and  not  because  every  such  contract  must  necessarily  operate  to  the 
public  injury.  The  old  common  law  rule  against  enforcing  such  contracts  has,  how- 
ever, been  relaxed  in  more  recent  times.  Though,  speaking  generally,  it  is  the  inter- 
est of  every  individual  member  of  the  community  that  he  should  be  free  to  earn  his 
livelihood  in  any  lawful  manner,  and  the  interest  of  the  community  that  every  indi- 
vidual should  have  this  freedom,  yet  under  certain  circumstances  it  may  be  to  the 
interest  of  the  individual  to  contract  in  restraint  of  this  freedom,  and  the  community 
if  interested  to  maintain  freedom  of  trade  is  equally  interested  in  maintaining  free- 
dom of  contract  within  reasonable  limits.  *  *  *  Their  Lordships  are  not  aware 
of  any  case  in  which  a  restraint  though  reasonable  in  the  interests  of  the  parties  has 
been  held  unenforceable  because  it  involved  some  injury  to  the  public.  Lindley 
and  Bowen  L.  JJ.  had  suggested  in  the  Court  below  that  though  a  restraint  might  be 
reasonable  as  between  the  parties  to  the  contract  it  might  be  unenforceable  because 
of  the  "law  which  forbids  monopolies,"  or  because  it  was  calculated  to  create  "a 
pernicious  monopoly,"  and  there  is  a  similar  suggestion  by  Lindley  L.  J.  in  Under- 
wood V.  Barker.  1  The  term  monopoly  can  not  be  here  used  in  its  proper  legal  sig- 
nification of  a  right  granted  by  the  Crown,  nor  can  the  expression  "the  law  which 
forbids  monopolies"  refer  to  any  common  law  or  statutory  rule  limiting  the  Crown's 
prerogative  in  this  respect.  The  learned  Lords  Justices  are  contemplating  a  state  of 
circumstances  in  which  some  trade  or  industry  has  passed  or  is  likely  to  pass  into  the 
hands  or  under  the  control  of  a  single  individual  or  group  of  individuals,  and  are  indi- 
cating that  if  a  restraint  on  trade  is  likely  to  produce  this  result,  it  may  on  grounds  of 
public  policy  be  unenforceable  however  reasonable  in  the  interests  of  the  parties  to 
the  contract.  Such  a  state  of  cu-cumstances  may,  by  eliminating  competition,  entail 
the  evils  thought  to  be  incident  to  monopoly  rights  granted  by  the  Crown,  and  may 
therefore  in  a  popular  sense  be  called  a  monopoly.     *    *    * 

The  chief  evil  thought  to  be  entailed  by  a  monopoly,  whether  in  its  .strict  or  popu- 
lar sense,  was  the  rise  in  prices  which  such  monopoly  might  entail.  The  idea  that 
the  public  are  injuriously  affected  by  high  prices  has  played  no  inconsiderable  part 
in  our  legal  history.  It  led,  no  doubt,  to  the  enactment  of  most,  if  not  all,  of  the  penal 
statutes  repealed  by  12  Geo.  3,  c.  71.  It  also  lay  at  the  root  of  the  common  law  offence 
of  engrossing,  which,  according  to  Hawkins'  Pleas  of  the  Crown,  vol.  ii.,  bk.  1,  ch. 
79,  consisted  in  buying  up  large  quantities  of  wares  with  intent  to  resell  at  unreason- 
able prices.  It  influenced  the  Courts  in  their  attitude  towards  contracts  in  restraint 
of  trade.  Although,  therefore,  the  whole  subject  may  some  day  have  to  be  reconsid- 
ered, there  is  at  present  ground  for  assuming  that  a  contract  in  restraint  of  trade, 
though  reasonable  in  the  interests  of  the  parties,  may  be  unreasonable  in  the  inter- 
ests of  the  public  if  calculated  to  produce  that  state  of  things  which  is  referred  to  by 
Lindley  and  Bowen  L.  JJ.  as  a  pernicious  monopoly,  that  is  to  say,  a  monopoly  cal- 
culated to  enhance  prices  to  an  um-easonable  extent.     *    *    * 

It  ia  only  necessary  to  add  that  no  contract  was  ever  an  offence  at  common  law 
merely  because  it  waa  in  restraint  of  trade.  The  parties  to  such  a  contract,  even  if 
unenforceable,  were  always  at  liberty  to  act  on  it  in  the  manner  agreed.  Similarly 
combinations,  not  amounting  to  contracts,  in  restraint  of  trade  were  never  unlawful 


(1899)  1  chap.  300. 


238  EEPORT   OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

at  common  law.  To  make  any  sucli  contract  or  combination  unlawful  it  must  amount 
to  a  criminal  conspiracy,  and  the  essence  of  a  criminal  consj^iracy  is  a  contract  or 
combination  to  do  something  unlawful,  or  something  lawful  by  unlawful  means. 
The  right  of  the  individual  to  carry  on  his  trade  or  business  in  the  manner  he  considers 
best  in  his  own  interestt  involves  the  right  of  combining  with  others  in  a  common 
course  of  action,  provided  such  common  course  r)f  action  is  undertaken  with  a  single 
view  to  the  in  teres  ts  of  the  combining  parties  and  not  with  a  view  to  injure  others  (the 
Mogul  Steamship  case  ^). 

So  far  as  these  two  particular  contracts  were  concerned  the  court 
held  that  both  the  vending  agreement  of  the  colliery  companies, 
wliich  related  to  apportioning  the  output  and  fixing  the  price  of  coal, 
and  the  contract  for  mutual  exclusive  dealing  between  the  colliery 
companies  and  the  shipping  companies,  and  the  fixing  of  a  maximum 
resale  price  of  coal  for  the  shipping  companies,  were  contracts  in 
restramt  of  trade,  but  it  did  not  state  whether  they  were  enforceable 
or  not. 

Railroads. — Although  the  law  respecting  raikoad  combinations 
is  somewhat  apart  from  the  present  subject,  it  may  be  noted  that 
in  recent  years  Parliament  has  not  generally  attempted  to  provide 
for  competition  among  such  carriers  by  granting  franchises  to  com- 
peting roads  when  the  public  conveniences  of  transportation  were 
already  established.  The  railroad  law,  however,  provides  that  rates 
shall  be  reasonable,  and  also  prohibits  discriminations  between 
persons. 

An  agreement  between  two  railroads  to  pool  profits  was  declared 
illegal  in  the  High  Court  of  Chancery  in  1859  as  ultra  vires.^  The 
court  said  that  if  such  an  amalgamation  were  lawful  that  all  the 
railways  of  the  kingdom  might  be  com])ined  into  one  concern. 

In  a  case  decided  in  the  same  court  only  two  years  later,  a  traffic 
agreement  between  two  railway  companies  for  dividing  earnings  and 
for  avoiding  competition  was  held  to  be  not  void  as  against  public 
policy.^ 

It  appears  that  at  the  present  time  such  amalgamations  must  receive 
the  approval  of  the  court  of  the  Railway  and  Canal  Commission.  A 
proposed  working  agreement  between  the  Great  Northern  Railway 
Co.  and  the  Great  Central  Railway  Co.  was  not  approved  by  the  said 
court  in  1908  on  the  ground  that  it  was  ultra  vires  under  the  charters. 
Tliis  decision  was  affirmed  by  the  court  of  appeals.* 

Patents. — An  amendment  of  the  patent  laws  in  1907  declares  cer- 
tain restrictions  attached  to  the  sale,  lease,  or  use  of  patented  articles, 
etc.,  to  be  in  restraint  of  trade  and  null  and  void.^ 

123  Q.  B.  D.  598;  (1892)  A.  C.  25. 

2  Charlton  v.  The  New  Castle  &  Carlisle  Ry.  Co.  and  the  Northeastern  Ry.  Co.,  5  Jurist,  N.  S.,  1096. 

3  Hare  v.  The  London  &  Northwestern  Ry.  Co.,  l.soi,  7  Jurist,  N.  S.,  1145. 
*  Twentieth  Annual  Report  of  the  Railway  and  Canal  Commission,  1908. 

6  Patent  and  Designs  (amendment)  Act,  1907,  chap.  28,  sec.  24  (see  p.  539). 


TRUST   LAWS  AND  UNFAIR  COMPETITION".  239 

Section  3.  Canada. 

There  are  several  statutes  in  Canada  which  have  a  direct  application 
to  trusts  or  combinations  to  control  the  market.  These  are  found 
in  the  Criminal  Code,  the  customs  laws,  the  patent  laws,  the  inland- 
revenue  laws,  and  in  the  recent  Combines  Investigation  Act  of  1910. 

Criminal  Code. — Under  a  law  enacted  in  1889  (52  Vic,  chap.  41) 
certain  forms  of  monopolistic  combinations  were  prohibited.  Later 
this  law  was  slightly  amended  and  now  provides  (Criminal  Code  of 
1908,  sec.  498),  in  part,  as  follows: 

Every  one  is  guilty  of  an  indictable  offense  and  liable  to  a  penalty  not  exc;eeding 
$4,000  and  not  less  than  $200,  or  to  two  years'  imprisonment,  or,  if  a  corporation,  is 
lialjle  to  a  penalty  not  exceeding  $10,000  and  not  less  than  $1,000,  who  conspires,  com- 
bines, agrees,  or  an-anges  with  any  other  person,  or  with  any  railway,  steamship, 
steamboat,  or  transportation  company — 

(ft)  To  unduly  limit  the  facilities  for  transporting,  producing,  manufacturing,  sup- 
plying, stormg,  or  dealing  in  any  article  or  commodity  which  may  be  subject  of  trade 
or  commerce ;  or, 

(h)  To  restrain  or  injure  trade  or  commerce  in  relation  to  any  such  article  or  com- 
modity; or, 

(c)  To  unduly  prevent,  limit,  or  lessen  the  manufactiu-e  or  production  of  any  such 
article  or  commodity,  or  to  unreasonably  enhance  the  price  thereof;  or, 

(d)  To  unduly  prevent  or  lessen  competition  in  the  production,  manufactiure,  pur- 
chase, barter,  sale,  transportation,  or  supply  of  any  such  article  or  commodity,  or  in 
the  price  of  insurance  upon  person  or  property. 

Specifically  excepted  from  this  law  are  combinations  of  workmen 
or  employees  for  their  reasonable  protection. 

In  this  connection  it  may  be  noted  that  the  courts  have  decided 
that  combmations  of  em])loyers  to  oppose  such  combinations  of 
workmen  are  not  prohibited.^ 

A  number  of  convictions  have  resulted  from  criminal  prosecutions 
under  this  law,^  and  it  has  also  been  successfully  pleaded  in  defense 
of  civil  actions.^  In  these  crimmal  cases  the  condenmations  in  each 
instance  were  obtained  against  members  of  trade  associations  which, 
among  other  things,  attempted  to  fix  prices.  The  prosecution  of  a 
grain  broker  as  a  member  of  a  grain  exchange  resulted  in  acquittal,* 
as  also  one  against  a  merrft^er  of  a  grocers'  association  which  estab- 
lished rules  regarding  resale  prices  and  the  sale  of  goods  by  manufac- 
^rers  through  regular  wholesalers  and  discountenanced  dealing  with 
manufacturers  who  sold  to  irregular  wholesalers.^  On  the  other 
hand,  agreements  for  fixing  resale  prices  were  successfully  pleaded  in 
defense  of  a  civil  action  in  one  of  the  cases  already  referred  to  (Wam- 

1  Le  Fobvre  v.  Knott,  13  Canadian  Criminal  Cases,  223  (1907). 

2  Rex  V.  Elliott,  9  Ont.  Law  Rep.,  648  (1905);  Rex  v.  Master  numbers'  Association,  14  Ont.  Law  Rep., 
295  (1907);  Rex  v.  McMichael,  10  Ont.  WTcly.  Rep.,  208  (1907);  Rex  v.  McGuire,  7  Ont.  Wkly.  Rep.,  225 
(1905);  Rex  V.  Clark,  14  Can.  Crim.  Cases,  57  (1907-8). 

3  Hately  i'.  Elliolt,  9  Ont.  Law  Hop.,  ISo  (1905);  Wiuupolo  v.  Karn,  11  Out.  Law  Rep.,  619  (1906). 
<  Rex  V.  Gage,  13  Can.  Crim.  Cases,  415  (19(J7). 

6  Rex  V.  Beckett,  20  Ont.  Law  Rep.,  401  (1910). 


240  REPORT  or    THE   COMMISSIONER  OF   CORPORATIONS. 

pole  V,  Earn).  In  a  civil  action  for  the  enforcement  of  a  pooling 
contract  between  two  merchants,  the  court  of  appeals  for  Manitoba 
held  that  the  agreement  was  not  void  at  common  law,  and  that  the 
statutes  made  only  such  acts  unla^vful  as  were  invalid  at  common 
law,  but  tliis  decision  was  reversed  by  the  supreme  court  of  Canada, 
which  held  that  the  agreement  was  made  unlawful  by  the  statutes.' 
In  an  action  to  recover  money  advanced  and  interest  thereon,  the 
evidence  disclosed  an  agreement  whereby  a  cordage  company  obtamed 
control  of  the  manufacture  of  twme  at  a  prison  with  the  result  that 
(1)  a  monopoly  was  established  m  the  production  of  twine,  and  the 
prices  of  twme  artificially  fixed,  and  (2)  a  fraudulent  decrease  made 
in  the  production  of  twme.  The  court  held  that  it  was  bound  to  take 
notice  of  this  as  a  conspiracy  injurious  to  the  public  mterest,  although 
it  was  not  covered  by  the  pleadmgs,  and  made  a  different  disposition 
of  the  clamis  of  the  parties  than  it  woidd  have  done  if  the  transaction 
had  been  lawful.^ 

Customs  tariff  law. — A  provision  was  made  in  the  customs 
tariff  law  of  June  29,  1897,  which  was  substantially  reenacted  in  the 
present  Customs  Tariff,  1907  (sec.  12),  to  the  effect  that  whenever 
the  governor  in  council  deems  it  in  the  public  interest  to  inquire  into 
any  alleged  combination  among  manufacturers  or  dealers  in  any  article 
to  unduly  promote  their  advantage  at  the  expense  of  the  consumers, 
a  judge  may  be  appomted  to  investigate  the  matter,  and  if  he  reports 
that  such  a  combination  exists,  the  governor  in  comicil  may  remove 
or  reduce  the  duty  in  order  to  give  the  consumer  the  benefit  of  rea- 
sonable competition. 

In  1902,  in  accordance  with  the  provisions  of  the 'earlier  law,  the 
customs  duty  on  news-print  paper  was  reduced  from  25  per  cent  to 
15  per  cent. 

Patent  law. — This  provides  substantially  that  if  a  patentee  does 
not  meet  the  reasonable  requirements  of  the  public  in  regard  to  the 
patented  article,  compulsory  licenses  may  be  issued  for  its  manufac- 
ture. On  refusal  of  patentee  to  comply  with  order  to  grant  license, 
a  patent  may  be  declared  void  in  judicial  proceedings.^ 

Inland-revenue  law.— By  the  act  of  August  10,  1904,  the  inland- 
revenue  law  was  so  amended  as  to  provide  that  the  license  of  any 
distiller,  rectifier,  compounder,  brewer,  or  maltster,  manufacturer  of 
tobacco  or  cigars,  or  bonded  manufacturer  may  be  revoked  by  the 
minister  of  inland  revenue  if  the  licensee  (1)  makes  a  sale  of  such 
goods,  or  consigns  them  for  sale  upon  commission,  subject  to  the  con- 
dition that  the  purchaser  or  consignee  shall  not  sell  or  deal  in  similar 
goods  produced  by  or  obtained  from  any  other  manufactm-er  or  dealer; 

1  Weidman  v.  Shragge,  46  Can.  Supreme  Court  Reports,  1  (1912). 

2  Consumers  Cordage  Co.  v.  Coimolly,  31  Can,  Supreme  Coiurt  Reports,  244  (1901). 

3  R.  S.,  1906,  chap.  09;  sees.  43^5. 


TKUST   LAWS  AND  UNFAIR  COMPETITION.  241 

or  (2)  makes  a  sale  of  such  goods,  or  consigns  them  for  sale  upon 
commission,  to  another  person  upon  such  terms  as  would,  in  their  appU- 
cation,  give  more  profit  to  the  piuchaser  or  consignee  if  he  should  not 
sell  or  deal  in  goods  of  a  like  kind,  produced  by  or  obtained  from  any 
other  manufacturer  or  dealer.  The  decision  of  the  minister  of  inland 
revenue  is  final  as  to  the  facts  in  the  case. 

This  act  was  passed  as  a  result  of  an  investigation  by  a  royal  commis- 
sion appointed  in  1903  under  the  provisions  of  chapter  114,  Revised 
Statutes  of  Canada,^  for  the  purpose  of  inquiring  into  an  exclusive  con- 
tract system  alleged  to  be  then  employed  by  the  American  Tobacco 
Co.  of  Canada,  and  the  Empire  Tobacco  Co.  (Ltd.).  It  was  charged 
that  the  object  and  effect  of  the  system  was  to  prevent  those  who  dealt 
in  goods  made  by  these  companies  from  selling  those  of  other  manufac- 
turers, thus  creating  a  monopoly.  The  commission  reported  that 
such  a  contract  system  existed  in  the  cigarette  and  tobacco  trade  in 
Canada;  that  such  contracts  were  not  illegal  either  under  the  common 
law  or  any  then  existing  statute,  and  that  as  a  result  other  manu- 
facturers were  placed  at  a  disadvantage.  The  act  apparently  has 
never  been  invoked. 

Combines  Investigation  Act. — The  Combines  Investigation  Act 
was  passed  on  May  4,  1910  (9-10  Edward  VII,  chap.  9).^  A  combine 
is  defined  in  section  2  as  follows: 

"Combine"  means  any  contract,  agreement,  arrangement  or  combination  which 
has,  or  is  designed  to  have,  the  effect  of  increasing  or  fixing  the  price  or  rental  of  any 
article  of  trade  or  commerce  or  the  cost  of  the  storage  or  transportation  thereof,  or  of 
the  restricting  competition  in  or  of  controlling  the  production,  manufacture,  trans- 
portation, storage,  sale  or  supply  thereof,  to  the  detriment  of  consumers  or  producers 
of  such  article  of  trade  or  commerce,  and  includes  the  acquisition,  leasing  or  otherwise 
taking  over,  or  obtaining  by  any  person  to  the  end  aforesaid,  of  any  control  over  or 
interest  in  the  business,  or  any  portion  of  the  business,  of  any  other  person,  and  also 
includes  what  is  known  as  a  trust,  monopoly  or  merger. 

Briefly  stated,  the  method  of  mvestigation  is  as  follows:  Wliere 
six  or  more  British  subjects  of  fuU  age  and  residents  of  Canada 
beheve  that  a  combine  exists  and  that  prices  have  been  enlianced 
or  competition  restricted  thereby  to  the  detriment  of  consumers  or 
producers,  they  m.ay  make  appHcation  m  wi'itmg  to  a  judge  for  an 
order  dh-ectbig  an  investigation,  setting  forth  in  the  application  the 
particulars  of  the  case.  Upon  such  application  the  judge  is  required 
to  give  a  hearing,  and  if  it  appears  to  him  that  there  are  reasonable 
grounds  for  the  charge  and  that  it  is  in  the  public  interest  to  hold  an 
investigation,  he  shall  order  one  to  be  made  by  a  board.     Such  board 

1  This  law  is  now  chap.  104,  R.  S.,  1906.  It  provides  for  investigation  by  the  governor  in  council  into  any 
matter  connected  with  the  good  government  of  Canada  or  the  conduct  of  any  part  of  the  public  busines?, 
and  for  the  enforcement  of  attendance  of  witnesses  and  compellinj;  of  evidence. 

a  The  text  of  this  law  is  given  iu  Exhibit  A  of  this  report.    See  p.  737. 

30035°— 10 10 


242  EEPOET  OF   THE   COMMISSIONER  OF   COEPOEATIONS. 

consists  of  three  persons,  one  nominated  by  the  comphiinants,  one 
by  the  parties  complained  of,  and  the  third  is  a  judge  chosen  by  the 
other  two.  This  board  has  the  power  to  summon  witnesses  and  to 
compel  the  production  of  books  and  papers.  The  report  of  the  find- 
ings of  the  board  are  published  in  The  Canada  Gazette. 

In  addition  to  the  pubHcity  thus  effected,  additional  remedial 
action  may  be  taken,  namely,  removal  or  reduction  of  customs 
duties,  revocation  of  letters  patent,  and  criminal  prosecution.  Re- 
garding the  fii"st-named  remedy,  the  provisions  are  substantially  the 
same  as  those  described  above  (p.  240)  under  the  customs  tariff. 

The  prohibitions  of  the  Criminal  Code,  given  above  (p.  239),  are 
substantially  reiterated  in  this  act  in  section  23  which,  however, 
provides  different  penalties : 

Any  person  reported  by  a  Board  to  have  been  guilty  of  unduly  limiting  the  facili- 
ties for  transporting,  producing,  manufactining,  sujiplying,  storing  or  dealing  in  any 
article  which  may  be  a  subject  of  trade  or  commerce;  or  of  restraining  or  injiuing 
trade  or  commerce  in  relation  to  any  such  article;  or  of  unduly  preventing,  limiting 
or  lessening  the  manufacture  or  production  of  any  such  article;  or  of  unreasonably 
enhancing  the  price  thereof;  or  of  \mduly  preventing  or  lessening  competition  in  the 
production,  manufacture,  purchase,  barter,  sale,  transportation,  storage  or  supply  of 
any  such  article,  and  who  thereafter  continues  so  to  offend,  is  guilty  of  an  indictable 
offence  and  shall  be  liable  to  a  penalty  not  exceeding  $1,000  and  costs  for  each  day 
after  the  expiration  of  10  days,  or  such  further  extension  of  time  as  in  the  opinion 
of  the  Board  may  be  necessary,  from  the  date  of  the  publication  of  the  report  of  the 
Board  in  The  Canada  Gazette  during  which  such  person  so  continues  to  offend. 

A  patent  may  be  revoked  if  the  patentee  is  declared  to  have  used 
his  privileges  to  do  substantially  the  things  prohibited  in  section  23 
just  quoted,  and  this  finding  is  proved  by  the  evidence  in  subsequent 
judicial  proceedings. 

The  only  proceedings,  apparently,  under  this  act  were  in  the  case  of 
Drouin  et  al.  and  United  Shoe  Machinery  Co.  of  Canada,  which  were 
begim  November  10,  1910.  The  board  made  a  report  on  October 
18,  1912,  which  found  that  the  leases  of  the  defendant  unduly  re- 
stricted competition  in  the  manufacture,  sale,  etc.,  of  shoe  machinery 
in  Canada.*     No  further  action  appears  to  have  been  taken. 

Railway  Act  of  1903. — Although  the  regulation  of  railways  is 
somewhat  apart  from  the  present  subject,  it  is  interesting  to  note 
that  the  Railway  Act  of  1903  (3  Edward  VII,  chap.  58)  estabHshed  a 
board  of  railway  commissioners  for  Canada,  and  provided,  among 
other  thmgs,  that  the  purchasing  or  leasing  of  railway  companies 
must  be  approved  by  the  governor  general  (sec.  281).  It  is  further 
provided  that  no  railway  company  shall,  in  the  future,  acquire  the 
stocks  or  bonds  of  other  railway  companies  in  Canada  (sec.  290). 

1  See  The  Labour  Gazette,  November,  1912,  p.  466. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  243 

Section  4.  Australia. 

Several  laws  have  been  passed  by  the  Commonwealth  of  Australia 
either  aimed  especially  at  combinations  or  containing  important 
provisions  with  respect  to  them,  and  also  an  act  for  an  interstate 
commission  with  strong  powers  over  both  transportation  and  in- 
dustry. 

Prior  to  the  enactment  of  these  laws,  two  cases  affecting  combina- 
tions were  decided  under  the  common  law.  In  each  of  them  mem- 
bers of  a  trade  association,  which  fixed  the  prices  of  the  commodity 
they  dealt  in,  prevented  a  nonmember  from  getting  supplies  of 
goods  because  he  sold  at  lower  prices.  In  one  case^  it  was  held  that 
no  legal  right  of  the  plaintiff  had  been  infringed,  while  in  the  other  ^ 
it  was  held  that  an  action  for  conspiracy  would  lie  against  the  mem- 
bers of  the  association. 

Australian  Industries  Preservation  Act,  1906-1910. — The 
Australian  Industries  Preservation  Act  is  by  far  the  most  important 
law  relating  to  combinations.^  It  was  first  enacted  in  1906  and 
amended  several  times.  It  aims  especially  at  the  "repression  of 
monopohes"  and,  as  germane  thereto,  it  also  aims  at  the  ''preven- 
tion of  dumping."  The  principal  provisions  of  the  law  as  amended, 
which  is  long  and  complicated,  are  briefly  summarized  in  the  follow- 
ing paragi'aphs: 

Any  person  who  enters  into  any  contract  or  engages  in  any  com- 
bmation  in  relation  to  commerce  with  other  countries  or  among  the 
States  (a)  in  restraint  of  or  with  the  intent  to  restrain  commerce, 
or  (h)  to  the  injmy  of  or  v/ith  the  intent  to  injure  by  means  of  unfair 
competition  any  Austrahan  industry  advantageous  to  the  Com- 
monwealth, is  guilty  of  an  offense,  and  any  contract  in  contravention 
of  this  prohibition  is  void. 

A  person  proceeded  against  under  the  above  provision,  however,  can 
defend  the  act  complained  of  by  showing  (a)  that  the  restraint  was 
"not  to  the  detriment  of  the  public,"  and  (h)  that  the  restraint  in 
question  was  "not  um-easonable."  Unfair  competition  is  to  be  inter- 
preted with  respect  to  the  circumstances  and  the  follo^v-ing  acts  are 
deemed  unfair  unless  proved  not  so:  (a)  If  the  defendant  is  a  "com- 
mercial trust"  (i.  e.,  a  combmation  of  persons  or  corporations  by 
means  of  a  trust  deed,  an  agreement,  a  board  of  management,  or 
like  means) ;  (6)  if  the  competition  would  result  in  inadequate  remu- 
neration for  labor  in  the  Australian  mdustry;  (c)  or  disorganize  the 
same;  (d)  or  if  the  defendant  gives  rebates,  etc.,  on  condition  of  ex- 
clusive patronage.     Furthermore,  in  considering  whether  the  com- 

I  Rea  V.  Buckland,  U  Wastem  Australian  Law  Kept.  2  (1908). 

«  Taffs  V.  Beesley,  10  Australian  Law  Tiinas,  59  (1894). 

3  The  text  of  this  law  is  given  in  Eidiibit  B  of  this  report.    See  p.  746. 


244  EEPOET   OF   THE   COMMISSIONER  OF   CORPORATIONS. 

petition  is  unfair,  regard  shall  be  had  to  the  question  whether  the 
AustraUan  industry  is  managed  with  reasonable  efficiency. 

Any  person  who  monopolizes  or  attempts  or  conspires  to  monop- 
olize commerce  with  other  countries  or  among  the  States  is  guilty 
of  an  indictable  offense,  and  every  contract  made  in  contravention 
of  this  provision  is  void.  Instead  of  proceeding  by  indictment,  the 
attorney  general  may  bring  a  civil  action  for  recovery  of  the  fines 
imposed,  without  jury  trial. 

The  giving  of  rebates,  etc.,  on  condition  of  various  specified  forms 
of  exclusive  dealing,  is  also  made  an  offense,  and  any  contract 
made  in  contravention  of  this  provision  is  void.  A  person  pro- 
ceeded against  under  this  rule  may  defend  the  act  complained  of 
by  showing  that  it  was  "not  to  the  detriment  of  the  public,"  not 
unfair  competition,  or  not  injurious  to  any  Australian  industry. 

The  refusal  to  deal  with  a  person  except  under  disadvantageous 
conditions  because  such  person  deals  with  some  other  person  or  with 
persons  not  belonging  to  a  commercial  trust,  is  made  an  offense  in 
certain  cases. 

Any  person  injured  by  any  of  the  foregoing  forbidden  acts  may 
sue  without  jury  trial  for  treble  damages  for  injury  incurred. 

Persons  questioned  in  proceedings  under  this  law  can  not  refuse 
to  answer  because  it  would  incriminate  them,  but  are  given  certain 
immunities  from  prosecution  in  connection  with  such  matters,  except 
in  case  of  perjury. 

Declaration  to  attorney  general  absolving  criminal  intent. — Any  per- 
son who  is  a  party  to  a  contract,  combination,  etc.,  may  declare 
the  facts  and  purposes  to  the  attorney  general,  and  publish  the 
same  in  the  Gazette.  The  attorney  general  may  at  any  time 
send  a  notice  to  the  declarant  that  he  regards  such  contract  or  com- 
bination in  restraint  of  trade,  etc.  If  before  the  declarant  receives 
such  notice  a  proceeding  is  brought  against  him,  liis  prior  declaration 
absolves  him  of  unlawful  intent,  provided  it  is  a  true  and  complete 
statement.     This  provision,  however,  has  not  yet  been  availed  of. 

In  proceedings  for  restraint  of  trade,  attempt  to  monopolize, 
exclusive  dealing,  refusal  to  deal,  etc.,  described  above,  the  aver- 
ments of  the  prosecution  are  presumed  to  be  proved  in  absence  of 
proof  to  the  contrary,  except  {a)  with  respect  to  intent  and  (&)  in 
proceecUngs  by  indictment. 

The  third  part  of  this  act,  which  deals  with  the  prevention  of 
dumping,  is  of  present  interest  in  connection  -with  unfair  competition 
and  this  part  of  the  law,  as  well  as  other  parts  which  have  reference 
to  unfair  competition,  are  considered  in  some  detail  in  Chapter  X. 
(See  p.  551.)  It  is  worthy  of  particular  note  that  the  prevention  of 
dumping  is  sought  here  through  the  antimonopoly  statutes  rather  than 
through  the  laws  relating  to  customs  duties. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  245 

So  far  as  known,  this  act  was  made  the  basis  for  the  prosecution 
of  a  trust  only  in  the  coal  vend  case,  which  is  discussed  below.  The 
lower  court  held  that  the  combination  had  struck  down  competition 
and  that  it  was  obnoxious  to  the  prohibition  against  monopoly.  A  fine 
of  several  hundred  thousand  dollars  was  imposed.  Tliis  judgment  was 
appealed  to  the  High  Court,  where  it  was  reversed  and  finally  went  to 
the  judicial  committee  of  the  Privy  Council,  the  supreme  court  of 
the  British  Empire,  where  the  judgment  of  the  High  Court  was 
afhrmed  in  1913.  ■ 

Coal  vend  case.^ — This  was  an  action  to  recover  pecuniary  damages 
from  certain  colUery  and  shipping  companies  and  others  under  the 
Australian  Industries'  Preservation  Act  for  alleged  breaches  thereof  ^ 
and  for  an  injunction  against  further  violation  of  the  law.  The  basis 
of  the  proceedings  was  an  agreement  between  the  colUery  companies 
and  the  sliipping  companies  of  the  following  general  character:  The 
colUery  companies  agreed  to  scU  to  the  shipping  companies  all  the 
coal  the  latter  required  in  interstate  trade,  at  prices  to  be  fixed 
annually  by  the  colHery  companies.  The  vendors  agreed  to  sell  coal 
for  interstate  trade  to  no  other  parties  while  the  purchasers  agreed  to 
buy  such  coal  only  from  the  said  vendors.  The  shipping  companies 
bound  themselves  not  to  sell  the  coal  at  higher  prices  than  those 
specified.  It  was  also  shown  in  evidence  that  the  colUery  companies 
had  an  agreement  among  themselves  whereby  the  output  of  each 
colUery  was  apportioned  and  the  selUng  price  fixed  by  a  governing 
board.  Sales  in  excess  of  allotments  obUged  the  party  making  them 
to  pay  certain  fines  to  a  common  fund.  The  coUicry  companies  also 
had  an  agreement  with  the  coal  miners  whereby  the  wages  of  miners 
for  each  year  varied  with  the  increase  or  decrease  in  the  "declared" 
or  probable  price  of  coal,  according  to  a  fixed  scale;  the  ''declared" 
price  was  jointly  determined  in  advance,  and  might  not  bo  actually 
realized.  The  Crown  contended  that  an  unenforceable  contract  in 
restraint  of  trade  was  necessarily  to  the  detriment  of  the  pubUc, 
within  the  meaning  of  sections  4  and  7  of  the  act.  The  court  (Privy 
Council)  denied  this  claim,  and  said  in  part  (p.  800) : 

It  was  strongly  urged  by  counsel  for  the  Crown  that  all  contracts  in  restraint  of 
trade  or  commerce  which  arc  unenforceable  at  common  law,  and  all  combinations  in 
restraint  of  trade  or  commerce  wluch  if  embodied  in  a  contract  would  be  unenforce- 
able at  common  law,  must  be  detrimental  to  the  public  witliin  the  meaning  of  the 
Act,  and  that  those  concerned  in  such  contracts  or  combinations  must  be  taken  to 
have  intended  this  detriment.  Their  Lordships  cannot  accept  Ihis  proposition.  It 
is  one  Hung  to  hold  that  a  particular  contract  cannot  be  enforced  l)ecause  it  I>elongs 
to  a  class  of  contracts  the  enforcement  of  wluch  is  not  considered  to  be  in  accordance 
with  pulilic  policy,  and  quite  a  different  thing  to  infer  as  a  fact  that  the  parties  to  such 

>Attorney  General  of  the  Commonwealth  of  Australia  t>.  Adelaide  Steamship  Co.  (Ltd.)  et  al.  (Privy 
Counril),  Law  Roports,  Appeal  Cases,  1913,  p.  7SL 
2 Sec.  1,  siibsoc.  1  (a),  sec.  7,  subsec.  1,  and  sec.  9. 


246  EEPOET   OF    THE   COMMISSIONER   OF   COKPOEATIONS. 

contract  had  an  intention  to  injnre  the  public.  It  is  quite  common  in  a  contract  of 
service  to  find  a  clause  restricting  the  area  in  which  the  employee  may  carry  on  a 
business  similar  to  that  of  his  employer  after  the  termination  of  the  service,  and  such 
area  is  often  held  too  wide  for  the  restraint  to  be  enforceable.  In  such  cases  both 
parties  have  as  a  rule  bargained  with  a  single  view  to  their  own  interests,  though  in 
the  opinion  of  the  Court  they  have  been  mistaken  as  to  the  area  of  the  restraint  required 
iji  their  OAvn  interest,  but  it  would  be  wrong  to  infer  from  tliis  that  they  had  any  inten- 
tion of  injuring  the  public.  It  would  be  equally  wrong  to  infer  that  such  a  sinister 
intention  must  have  existed  in  cas3s  of  trade  combinations,  such  as  that  which  was  the 
subject  of  the  decision  in  Hilton  v.  Eckersley.' 

The  court  held,  nevertheless,  that  all  these  agreements  were  in 
restraint  of  trade,  without  stating  whether  they  were  enforceable  or 
not  at  the  common  law. 

The  word  "pubUc"  in  the  phrase  "detriment  to  the  public"  was 
also  defined  to  include  all  classes — producers  and  distributers,  as  well 
as  consumers. 

The  court  declared  that  in  order  to  make  out  a  case  the  Government 
must  show  either  an  intent  to  do  a  proliibited  act,  or  that  the  acts  done 
were  of  such  a  character  as  to  leave  no  doubt  of  the  intent. 

The  court  denied  that  the  nature  of  the  agreement,  the  facts  as  to 
prices  obtained,  or  the  competitive  methods  used,  gave  evidence  of 
an  intent  to  restrain  or  monopolize  trade  to  the  detriment  of  the 
public  within  the  meaning  of  the  law.  While  prices  in  1906  had  been 
as  low  as  7s.  6d.  f .  o.  b.  Newcastle,  and  had  subsequently  been  raised 
to  lis.  and  maintained  there,  the  court  thought  that  the  prices  in 
1906  had  been  shown  to  be  unduly  low  on  account  of  "cut-tlu'oat" 
competition,  and  that  the  increase  was  not  unreasonable,  taldng  into 
consideration  the  increase  in  wages  paid  and  reasonable  rates  of  profit 
on  investment.  The  court  also  called  attention  to  the  fact  that  the 
prohibitions  in  question  were  expressly  directed  to  acts  destructive 
of  Australian  industries.  In  this  connection  it  noted  also  that  the 
prices  of  coal  exported  which  met  international  competition  were  not 
lower  than  for  interstate  trade.  The  agreement  for  exclusive  mutual 
dealing  between  the  colliery  and  shipping  companies  was  also  held 
by  the  court  to  afford  no  basis  for  action. 

The  Patents  Act,  1903.—The  features  of  the  Patents  Act  of  1903, 
as  amended  in  1906  and  1909,  wliich  are  of  interest  are  the  provisions 
for  compulsory  license  and  the  restrictions  placed  on  contracts  made 
by  patentees  with  respect  to  the  obligation  to  use  or  not  to  use  non- 
patented  articles. 

On  petition  to  the  Commissioner  of  Patents  by  an  interested  party 
declaring  that  the  reasonable  requirements  of  the  public  with  respect 
to  a  patented  article  are  not  satisfied,  the  question  may  be  sub- 
mitted to  the  courts,  which  rtiay  grant  compulsory  licenses  or 
revoke  the  patent  under  certain  conditions.     The  term  ''reasonable 

-— — — ■ ■ . ■    ^    '■ ■ — — »  -  wturn 

16E.  &  B.,  47. 


TRUST   LAWS  AND   UNFAIE   COMPETITION.  247 

requirements"  is  particularly  defined  in  the  law.  Among  other 
things,  the  patentee  is  held  to  be  at  fault  if  he  has  failed  to  grant 
licenses  on  reasonable  terms,  with  the  result  that  any  existmg  trade 
or  industry  or  the  establishment  of  any  new  trade  or  industry  in 
Australia  is  unfairly  prejudiced,  or  the  demand  for  the  patented 
article  is  not  reasonably  met. 

Patentees  are  prohibited  from  inserting  conditions  in  contracts  of 
sale,  lease,  or  license,  which  would  prevent  the  purchaser,  lessee,  or 
licensee  from  using  another  article,  whether  patented  or  not,  supplied 
by  another  person,  or  to  require  said  purchaser,  etc.,  to  acquire  from 
the  patentee  any  articles  not  protected  by  patent,  and  any  such  con- 
ditions are  made  null  and  void.  This  proliibition  does  not  apply, 
however,  if  it  is  proved  that  the  purchaser,  etc.,  had  the  option  of 
purchasing  or  acquiring  the  patented  article  on  reasonable  terms 
without  such  conditions,  or  if  the  purchaser,  etc.,  had  the  right  to 
abrogate  the  conditions  in  the  contract  aftei"  three  months  notice  on 
payment  of  such  sum  as  may  be  fixed  by  an  arbitrator  named  by  the 
Government. 

Interstate  Commission  Act,  1912. — A  law  was  enacted  on  De- 
cember 24,  1912,  providing  for  an  Interstate  Commission.^  The  prin- 
cipal provisions  of  this  law  are  substantially  as  follows: 

The  Interstate  Commission  consists  of  tliree  members,  one  of  whom 
is  caUed  the  Cliief  Commissioner,  appointed  by  the  governor  general 
for  terms  of  seven  years  each.  It  is  constituted  a  body  corporate 
with  perpetual  succession,  and  may  sue  or  be  sued.  Two  commis- 
sioners constitute  a  quorum,  and  a  majority  of  the  commission  shall 
make  the  decisions. 

The  general  investigating  powers  of  the  commission  are  stated  as 
follows : 

Tho  Commission  shall  be  charged  with  the  duty  of  investigating,  from  time  to  time, 
all  matters  which  in  tho  opinion  of  tho  Commission  ought  in  the  public  interest  to  be 
investigated  affecting — (a)  the  production  of  and  trade  in  commodities;  (b)  the  encour- 
agement, impro-^^ement,  and  extension  of  Australian  industries  and  manufactures; 
(c)  markets  outside  Australia,  and  tho  opening  up  of  external  trade  generally;  (d) 
the  effect  and  operation  of  any  Tariff  Act  or  other  legislation  of  the  Commonwealth  in 
regard  to  revenue,  Australian  manufactures,  and  industry  and  trade  generally;  (e) 
prices  of  commodities;  (f)  profits  of  trade  and  manufacture;  (g)  wages  and  social  and 
indiLstrial  conditions;  (h)  labour,  employment,  and  unemployment;  (i)  bounties  paid 
by  foreign  countries  to  encourage  shipping  or  export  trade;  (j)  population;  (k)  immi- 
gration ;  and  (1)  other  matters  referred  to  the  Commission  by  either  House  of  the  Parlia- 
ment, by  resolution,  for  investigation. 

More  detailed  description  is  given  of  the  matters  tho  commission 
may  investigate  respecting  waterways  and  the  use  of  water  for  irriga- 
tion, etc. 

I  The  text  of  this  law  is  given  in  Exhibit  C  of  this  report.    See  p.  756. 


248  KEPOET  OF   THE   COMMISSIONER   OF   COEPOEATIONS. 

The  law  makes  special  provisions  regarding  rates  and  discrimina- 
tions therein  with  respect  to  transportation  in  interstate  traffic, 
affecting  both  private  and  State  railways.  Unreasonable  or  unjust 
rates  ara  prohibited.  State  railways  may  not  make  rates  wliich 
unjustly  discriminate  against  any  State.  In  interpreting  the  law 
the  commission  may  consider  the  financial  responsibihties  of  the 
railways  and  the  necessities  of  development  of  their  territory. 

The  act  contains  the  following  prohibition  also*: 

No  common  carrier  or  State  Authority,  other  than  a  State  Railway  Authority,  shall, 
in  respect  of  interstate  commerce,  or  so  as  to  affect  such  commerce — (a)  make  or  give 
any  undue  ot  unreasonable  preference  or  advantage  to  any  particular  person,  State, 
locality,  or  description  of  traffic;  or  (b)  sul)ject  any  particular  person.  State,  locality, 
or  description  of  traffic  to  any  undue  or  unreasonable  prejudice  or  disadvantage. 

Where  such  discrimination  is  made,  the  burden  of  proving  its 
reasonableness  rests  on  the  carrier  or  State  authority  maldng  it. 
The  commission  is  given  authority  to  decide  the  matter. 

The  commission  is  given  judicial  power  as  a  court  of  record,  as 
follows : 

The  Commission  shall  have  jurisdiction  to  hear  and  determine  any  complaint,  dis- 
pute, or  question,  and  to  adjudicate  upon  any  matter  arising  as  to — (a)  any  preference, 
advantage,  prejudice,  disadvantage,  or  discrimination  given  or  made  by  any  State 
or  by  any  State  Authority  or  by  any  common  earner  in  contravention  of  this  Act,  or  of 
the  pro\dsions  of  the  Constitution  relating  to  trade  and  commerce  or  any  law  made 
thereunder;  (b)  the  justice  or  reasonableness  of  any  rate  in  respect  of  interstate  com- 
merce, or  affecting  such  commerce;  (c)  anything  done  or  omitted  to  be  done  by  any 
State  or  by  any  State  Authority  or  by  any  common  carrier  or  by  any  person  in  con- 
travention of  this  Act  or  of  the  provisions  of  the  Consititution  relating  to  trade  or  com- 
merce or  any  law  made  thereunder. 

"Commerce"  is  defined  in  this  act  to  include  "trade  and  trafhc  of 
all  descriptions  by  land  or  water."  "Traffic"  is  defined  to  include 
"the  transportation  of  passengers  and  of  goods."  "Trade"  is  not 
defined,  and  it  does  not  appear  from  the  context  whether  it  is  sub- 
stantially synonymous  with  traffic  or  includes  other  kinds  of  com- 
merce than  transportation.  Nothing  specifically  appears  in  the  act 
to  show  that  these  judicial  powers  cover  other  matters  than  transpor- 
tation. 

The  commission  is  given  broad  powers  of  rehef;  among  other 
things,  it  may  (1)  award  damages;  (2)  order  that  a  party  be  restramed 
by  injunction;  (3)  declare  a  regulation,  or  any  part  thereof,  void; 
(4)  name  a  maximum  rate  for  any  service;  (5)  name  both  a  maxi- 
mum and  a  minimum  rate;  (6)  name  a  maximum  or  mmimum  of 
difference  between  two  rates ;  (7)  determine  the  division  of  a  joint  rate; 
(8)  require  amendments  of  traffic  rules  and  regulations;  (9)  fix 
pecuniary  penalties  for  disobedience  of  its  orders. 

The  commission  has  full  jurisdiction  to  hear  and  determine  all 
matters,  whether  of  lav/  or  of  fact,  with  the  powers  of  a  high  court. 


TRUST   LAWS  AND   UNFAIR  COMPETITION".  249 

It  may  review,  rescind,  or  vary  any  order.     Appeal  may  be  taken  as 
follows : 

No  appeal  shall  lie  from  the  Commission  except  an  appeal  to  the  High  Court  on 
questions  of  law  only. 

Pending  appeal  the  orders  of  the  commission  are  not  suspended 
unless  otherwise  ordered  by  the  commission  or  the  High  Court. 

The  commission  shall  make  amiual  reports  and  reports  of  investi- 
gations and  publish  such  information  regarding  matters  investigated 
as  it  thinks  fit.  The  chief  commissioner  may  summon  witnesses  and 
compel  the  production  of  books  and  papers,  but  evidence  given  by  a 
witness  shall  not  be  used  agamst  Mm,  "except  in  proceedings  for  an 
offence  agamst  tliis  Act,"  m  any  court.  Extensive  provisions  are 
made  regarding  -svitnesses,  evidence,  contempt  of  the  commission,  etc., 
which  it  is  not  necessary  to  describe  here. 

The  first  annual  report  of  this  commission  was  made  on  October 
6,  1914. 

The  first  investigation  and  report  made  with  respect  to  an  indus- 
trial combination  related  to  printers,  paper  merchants,  etc.,  and  was 
published  in  1914.^  This  report  was  made  pursuant  to  the  authority 
of  the  commission  to  investigate  tariff  questions,  the  trades  affected 
by  the  combination  being  protected  by  tariff  duties  with  respect  to 
certain  commodities.  The  commission  found  that  a  combmation 
existed  among  most  of  the  printers  in  the  State  of  Victoria  with 
respect  to  prices  to  be  charged  for  printing;  that  they  had  made  a 
contract  with  paper  merchants  and  other  supphers  of  printers' 
materials  whereby  the  members  of  the  printers'  combmation  should 
purchase  exclusively  of  such  merchants,  and  the  latter  should  charge 
prices  to  noncombination  printers  25  per  cent  higher  than  to  the 
combination  printers;  that  prices  had  been  unduly  advanced  to  the 
consumer  in  consec|uence,  and  that  noncombmation  printers  had 
been  oppressively  treated.  The  commission  held  that  this  combina- 
tion was  probably  not  subject  to  the  prohibitions  of  the  Australian 
Industries  Preservation  Act,  because  it  was  not  an  interstate  com- 
bination, but  that  it  had  frustrated  the  intentions  of  Parliament 
with  respect  to  tariff  legislation  by  compellmg  noncombination 
printers  to  purchase  supplies  from  abroad.  The  commission  held 
further  that  under  the  constitution  the  problem  could  only  be  dealt 
with  by  State  legislation,  although  the  chief  commissioner  took  the 
view  that  appropriate  legislation  by  the  Australian  Parliament  with 
respect  to  the  tariff  could  provide  for  remittmg  protective  duties 
in  such  cases. 

"Report  by  the  Interstate  Commission  upon  a  pombination  (known  as  Typothetae)  betwcon  master 
priiilors,  paper  merchants  and  suppliers  of  printers'  materials  in  the  State  of  Victoria.  May  0, 1914,  Mel- 
bourne, Australia. 


250  REPOET   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

In  this  connection  it  may  be  noted  that  it  was  not  the  Interstate 
Commission  but  a  temporary  "Royal  Commission"  that  in  1914 
was  intrusted  with  the  duty  of  inquiring  into  and  reporting  on  "the 
operations  of  any  person,  combination,  or  trust  tendmg  to  create 
any  restraint  of  trade  or  monopoly  in  connection  with  the  export 
trade  of  meat  from  Australia."  In  pursuance  thereof  a  report  of  the 
Royal  Commission  on  the  meat  trade  was  issued  on  November  14, 
1914. 

Section  5.  New  Zealand. 

Several  laws  have  been  enacted  in  New  Zealand  which  are  of  interest 
in  this  connection,  the  two  most  important  bemg  the  Monopoly  Pre- 
vention Act  of  190S,  which  embodied  some  previous  legislation,  and 
the  Commercial  Trusts  Act  of  1910. 

The  Monopoly  Prevention  Act,  1908. — The  Monopoly  Prevention 
Act  substantially  combined  two  previous  acts,  namely,  the  Agricultural 
Implement,  Manufacture,  Importation,  and  Sale  Act,  1905,  and  the 
Flour  and  Other  Products  Monopoly  Prevention  Act,  1907.  The  law 
is  divided  into  two  parts,  corresponding  to  the  two  acts  mentioned 
above.  Inasmuch  as  the  first  part  of  this  act  is  chiefly  of  interest 
in  connection  with  the  question  of  unfair  competition  and  is  con- 
sidered in  Chapter  X  (see  p.  551),  it  is  unnecessary  to  consider  it  here. 

The  second  part  of  the  act  gives  to  the  governor,  on  recommenda- 
tion of  a  certain  court,  the  power  to  issue  an  order  in  council  to  remit 
the  customs  duty  on  flour.  Such  order  may  be  revoked  after  a  period 
of  three  months.  It  is  provided  that  the  court  may  from  time  to  time, 
at  the  direction  of  the  governor,  make  inquiry  into  the  wholesale 
market  price  of  flour,  and  if  it  finds  that  such  price  is  unreasonably 
high,  to  recommend  action  by  the  governor,  as  stated  above.  The 
act  declares  that  the  price  of  flour  is  unreasonably  high  under  the 
following  circumstances : 

(a)  If  the  average  price  of  flour  in  New  Zealand  is,  relatively  to  the  price  of  wheat  in 
New  Zealand,  higher  than  the  average  price  of  flour  in  Australia  relatively  to  the  aver- 
age price  of  wheat  in  Australia,  unless  in  the  opinion  of  the  Court  the  additional  price 
in  New  Zealand  is  justified  by  additional  cost  of  production;  or 

(b)  If  the  average  price  of  wheat  in  New  Zealand  has,  by  reason  of  any  combination 
among  the  holders  of  stocks  of  wheat,  or  by  reason  of  any  complete  or  partial  monopoly 
established  by  any  such  holder,  been  raised  above  the  price  which  would  be  deter- 
mined by  unrestricted  competition. 

The  provisions  as  to  tlie  power  of  tlio  governor  to  remit  duties  and 
of  the  court  to  inquire  into  the  reasonableness  of  prices  apply  also  to 
wlicat  and  potatoes,  and  the  act  lays  down  the  following  rules  in 
respect  thereto: 

*  *  *  the  price  of  wheat  shall  be  deemed  to  be  unreasonably  high  if  the  average 
wholesale  price  in  New  Zealand  has,  by  reason  of  any  combination  among  the  holders 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  251 

of  stocks,  or  by  reason  of  any  complete  or  partial  monopoly  established  by  any  such 
holder,  been  raised  above  the  price  which  would  be  determined  by  unrestricted  com- 
petition . 

*  *  *  the  price  of  potatoes  shall  be  deemed  to  be  unreasonably  high — (a)  If  the 
average  wholesale  price  in  New  Zealand  exceeds  seven  pounds  per  ton;  or  (b)  If  the 
average  wholesale  price  in  New  Zealand  has,  by  reason  of  any  combination  among  the 
holders  of  stocks  of  potatoes,  or  by  reason  of  any  complete  or  partial  monopoly  estab- 
lished by  any  such  holder,  been  raised  above  the  price  which  would  be  determined  by 
imrestricted  competition. 

The  act  specifies  seven  places  in  New  Zealand  and  three  places  in 
Australia  for  which  the  market  prices  shall  be  ascertained  in  order  to 
determine  the  respective  average  prices.  To  aid  the  court  in  deter- 
mining tlie  facts  a  special  member  for  this  purpose  is  added  to  the 
court  to  be  named  by  certain  agricultural  societies,  or  faihng  such 
nomination,  to  be  appointed  by  the  governor.  The  court  is  author- 
ized to  use  the  powers  conferred  by  the  Commissions  of  Incjuiry  Act, 

1908. 

The  Commercial  Trusts  Act,  1910. — The  Commercial  Trusts 
Act,  enacted  on  November  21,  1910,  was  partly  modeled  on  the 
Australian  Industries  Preservation  Act,  1906-1910.  The  applica- 
tion of  the  law  is  limited  to  matters  affecting  the  trade  in  the  follow- 
ing commodities  only:  Agricultural  implements,  coal,  meat,  fish, 
flour,  oatmeal  (or  other  products  of  wheat  and  oats),  petroleum  (or 
other  products  of  mineral  oil),  sugar,  and  tobacco  (including  cigars 
and  cigarettes). 

The  offenses  are  substantiall}'  as  follows: 

(a)  Every  person  commits  an  offense  who  gives  a  rebate  or  dis- 
comit,  etc.,  in  connection  with  the  sale  of  goods,  on  the  express  or 
implied  condition  that  the  person  receiving  the  same  will  deal  exclu- 
sively with  the  vendor  for  such  goods,  or  generally,  or  \\'ill  not  deal 
with  others,  or  will  become  a  member  of  a  commercial  trust  (see 
p.  252)  or  act  in  obedience  to  directions  from  such  trust.     (Sec.  3.) 

(6)  Every  person  commits  an  offense  who  refuses  to  sell  or  to  sup- 
ply another  person  either  absolutely  or  on  relatively  disadvanta- 
geous conditions,  because  he  will  not  deal  exclusively  ^\dth  such 
vendor  in  that  article,  or  generally,  or  will  not  become  a  member  of  a 
commercial  trust  or  follow  the  dh-ections  of  the  same  in  respect  to  the 
sale,  purchase,  or  supply  of  goods.     (Sec.  4.) 

(c)  Any  person  who  conspires  to  monopohze  wholly  or  partially 
the  demand  or  supply  of  goods  in  New  Zealand,  or  any  part  thereof, 
is  guilty  of  an  offense  if  such  monopoly  is  contrary  to  the  public 
interest.     (Sec.  5.) 

(d)  Every  person  commits  an  offense  wlio  sells,  supphcs,  or  offers 
goods  at  an  unreasonably  high  pnco  if  the  price  is  directl}^  or  indi- 
rectly controlled  or  influenced  by  a  commercial  trust  with  which  he  is 
or  has  been  comiected.     It  is  also  an  offense  if  he  commits  the  same 


252  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

act  at  the  suggestion  or  direction  of  a  commercial  trust,  even  though 
he  is  not  connected  therewith,  and  the  price  is  not  controlled  by  such 
trust.     (Sec.  6.) 

(e)  If  a  commercial  trust  sells,  suppUes,  or  offers  any  goods  at  a 
price  wliich  is  unreasonably  high,  every  person  who  is  a  member 
thereof  (for  defuiition  of  member  see  below),  or  if  it  is  a  corporation, 
the  corporation,  also,  commits  an  offense.     (Sec.  7.) 

(/)  Every  person  who  aids,  counsels,  or  produces  the  commission 
of  an  offense  under  this  act,  or  the  doing  of  an  act  outside  of  New 
Zealand  which  if  done  in  New  Zealand  would  be  such  an  offense,  is 
to  be  deemed  to  have  committed  such  offense.     (Sec.  9.) 

A  commeicial  trust  is  defuied  substantially  as  follows: 

Any  association  having  as  one  of  its  objects  controlhng  or  influenc- 
ing the  supply  or  demand  or  price  of  any  goods  in  New  Zealand  or 
any  part  thereof,  or  elsewhere,  or  creating  or  maintaining  a  monopoly, 
whether  complete  or  partial,  in  the  supply  or  demand  of  any  goods. 
An  association  includes  the  union  of  any  number  of  persons  under 
any  agreement  or  trust,  whether  temporary  or  permanent,  and 
whether  legally  vahd  or  not,  and  whether  including  any  scheme  of 
organization  or  common  management  or  control  or  not.  Member 
of  such  trust  includes  any  constituent  person  or  agent,  and  in  case 
the  agent  is  a  corporation,  fh'm,  or  association,  every  member  thereof. 

The  term  ''unreasonably  high  price"  is  defined  as  follows: 

For  the  purposes  of  this  Act  the  price  of  any  goods  shall  be  deemed  to  be  unreasonably 
high  if  it  produces  or  is  calculated  to  produce  more  than  a  fair  and  reasonable  rate  of 
commercial  profit  to  the  person  selling  or  supplying,  or  offering  to  sell  or  supply, 
those  goods,  or  to  his  principal,  or  to  any  commercial  trust  of  which  that  person  or 
his  principal  is  a  member,  or  to  any  member  of  any  such  commercial  trust. 

The  offenses  described  above  are  punishable  by  a  fine  of  £500 
sterling,  or  such  part  thereof  as  the  court  thinks  fit.  The  fine  is 
made  a  debt  to  the  King  and  can  be  recovered  in  civil  action,  together 
with  costs. 

In  addition  to  the  penalty  of  fine  the  Supreme  Court  may  grant  an 
injunction  against  the  continuance  or  repetition  of  the  offense. 

The  first  case  decided  under  this  law,  and  the  only  one  which  has 
been  noted,  was  Merchants'  Association  of  New  Zealand  v.  the  King.* 

The  Merchants'  Association  of  New  Zealand  fixed  rules  regard- 
ing the  trading  methods  of  its  members  with  respect  to  various 
commodities,  and  in  particular  sugar.  The  Colonial  Sugar  Co. 
(Ltd.)  was  the  only  refiner  of  sugar  in  New  Zealand,  and  produced 
practically  all  the  refined  sugar  consumed  there.  After  the  passage 
of  the  Commercial  Trusts  Act  in  1910  the  sugar  company  established 
a  scale  of  discounts  which  allowed  higher  discounts  for  larger  quan- 

1  Merchants'  Association  of  New  Zealand  (Inc.)  et  al.  v.  U.  M.  the  King,  Court  of  Appeal,  32  New  Zea- 
land Law  Kept.  1233  (1913). 


TEUST   LAWS   AND   UNFAIR   COMPETITION.  253 

titles  purchased  than  for  smaller  quantities,  and  was  arranged  to 
prevent  merchants  not  belonging  to  the  association  from  availing 
themselves  of  the  highest  rate  of  discount.  Certain  association 
merchants  appointed  one  of  their  number  to  buy  for  them,  and 
thus  by  poohng  then-  purchases  they  obtained  the  highest  rate  of 
discount,  while  a  nonassociation  merchant  buying  smaller  quanti- 
ties was  refused  as  large  a  discount.  The  evidence  also  showed 
that  the  association  merchants  obtained  control  of  the  distribution 
of  sugar  in  New  Zealand  and  kept  prices  at  a  higher  level  than  they 
would  otherwise  have  been.  The  sugar  company,  the  association, 
and  certain  association  merchants  were  made  defendants  in  a  crim- 
inal suit  under  the  Commercial  Trusts  Act,  1910.  The  court  held 
(1)  that  all  of  the  defendants  were  guilty  of  an  offense  under  section 
5  which  forbids  conspiracy  to  monopolize  contrary  to  the  public 
interest,  etc.;  (2)  that  the  sugar  company  was  guilty  under  section 
3  with  respect  to  the  prohibition  agamst  giving  rebates,  because 
the  person  receivmg  them  is  a  member  of  a  commercial  trust,  etc.; 
(3)  that  the  sugar  company  was  also  guilt}^  under  section  4  with 
respect  to  the  prohibition  against  refusing  to  sell  to  persons  who 
will  not  follow  the  directions  of  a  commercial  trust  in  the  purchase 
or  sale  of  goods,  etc.;  and  (4)  that  the  merchants'  association  was 
guilty  under  section  9,  which  forbids  any  person  to  aid  or  abet 
offenses  against  the  act,  etc.  The  com*t  distinguished  this  New 
Zealand  law  from  the  Australian  law  (see  p.  243)  and  said,  in  part 
(p.  1267): 

In  the  present  case  the  Sugar  Company  had  clearly  a  monopoly  in  the  manufacture 
of  refined  sugar  in  New  Zealand,  and  practically  a  complete  monopoly  in  the  sale  of 
it,  as  the  amount  of  imported  refined  sugar  so  far  as  regards  competition  was  negligible. 
The  company  -wished  to  preserve  that  monopoly  and  to  exclude  foreign  competition. 
It  also  wished  to  secure  the  co-operation  of  the  merchants  as  a  distributing  agency. 
The  object  of  the  merchants  was  to  secure  the  exclusive  control  of  the  sugar  trade, 
to  keep  the  distribution  of  sugar  in  their  own  hands,  and  to  prevent  competition. 
The  company  and  the  merchants  combined  to  carry  out  their  objects,  and  in  order  to 
carry  them  out  committed  the  offences  which  Ave  have  already  dealt  with.  So  far 
as  can  be  judged  from  the  evidence,  to  carry  out  these  objects  necessarily  involved 
the  commission  of  these  offences.  If  the  monopoly  or  control  sought  to  be  obtained 
can  only  be  obtained  by  breaches  of  the  law  it  is,  in  our  opinion,  of  such  a  nature  as 
to  be  contrary  to  the  public  interest,  although  if  it  could  have  been  obtained  without 
breaches  of  the  law  it  might  not  have  been  contrary  to  the  public  interest.  Apart, 
however,  from  the  above  considerations,  it  appears  to  us  that  the  monopoly  or  control 
sought  to  be  established  was  of  such  a  nature  as  to  be  contrary  to  the  public  interest. 
It  is  not  necessary,  as  in  The  Coal  Vend  case,  to  prove  an  intent  to  control  the  supply 
or  price  to  the  detriment  of  the  public,  or  to  show  that  any  detriment  has  happened 
to  the  public. 

Patents,  designs,  and  trade-marks. — The  law  relating  to  pat- 
ents, trade-marks,  etc.,  was  amended  in  1908  (Act  No.  140,  sec.  28), 
and  proA-ision  made  for  the  granting  of  compulsory  licenses  in  case  it  is 


254  EEPOKT  OF   THE   COMMISSIONER   OF   CORPOEATIONS. 

j)roved  to  the  governor  that  (a)  the  patent  is  not  being  worked  in  New 
Zealand,  or  (b)  the  reasonable  requirements  of  the  public  with  respect 
to  the  invention  can  not  be  suppMed,  or  (c)  any  person  is  prevented 
from  working  or  using  to  the  best  advantage  an  invention  of  which 
he  is  possessed.  The  governor  may  order  the  patentee  to  grant 
licenses  on  such  terms  as  he  deems  just  under  the  circumstances. 

Section  6.  Union  of  South  Africa. 

An  act  of  the  Legislature  of  the  Ca])C  of  Good  Hope  of  1907  %vith 
respect  to  the  meat  trade  and  an  act  of  the  Union  of  South  Africa  of 
1911,  relating  to  the  post  ofhce  are  of  interest  in  this  connection. 

The  Meat-Trade  Act,  1907.— The  Meat-Trade  Act  of  1907  pro- 
vides for  the  payment  of  a  Ucense  fee  by  butchers,  which  is  lower  for 
those  who  sell  meat  from  stock  raised  in  South  Africa  than  for  others. 
It  also  makes  the  following  provisions  concerning  restraint  of  trade 
which,  however,  shall  become  operative  in  the  particular  divisions 
of  the  colony  only  after  proclamation  by  the  governor: 

Every  act,  contract,  combination  or  conspiracy  in  unreasonable  restraint  of  the 
trade  of  a  butcher  is  hereby  declared  to  be  illegal,  and  every  person  who  shall  commit 
any  such  act  or  make  any  such  contract  or  engage  in  such  combination  or  conspiracy 
shall  be  guilty  of  a  criminal  offence,  and  subject  on  conviction  to  a  penalty  not  exceed- 
ing £500,  and  in  default  of  payment  thereof  to  imprisonment  with  or  without  hard 
labour  for  a  period  not  exceeding  twelve  months. 

It  is  expressly  provided,  however,  that  the  establishment  of  bona 
fide  partnerships' to  carry  on  the  business  more  economically,  or 
contracts  made  in  connection  with  bona  fide  sales  to  enhance  the 
value  of  the  property  sold,  shall  not  be  regarded  as  illegal. 

It  is  further  provided  that — 

All  contracts  and  undertakings  in  support  of  any  combination  the  object  of  which 
is  to  secure  the  control  of  the  sale  of  meat,  so  as  to  enable  such  combination  to  arbi- 
trarily control  or  regulate  the  price  thereof,  shall  be  held  to  be  illegal  and  void. 

The  use  of  threats  or  intimidation  to  compel  a  butcher  to  sell  at 
other  prices  than  those  he  was  selling  at  when  such  threats  or  intimi- 
dation was  used  is  also  made  a  criminal  offense. 

A  license  issued  to  a  butcher  who  has  been  convicted  of  violating 
the  criminal  proliibitions  shall  be  canceled  and  not  reissued  within 
two  years  after  conviction. 

The  Post  Office  Administration  and  Shipping  Combinations 
Discouragement  Act,  1911. — The  governor  general  is  forbidden 
by  the  Post  Office  Administration  and  Shipping  Combinations  Dis- 
couragement Act  of  1911  to  make  ocean-mail  contracts  with  any 
person  who — 

(1)  is  connected  directly  or  indirectly  with  any  such  shipping  or  other  combination  as 
the  Governor-General  may  deem  detrimental  to,  or  likely  to  affect  adversely,  South 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  255 

African  trade  or  industries;  or  (2)  gives,  offers,  or  promises  to  any  person  any  rebate, 
refund,  discount,  or  reward  upon  condition  that  such  person  shall  ship,  or  in  consid- 
eration of  such  person  having  shipped,  goods  by  vessels  of  particular  lines  to  the 
exclusion  of  any  others. 

Section  7.  British  India. 

The  Indian  Contract  Act  of  1872  contains  two  sections  which  have 
been  judicially  interpreted  with  respect  to  restraint  of  trade. 

Section  23  describes  certain  conditions  under  which  a  contract 
may  be  unlawful  as  f oUows : 

Sec.  23. — The  consideration  or  object  of  an  agreement  is  lawful,  unless  it  is  for- 
bidden by  law;  or  is  of  such  a  nature  that,  if  permitted,  it  would  defeat  the  provisions 
of  any  law;  or  is  fraudulent;  or  involves  or  implies  injury  to  the  person  or  property  of 
another;  or  the  Court  regards  it  as  immoral,  or  opposed  to  public  policy. 

In  each  of  these  cases,  the  consideration  or  object  of  an  agreement  is  said  to  be 
imlawfid.     Every  agreement  of  which  the  object  or  consideration  is  unlawful  is  void. 

The  relation  of  public  policy  to  contracts  involvmg  monopoly 
were  adjudicated  in  a  case  ^  where  the  defendant,  a  municipal  council, 
had  granted  to  the  plaintiff  and  another,  who  had  released  his 
rights  to  the  plaintiff  in  consideration  of  a  certain  sum  of  money, 
the  exclusive  privilege  of  selluig  flesh  withm  the  limits  of  the  munici- 
pality for  one  year.  The  coui't  held  that  certain  powers  conferred 
on  the  municipality  to  issue  licenses,  including  licenses  for  the  sale 
of  flesh,  did  not  give  it  the  power  to  create  in  advance  a  monopoly 
such  as  the  one  in  question,  because  such  power  was  not  expressly 
conferred  and  was  contrary  to  public  policy  under  section  23  of  the 
Indian  Contract  Act. 

Section  27  of  the  Indian  Contract  Act  contains  certain  provisions 
regardmg  contracts  which  restrain  a  person  from  exercising  an 
occupation,  and  these  have  been  interpreted  in  connection  with  the 
lawfuhiess  of  trade  combinations.     Section  27  reads  as  follows: 

Sec.  27. — Every  agreement  by  which  anyone  is  restrained  from  exercising  a  lawful 
profession,  trade  or  business  of  any  kind,  is  to  that  extent  void. 

Exception  1. — One  who  sells  the  goodwill  of  a  business  may  agree  with  the  buyer  to 
refrain  from  carrying  on  a  similar  business,  mthin  specified  local  limits,  so  long  as  the 
buyer,  or  any  person  deriving  title  to  the  goodwill  from  him,  carries  on  a  like  business 
therein,  provided  that  such  limits  appear  to  the  Court  reasonable,  regard  being  had 
to  the  nature  of  the  business. 

Exception  2. — Partners  may,  upon  or  in  anticipation  of  a  dissolution  of  the  partner- 
ship, agree  that  some  or  all  of  them  -will  not  carry  on  a  business  similar  to  that  of  the 
partnership  within  such  local  limits  as  are  referred  to  in  the  last  preceding  exception. 

Exception  3. — Partners  may  agree  that  some  one  or  all  of  them  will  not  carry  on  any 
business,  other  than  that  of  the  partnership,  durint^the  contmuance  of  the  partnership. 

1  Somu  Pillai  v.  Municijjal  Council,  Mayavaram,  Indian  Law  Pvop.,  Madras  Series,  XXVIII,  1905,  p.  520. 


256  EEPOET  OF   THE   COMMISSIONER  OF   CORPOEATIONS. 

The  first  important  case  ^  was  that  of  a  trade  combination  formed 
by  four  cotton  gmning  concerns  which,  for  a  term  of  four  years,  agreed 
that  the  price  of  gimiing  should  be  Rs.  4-8-0  per  palla  of  cotton,  or 
such  other  price  as  might  be  agreed  on,  and  that,  in  their  accounts,  they 
would  charge  Rs.  2-8-0  per  palla  to  cost  of  gimiing  and  the  remainder 
of  the  price  to  profit,  which  profit  should  be  divided  among  the  par- 
ties in  proportion  to  the  number  of  gins  they  i^ossessed.  One  of  the 
parties  refused  to  pay  to  the  others  the  amounts  due  under  the 
agreement  as  shown  by  the  accounts  and  was  sued  for  payment  by  one 
of  the  other  parties  to  the  agreement.  The  court  held  that  the 
plaintifi^  was  entitled  to  recover ;  that  the  only  agreement  sought  to  be 
enforced  was  the  agreement  to  divide  profits  and  that  such  an  agree- 
ment was  lawful. 

A  similar  case  ^  arose  in  connection  with  a  combination  of  ice 
manufacturers  in  1902  wherem  all  the  ice  manufactui'ers  of  Bombay 
agreed  to  carry  on  their  business  in  concert  until  the  end  of  1903  and 
thereafter  unless  the  agreement  was  terminated  by  notice.  The 
agreement  provided,  among  other  things,  for  minimum  selling  j^rices 
for  ice,  for  fixed  quotas  of  production  and  sale,  for  restricting  additions 
to  the  plant  and  machinery  of  members,  and  for  contributions  from 
profits  on  sales  to  a  general  fund  or  pool  for  division  among  the 
participants.  It  was  provided  further  that  if  a  competing  ice 
factory  should  be  started  the  agreement  would  be  terminated.  By  a 
supplementary  agreement  the  price  of  ice  for  certain  wholesale 
dealings  was  fixed  at  Rs.  58  per  ton,  and  prices  were  agreed  on  for 
other  classes  of  customers,  except  steamers,  which  in  no  case  were 
less  than  Rs.  58  per  ton.  A  few  months  after  this  pool  began  opera- 
tions one  of  the  members  notified  the  pool  managers  that  it  was 
advised  that  the  agreement  was  void  and  that  it  would  sell  ice  at  Rs. 
22-8-0  per  ton,  which  was  below  the  agreed  prices.  Suit  was  brought 
by  other  members  of  the  pool  which  prayed  the  court  to  restrain  the 
sale  of  ice  contrary  to  the  terms  of  the  agreement,  to  order  the  pay- 
ments due  under  the  agreement  to  the  pool  fund,  to  award  damages, 
etc.  The  only  issue  which  requires  attention  here  was  the  defense 
set  up  that  the  agreement  was  void.  The  court  held,  per  Jenkins, 
C.  J.,  that  so  far  as  the  obligation  to  contribute  to  the  pool  fund  was 
concerned,  which  was  the  only  issue  the  court  needed  to  decide, 
there  was  no  unlawful  restraint  of  trade  within  the  meaning  of 
section  27  of  the  Indian  Contract  Act,  nor  was  it  void  as  contrary  to 
public  policy  under  section  23  of  the  same  act,  because  so  far  as  such 
restraints  of  trade  are  concerned  those  which  are  contrary  to  public 
pohcy  are  covered  by  section  27.     The  court  held  further  that  the 

1  Haribhai  Maneklal  v.  Sharafali  Isabji,  Indian  Law  Rep.,  Bombay  Series,  Vol.  XXII,  189S,  p.  861. 

2  Fraser  &  Co.  v.  Bombay  Ice  Manufacturing  Co.,  Indian  Law  Rep.,  Bombay  Series,  XXIX,  1905,  p.  107. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  257 

only  relief  which  could  be  given  under  the  circumstances  of  the  case 
was  damages  for  the  nonpayment  of  contributions  to  the  pool  fund. 

Section  8.  Egypt. 

The  Egyptian  Penal  Code  for  mixed  tribunal  :;i  in  article  308  pro- 
vides a  penalty  against  interfering  with  free  competition  in  auctions 
almost  identical  with  article  412  of  the  French  Penal  Code  (see  p. 
272),  and  in  articles  309  and  310  combinations  which  tend  to  effect 
changes  in  the  prices  of  commodities  or  securities  are  prohibited  in 
practically  the  same  terms  as  in  articles  419  and  420,  respectively,  of 
the  French  Penal  Code.     (See  pp.  269-270.) 

Section  9.  Germany. 

There  are  no  general  laws  specifically  applicable  to  trusts  or  com- 
binations (cartels)  in  Germany,  except  with,  respect  to  bidding  on 
public  contracts,  but  some  of  the^eneral  legislation,  as  well  as  certain 
local  laws  and  acts  affecting  specific  industries,  are  of  importance. 

Criminal  law. — The  Penal  Code  for  the  German  Empire  ^  con- 
tains no  provisions  specifically  aft'ecting  cartels.  Of  some  interest 
in  this  connection  is  section  253  of  the  Penal  Code,  which  proliibits 
extortion.  The  following  case  illustrates  the  application  of  this  law 
where  a  cartel  was  involved :  A  powder  manufacturing  combination 
refused  to  supply  dealers  who  failed  to  patronize  it  exclusiveh',  and 
threatened  to  discontinue  the  supply  of  a  customer  who  had  pur- 
chased such  goods  from  a  competitor.  The  Imperial  Court  con- 
demned the  powder  combination  under  this  section  of  the  Penal 
Code.3 

In  section  302e  of  the  Penal  Code  penalties  arc  imposed  on  those 
who  exploit  the  necessity,  thoughtlessness,  or  inexperience  of  another 
in  order  to  obtain  for  themselves  or  a  third  party  a  pecuniary  advan- 
tage which  is  strikingly  disproportional  to  the  service  rendered. 

The  criminal  law  of  ^Usace-Lorraine,  however,  preserves  the  pro- 
hibitions of  articles  419  and  420  of  the  French  Penal  Code  (see  pp. 
269-270),  but  no  cases  appear  to  have  occurred  of  the  application  of 
this  law.  Furthermore,  the  States  of  the  German  Empire  have  sup- 
plementary criminal  laws  of  local  ai)plication,  and  several  of  them  have 
laws  proliibiting  agreements  to  avoid  competition  in  bidding  on  public 
contracts,  as,  for  example,  Prussia,  Hessen,  and  Alsace-Lorraine. 
The  Prussian  Criminal  Code  of  April  14,  1851,  section  270,  provides 
as  follows : 

WTioever  by  force  or  threats  or  by  the  promise  or  guarantee  of  an  advantage,  restrains 
another  from  bidding  or  overbidding  in  an  auction  undertaken  by  public  authorities 


1  Code  Pdnal  des  Tribunaux  Mixtes;  Codes  des  Tribunaux  Mixtes  d'Egypte,  Alexandria,  1907. 

'  Strafgesetzbuch  fiir  das  deutsche  Reich. 

» Urt.  V.  29.  Nov.  1900,  Entscheidungen  des  Reichsgerichts  in  Strafsachen,  Bd.  34,  S.  16  ff. 

30035°— 16 17 


258  EEPOKT   OF    THE    COMMISSIONER   OF    COEPORATIOlSrS. 

or  officials,  whether  the  same  relates  to  sales,  leases,  delivery  of  goods,  enterprises  or 
business  of  any  kind,  shall  be  punishable  with  a  fine  up  to  three  hundred  thalers  or 
with  imprisonment  up  to  six  months. 

Similar  provisions  are  found  in  the  Police  Criminal  Law  of  Hessen, 
article  381  (Oct.  30,  1855,  and  Oct.  10,  1871),  and  in  article  412  of  tlie 
Criminal  Code  of  Alsace-Lorraine  (cf.  French  Penal  Code,  art.  412). 
These  prohibitions  have  been  apphed  and  interpreted  by  the  courts 
in  various  cases.^ 

According  to  statements  in  the  press  ^  the  German  Government 
shortly  prior  to  the  war  contemplated  applying  another  section  of 
the  Penal  Code  in  comiection  with  an  investigation  of  the  relations 
of  a  certain  tobacco  and  cigarette  dealer  in  Dresden  with  the  British- 
American  Tobacco  Co.  The  provisions  of  the  section  in  question, 
namely,  section  128,  are  as  follows:  ^ 

Participation  in  a  society  whose  existence,  constitution  or  purpose  shall  be  kept 
secret  from  the  Government,  or  in  which  is  j^romised  obedience  to  an  unknown 
superior,  or  unconditional  obedience  to  a  known  superior,  makes  the  members  punish- 
able with  imprisonment  up  to  six  months  and  the  promoters  and  leaders  of  the  society 
with  imprisonment  from  one  month  to  one  year. 

It  also  provides  in  the  case  of  officials  for  the  loss  of  capacity  to 
hold  office  for  a  period  of  from  one  to  five  years. 

Civil  law. — Wliile  the  general  civil  law  of  the  German  Empire  does 
not  contain  any  provisions  expressly  governing  the  legahty  of  combi- 
nations, certain  sections  of  the  Industrial  Code  and  of  the  Civil  Code 
have  occasional  appHcabihty.  The  civil  law  also  contains  provisions 
which  are  of  importance  in  determining  the  legafity  of  particular 
practices  of  cartels;  these  are  found  chiefly  in  the  CivU  Code,  but  also 
in  the  Law  against  Unfair  Competition. 

The  chief  provisions  of  the  law  which  are  of  significance  with 
respect  to  the  legality  of  combinations  are  section  1  of  the  Industrial 
Code  and  section  138  of  the  Civil  Code. 

In  section  1  of  the  Industrial  Code  the  following  provision  is  made : 

The  pursuit  of  an  industry  is  permitted  to  everyone,  in  so  far  as  exceptions  or  limita- 
tions are  not  imposed  or  permitted  in  this  law.* 

That  this  provision  of  the  law  does  not  render  invafid  the  existence 
of  a  combination  was  decided  in  the  case  of  the  book  dealers'  cartel, 
referred  to  below.  (See  p.  259.)  A  more  important  decision  was  that 
made  with  regard  to  the  Saxon  wood-pulp  cartel  which  apportioned 
the  output  of  members  of  the  combination  and  sold  their  products 
through  a  common  selUng  agency.''     In  a  suit  to  enforce  the  agree- 


1  Denkschrift  iiber  das  Kartellwesen,  Bearbeitet  im  Reichsamt  des  Innern,  II.  Teil,  Berlin,  1906, 
pp.  28-30.    Local  authorities,  moreover,  often  provide  against  combinations  in  bidding. 

2  Frankfurter  Zeitung,  Jan.  22,  1914. 

3  Strafgesetzbucb  ftir  das  deutsche  Reich. 
*  Gewerbe-Ordnung. 

5  Urt.  V.  4.  Feb.  1897,  Entsch.  d.  R.  Ger.  in  Civilsachen,  Bd.  38,  S.  155  fl. 


TEUST   LAWS  AND  UNFAIR  COMPETITION,  259 

meiit  the  defense  was  made  that  it  was  iiivaUd  as  contrary  to  section 
1  of  the  Industrial  Code.  The  Imperial  Court  upheld  the  agreement 
and  said  (p.  156): 

This  objection  can  not,  however,  be  regarded  as  well  founded.  The  complainant 
association  is  established,  as  expressly  stated  in  the  statutes,  and  without  dispute 
between  the  parties,  in  order  to  prevent  for  the  future  a  destructive  competition 
between  the  Saxon  wood-pulp  manufacturers,  and  to  make  possible  the  attainment  of 
higher  prices  than  would  be  reached  by  unrestricted  competition. 

Examining  this  matter  from  the  point  of  view  of  pubhc  poHcy  the 
court  went  on  to  say  (p.  157): 

If  in  any  branch  of  industry  the  prices  of  products  sink  too  low  and  if  the  thriving 
operation  of  the  industry  is  thereby  made  impossible  or  endangered,  then  the  crisis 
which  occurs  is  destructive  not  only  for  individuals,  but  also  for  the  social  economy 
in  general,  and  it  lies,  therefore,  in  the  interest  of  the  whole  community  that  unduly 
low  prices  in  a  branch  of  industry  shall  not  permanently  exist. 

While  the  court  concluded,  therefore,  that  such  combination  agree- 
ments were  not  invaUd  in  principle,  it  proceeded  to  consider,  never- 
theless, whether  they  might  not  be  invalid  under  certain  circum- 
stances, and  stated  the  possible  exceptions  as  follows  (p.  158): 

Agreements  of  the  kind  under  consideration  can  therefore  be  questioned  from  the 
standpoint  of  the  protection  of  the  general  interest  through  the  freedom  of  industry 
only  if  particular  circumstances  give  rise  to  objections  in  individual  cases,  especially  if 
it  is  evident  that  the  creation  of  an  actual  monopoly  and  the  usurious  exploitation  of 
the  consumers  is  aimed  at,  or  these  results  are  actually  brought  about  by  the  agreements 
and  arrangements  made. 

It  was  claimed  in  this  case,  also,  that  another  section  of  the  Indus- 
trial Code,  namely,  section  152,  which  provides  that  participants  in 
a  union  or  agreement  to  raise  wages  or  improve  the  conditions  of 
labor  may  freely  withdraw  therefrom,  enabled  a  member  of  a  cartel 
to  refuse  to  fulfill  his  agreement,  but  the  court  rejected  this  view. 

The  Civil  Code,  in  section  138,  provides  in  the  first  paragraph  as 
follows : 

A  jural  act  which  is  repugnant  to  good  morals  is  void.^ 

An  additional  j)aragraph  of  this  section  states  particular  instances 
of  its  appHcation  similar  to  those  noted  above  (p.  257)  in  connection 
with  section  302e  of  the  Penal  Code. 

Before  the  enactment  of  this  code  efforts  were  made  to  have  the 
courts  annul  such  agreements  under  substantially  similar  provisions 
of  prior  codes.  The  Imperial  Court,  in  holding  as  lawful  a  book- 
dealers'  cartel  which  fixed  rebates  or  discounts,  declared  that  the  claim 
that  it  was  an  i)ifraction  of  good  morals  was  not  well  founded.  The 
court  made  a  distinction  between  speculative  "rings"  for  the  pur- 

i  Biirgerliches  Gesetzbuch,  sec.  13S.  For  "  Rechtsgeschiift,"  here  rendered  "jural  act,"  there  is  no  precise 
English  equivalent;  it  includes  all  acts  by  which  persons  endeavor  to  produce  legal  results — contracts, 
conve.vances,  etc.  The  phrase  translated  "good  morals"  is  "die  guten  Sitten,"  which  is  itself  a  trans- 
lation of  the  Latin  "boni  mores." 


260  REPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

pose  of  controlling  the  market  and  destroying  the  free  activity  of  eco- 
nomic forces  and  the  associations  of  persons  in  the  same  trade  for  the 
bona  fide  purpose  of  preserving  a  living  basis  by  preventing  the 
depreciation  of  commodities  and  other  disadvantages  arising  from 
price  cutting.^ 

In  an  earlier  case,  in  the  highest  court  in  Bavaria,  the  court  held 
that  a  combination  of  tile  manufacturers  which  fixed  prices  and 
hmitcd  production  was  not  against  good  morals,  but,  on  the  contrary, 
both  a  valid  and  a  prudent  business  arrangement.^ 

The  German  Imperial  Court  has  almost  invariably,  indeed,  upheld 
ordinary  combination  agreements  or  cartels.  Particular  reference 
may  be  made  to  a  decision  affirming  the  validity  of  the  Rhenish- 
Westphalian  Coal  Syndicate  agreement,^  one  of  the  most  powerful 
cartels  in  Europe,  which  regulates  the  output  of  its  members  and  sells 
the  coal  through  a  common  selling  compan}^ 

A  remarkable  case  was  decided  recently  by  the  Imperial  Court,  in 
which  the  principal  facts  were  substantially  as  follows :  "*  The  Deutsche- 
Pctroleum  Verkaufs-GeseUschaft,  plaintiff,  a  subsidiary  of  the  Euro- 
paische  Petroleum  Union,  and  the  Deutsch-Amerikanische  Petroleum 
GeseUschaft,  defendant  (a  Standard  Oil  concern),  both  companies 
being  organized  in  Germany,  made  a  pool  agreement  in  London  on 
May  27,  1907,  to  the  following  effect:  The  plaintiff  company  gave 
to  the  Standard  concern  complete  control  over  its  equipment,  prod- 
uct, and  seUing  force,  to  manage  the  sale  of  oil  in  Germany,  with 
the  power  to  fix  the  prices  of  oil,  to  appoint  and  dismiss  depart- 
mental managers  and  other  employees,  and  to  increase  or  reduce 
the  equipment,  including  the  sale  thereof  to  the  Standard  concern 
or  others  at  the  book  value  less  stipulated  rates  of  depreciation. 
The  plaintiff  company  also  agreed  that  its  directors  and  stockholders 
would  make  such  by-laws  and  resolutions  necessary  for  the  carrying 
out  of  the  agreement  as  might  be  demanded,  under  jDenalty  of  a 
fine  for  each  refusal.  It  also  agreed  to  maintain  its  capital  stock 
at  not  less  than  6,000,000  marks.  The  pla,intiff  company  was  to 
keep  its  general  organization  and  to  have  ''independent"  employees 
for  conducting  the  financial  side  of  its  business,  but  such  officials 
were  to  be  paid  by  the  Standard  concern  and  were  not  to  be  allowed 
to  interfere  in  the  commercial  side  of  the  business.  The  Standard 
concern  only  was  to  have  the  right  to  admit  other  members  to  the 
pool.  Disputes  as  to  the  meaning  of  the  agreement  were  to  be  deter- 
mined by  an  arbitration  court. 

The  plaintiff  company  in  1912  sought  to  have  this  agreement  an- 
nulled by  the  courts,  and  it  was  finally  decided  in  the  Imperial  Court 

>  Urt.  V.  25.  Juni  1890,  Entsch.  d.  R  Ger.  in  CivDsachen,  Bd.  28,  S.  238  S. 
>Urt.  d.  O.  L.  G.  {.  Bayern  v.  7.  April  1888;  Seuffert's  Archiv,  Bd.  44,  Nr.  13.    p.  16. 
8  Gewerkschaft  d.  Zeche  ver.  Hannibal  w.  Rheinisch-Westfalisches  Kohlensyndikat.    Urt.  v.  19.  Feb. 
1901;  Entsch.  d.  R  Ger.  in  Civilsachen,  Bd.  48,  S.  306. 
*  Urt.  V.  27.  Mai  1913,  Entsch.  d.  R  Ger.  in  Civilsachen,  Bd.  82,  S.  308  ff. 


TRUST   LAWS  AISTD   UNFAIR   COMPETITION.  261 

to  be  invalid  under  article  138  of  the  Civil  Code.     The  coui*t  said  in 
part: 

Such  a  gagging  of  one  party  by  the  other,  such  a  complete  subjection  to  the  will 
of  the  opposite  party,  contradicts  the  views  of  morality  prevailing  in  Germany.  An 
agreement  which  contains  such  pro\T.siong,  and  especially  as  the  kernel  of  the  whole 
arrangement,  must  be  regarded  as  null  in  its  full  extent  according  to  section  138, 
paragraph  1,  of  the  Ci^il  Code. 

*  4f  *  *  »  *  * 

A  company  can  dissolve  itself,  but  it  can  not  put  itself  in  wardship  any  more  than  a 
natural  person  can. 

It  is  noteworthy  that  m  this  case  the  pooling  agreement  was  not 
declared  invahd  because  the  public  was  injuriously  affected,  but  be- 
cause it  was  regarded  as  unfair  between  the  parties  and  ultra  vires. 
The  pubhc  interest  is  not  regarded  as  injuriously  affected,  appar- 
ently, unless  the  combination  is  in  the  nature  of  a  speculative  ring 
to  control  the  market  (see  p.  259)  or  unless  it  ainis  at  or  results  m  a 
complete  monopoly  and  the  usurious  exploitation  of  consumers. 
(Seep.  259.) 

The  question  has  also  arisen  in  the  German  courts  whether  agree- 
ments to  prevent  competition  in  public  auctions  are  contra  bonos 
mores.  The  Imperial  Court  has  declared  that  they  are  not  necessarily 
so,*  but  nevertheless  such  agreements  have  been  sometimes  declared 
void.^ 

Another  provision  of  the  Civil  Code  may  be  noticed  which  is  of 
interest  in  connection  with  the  local  criminal  prohibitions  against 
combinations  at  pubUc  auciions,     (See  p.  257.)    Section  134  provides: 

A  jural  act,  which  is  repugnant  to  a  legal  prohibition,  is  void,  if  the  law  does  not  pro- 
vide otherwise. 

In  the  case  of  an  agreement  by  which  a  person  refrained  from 
bidding  at  a  public  auction  contrary  to  section  270  of  the  Prussian 
Criminal  Code,  the  Imperial  Court  declared  that  the  agreement  itself 
was  not  necessarily  void  under  article  134  of  the  Civil  Code.^ 

The  most  important  rules  against  unfair  competition  which  have 
been  applied  to  the  practices  of  combinations  are  found  in  the  Civil 
Code.  There  is  also  a  special  Law  against  Unfair  Competition, 
enacted  in  1909  (see  Chap.  X,  p.  623),  but  only  a  few  of  its  provisions 
are  of  much  significance  with  relation  to  combinations,  and  no  prac- 
tical application  of  them  by  the  courts  has  been  noted  in  this  con- 
nection.* 

» rrt.  V.  n.  Juli  1904,  Entsch.  d.  R  Ger.  in  Civilsachen  Bd.  58,  S.  393  ff. 

«  Urt.  V.  17.  Nov.  1891,  Juristische  Zeitschrift  ftii-  Elsass-Lothringen,  Bd.  17,  S.  139  IT.  Cited  in  Denk- 
SChrift  u.  d.  Kartolhvesen,  Berlin,  190<3,  II.  Teil,  pp.  10—11. 

8  Urt.  V.  17.  M;irz  1905,  Entsch.  d.  R  Ger.  in  Civilsachen,  Bd.  CO,  S.  273  rt. 

*  Subsequent  to  the  issue  date  of  this  report  (Mar.  15, 1915)  the  Imperial  Coiu-theld  that  a  company  which 
incorrectly  advertised  itself  as  independent  of  the  "Trust"'  for  purposes  of  competition,  liad  violated  sees. 
1  and  3  of  the  Law  against  Unfair  Competition.  (See  p.  659.)  Urt.  v.  30.  Marz  1915,  Monatsschriftfiir 
Handelsrecbt  u.  Bankwesen,  Juni  1915,  p.  126. 


262  EEPORT  OF   THE   COMMISSIONER   OF    CORPORATIONS. 

The  Civil  Code,  under  the  title  of  ''Unpermitted  dealings,"  con- 
tams  numerous  sections,  of  which  the  most  important  in  the  present 
connection  are  the  first  part  of  section  823  and,  especially,  section 
826,  which  are  as  follows: 

Sec.  823.  Whoever,  contrary  to  law,  intentionally  or  negligently  injures  the  life, 
body,  health,  freedom,  property  or  any  other  right  of  another,  is  bound  to  such  other 
for  compensation  of  the  injury  arising  therefrom. 

Sec.  826.  WTioever  in  a  manner  repugnant  to  good  morals  intentionally  inflicts 
an  injury  upon  another  is  bound  to  such  other  for  compensation  of  the  injury. 

Both  of  these  provisions  have  been  considered  by  the  courts  in 
connection  with  practices  that  are  often  found  among  cartels. 

An  illustration  of  the  application  of  section  823  is  found  in  the 
case  of  an  association  of  medical  practitioners  which  maintained 
rules  prohibitmg  members  from  medical  consultation  with  certain 
other  practitioners.  A  member  physician  who  conducted  a  private 
clinic  was  expelled  from  the  association  for  consulting  with  a  homeo- 
pathic physician,  and  other  members  were  warned  against  consulting 
with  the  said  member.  The  physician  claimed  to  be  injured  thereby 
under  section  823  of  the  Civil  Code,  The  court  held  that  the  said 
warning  issued  to  other  members  was  in  violation  of  this  section  of 
the  law,  the  question  of  civil  liability  being  referred  to  the  lower 
court  for  further  evidence  and  consideration.^ 

An  illustration  of  the  appUcation  of  section  826  is  found  in  the  fol- 
lowing case:  A  steamship  company  tried  to  force  a  competing  group 
of  sailmg  boats  out  of  a  certain  trade  by  refusmg  to  accept  shipments 
at  the  ordinary  rates  from  a  large  shipper  if  he  persisted  in  patronizing 
the  competing  sailmg  boats.  The  shipper  brought  an  action  to  compel 
the  steamship  company  to  abandon  such  discrimmation.  The  Impe- 
rial Court  sustained  this  claim  and^said,  in  part  (pp.  119,  125)  i^ 

*  *  *  section  826  is  adapted  and  also  intended  by  the  legislator  to  provide  a  pro- 
tection against  unfair  treatment  in  a  comi^rehensive  manner,  particularly  for  business 
intercourse,  in  so  far  as  provision  is  not  made  through  special  laws.     *    *    * 

Especially  also  against  abuse  of  the  freedom  of  industry  through  avaricious  exploi- 
tation or  through  the  overpowering  of  others,  section  826  of  the  Civil  Code  affords 
protection. 

The  standard  of  morals  applicable  under  section  826  the  court 
stated  to  be  the  sense  of  propriety  of  right-minded  persons,  and  in 
commercial  matters  the  views  of  honorable  merchants. 

Another  illustration  of  the  application  of  section  826  is  found  in  the 
following  case:  A  cartel  was  formed  among  goldbeaters  in  a  certain 
district  to  regulate  production  and  prices,  wliich  made  an  agreement 
mth  an  organized  union  of  workpeople  in  that  branch  of  industry 
whereby  the  latter  were  to  receive  certain  wages,  etc.,  and  were  to 

lUrt.  V.  6.  Marz  1902.  Entsch.  d.  R  Ger.  in  Civilsachen,  Bd.  51,  S.  66  ff. 
«Urt.  V.  11.  April  1901,  Entsch.  d.  R  Ger.  in  Civilsachen,  Bd.  48,  S.  114  ff. 


TRUST   LAWS  AND  UNFAIR   COMPETITION,  263 

abstain  from  accepting  employment  in  concerns  not  comprehended 
in  this  agreement,  while  no  new  concerns  were  to  be  admitted  thereto 
during  the  first  year  (1902).  Two  goldbeaters  who  had  been  in  the 
business  before,  but  who  had  ceased  to  operate  on  account  of  a  strike 
due  to  a  reduction  of  wages,  recommenced  business  in  that  district 
in  1902  and  sought  admission  into  the  cartel  and  the  labor  agreement. 
The  workpeople  were  wilUng  to  call  the  strike  off,  but  were  induced 
by  the  goldbeaters'  cartel  to  continue  it  for  another  year.  The  two 
goldbeaters  brought  an  action  against  certain  directing  members 
of  the  cartel  under  section  826  of  the  Civil  Code.  While  certain 
matters  relating  to  the  liability  of  the  defendants  were  not  clear, 
the  court  gave  an  opinion  on  the  appUcabiUty  of  section  826  of  the 
Civil  Code,  as  follows  (p.  105): 

According  to  these  unimpeachable  statements  of  fact  in  the  judgment  on  appeal,  no 
doubt  can  exist  that  by  the  said  dealings  injury  was  intentionally  done  to  the  plaintiffs 
through  representatives  of  the  employers,  in  a  manner  contrary  to  good  morals.^ 

Prior  to  the  introduction  of  the  present  Civil  Code,  namely,  on 
May  27,  1896,  a  law  against  unfair  competition  was  enacted  which 
was  subsequently  revised  and  amplified  by  the  Law  against  Unfair 
Competition  of  June  7,  1909.^  This  law  prohibits  various  specific 
practices,  which  are  not  particularly  characteristic  of  combinations, 
and  affords  both  civil  and  criminal  remedies.  (See  p.  623.)  The  most 
important  as  well  as  the  most  comprehensive  provision  of  the  law  is 
the  fu-st  section,  which  reads  as  follows : 

WTioever  in  business  affairs,  for  the  purpose  of  competition,  commits  acts  which  are 
repugnant  to  good  morals  may  be  subject  to  an  action  to  desist  therefrom  and  to 
pay  damages. 

This  section  is  similar  to  section  826  of  the  Civil  Code,  but  it  is 
restricted  to  business  deahngs.     (See  p.  648.) 

Special  laws  regarding  particular  industries. — A  remarkable 
feature  of  German  policy  with  regard  to  combinations  is  their  direct 
encouragement  in  a  few  particular  mstances. 

The  chief  instance  of  present  interest  is  the  imperial  law  regarding 
potash,  which  is  practically  all  produced  in  Germany  at  the  present 
time,  and  in  which  industry  several  German  States,  and  especially 
Prussia  and  Anhalt,  are  directly  engaged.  Until  1910  this  industry 
was  practically  monopolized  by  a  cartel  in  wliich  both  of  these  two 
States  were  members,  and  in  wliich  the  Prussian  mining  officials 
had  a  powerful  influence. 

By  the  Law  Concernmg  the  Sale  of  Potash,^  of  May  25,  1910,  the 
production,  sale,  and  prices  were  regulated.  The  principal  provi- 
sions are  as  follows:   (1)  Potash  salts  can  be  sold  by  the  owners  of 

1  Urt.  V.  2.  Feb.  1905,  Entseh.  d.  R  Gcr.  in  Civilsachen,  Bd.  60,  S.  94  ft. 
s  Gesctz  gegen  den  unlauteren  Wettbewerb,  v.  7.  .Tiuii  1909.    Reichsgesetzblatt,  1909,  p.  -199, 
'  Gesetz  iiber  den  Absaf  z  von  Kalisalzen,  v.  25.  Mai  1910;  Reichsgesetzblatt,  1910,  p.  775.    A  Iranslation 
of  this  law  is  given  in  Exhibit  D  of  this  report.     See  p.  770. 


264  EEPOET   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

the  potash  mines  only  as  provided  by  law;  (2)  sales  for  export  can 
be  made  only  by  potash-mining  companies ;  (3)  the  maximum  quantity 
to  be  sold  and  the  part  to  be  sold  for  export  is  fixed  by  a  central 
administrative  agency;  (4)  the  quota  of  each  producer  is  determined 
by  this  central  agency,  and  is  the  same  both  for  domestic  and  export 
sales;  a  failure  to  participate  to  full  quota  in  domestic  sales  operates 
to  reduce  the  export  quota;  (5)  the  granting  of  quotas  for  new  mines 
as  they  are  opened  by  the  mining  companies  is  allowed  and  regulated 
(this  of  course  reduces  the  quotas  of  existing  mines) ;  (6)  the  prices 
of  domestic  sales  are  fixed  in  the  law,  but  may  be  changed  by  the 
Government  from  time  to  time  as  provided;  (7)  the  prices  of  export 
sales  must  not  be  less  than  domestic  prices;  (8)  a  heavy  tax  is  levied 
on  excess  sales;  (9)  heavy  penalties  are  provided  for  defrauding  the 
Government  of  the  tax  on  excess  sales  and  for  other  specified  viola- 
tions of  the  law;  (10)  certain  modifications  are  permitted  with  respect 
to  the  prices  of  potash  obtained  under  contracts  made  before  a  certain 
date,  while  certain  other  contracts  having  effect  over  a  long  term  of 
years  are  declared  invalid. 

The  last-mentioned  provisions  relate  to  certain  business  and  inter- 
national complications  which  are  not  of  importance  in  this  connection. 

The  general  purpose  of  the  law  was  to  regulate  production  and 
prices  so  that  there  should  not  be  an  excessive  competition  between 
producers  and  a  dumping  of  potash  at  low  prices  in  export  trade 
on  the  one  hand,  nor  very  high  prices  for  the  domestic  consumer  on 
the  other  hand.  Dumping  is  effectually  checked  by  the  system  of 
allotting  and  dividing  domestic  and  export  sales  and  taxing  heavily 
any  excess  sales.  Low  prices  in  the  domestic  market  are  established 
by  a  direct  fixing  of  the  price.  Export  sales  are  generally  made  at 
higher  prices  than  domestic  sales,  but  the  export  prices  are  not 
uniform.^  The  prevention  of  excessive  competition  between  the 
producers  has  apparently  not  succeeded;  mstead,  there  has  been 
an  extraordinarily  large  development  of  new  mmes,  and  with  the 
limitation  of  total  output  this  has  resulted  m  reducing  the  quota 
of  each  mme  and  increasing,  it  is  said,  the  costs  of  minmg  the  pot- 
ash. It  is  generally  reported  that  the  Government  contemplates 
further  legislation  to  restrict  the  opening  of  new  mines,  but  that 
the  private  companies  are  opposed  to  this.  As  was  expected  by  the 
Government,  the  enactment  of  this  law  facilitated  the  reestablish- 
ment  of  the  potash  cartel,  in  which  nearly  all  mining  companies  par- 
ticipate, including  the  States  of  Prussia  and  Anhalt.  In  the  original 
draft  of  the  biU  it  was  planned  to  establish  a  cartel  by  law  and  to 
compel  all  mining  companies  to  become  members  thereof. 

»  Verhandlungen  der  vom  K.  K.  Handelsministeriuin  veranstalteten  Kartell  Enqufite,  Wien,  2.  Jull 
1912,  IX,  p.  92. 


TRUST  LAWS  A^T>  UNFAIR   COMPETITIOlSr.  265 

While  the  potash  law  is  an  exceptional  one,  Germany  has  also  in 
a  few  other  cases  enacted  revenue  laws  which,  by  discriminating  in 
favor  of  concerns  already  operating,  have  encouraged  the  formation 
of  cartels.  The  industries  which  have  been  thus  affected  are  (a) 
spirits,  (b)  beer,  and  (c)  matches.* 

Notwithstanding  the  peculiar  legislation  with  regard  to  particular 
industries  just  discussed,  it  is  important  to  emphasize  the  fact  that 
the  German  law  regarding  combinations  is  primarily  one  of  free  con- 
tract, and  the  general  attitude  of  the  pubhc  admmistration  toward 
cartels  is  laissez  fake.  Administrative  intervention  in  the  manage- 
ment of  cartels,  or  to  counteract  their  activities,  is  of  rare  occurrence. 

Section  10.  Austria. 

There  are  no  criminal  laws  against  industrial  combinations  or  car- 
tels in  Austria,  but  they  are  invaUd  under  the  civil  law. 

The  Penal  Code  of  1852,  section  479,  prohibited  agreements  among 
manufacturers,  etc.,  to  raise  the  price  of  a  commodity  to  the  disad- 
vantage of  the  public,  or  to  cause  a  scarcity  thereof,  etc.,  but  this  was 
repealed  m  1870.  The  "coaUtion"  law  of  April  7,  1870,  provides  in 
the  second  section  that  agreements  of  employers  through  shutdowns 
or  lockouts  to  reduce  wages,  etc.,  or  of  employees  through  strikes  to 
increase  wages,  etc.,  are  null  and  void.  In  the  third  section  the 
attempt  to  carry  out  such  agreements  through  intimidation  or  force 
is  made  criminally  punishable.     The  fourth  section  reads  as  follows  :^ 

Sec.  4.  The  provisions  contained  in  sections  2  and  3  are  applicable  also  to  agree- 
ments of  manufacturers  for  the  purpose  of  raising  the  price  of  a  commodity  to  the  dis- 
advantage of  the  public. 

Thus,  cartel  agreements  are  void  at  the  civil  law.  Under  the  rules 
of  civil  procedure  prevailing  in  Austria  prior  to  1895  it  was  possible 
to  make  such  agreements  effective  for  all  practical  purposes  by  provid- 
ing for  a  private  arbitration  to  enforce  the  agreement.  Such  an  arbi- 
tration decision  could  not  be  appealed  from  except  in  case  of  fraud. ^ 
In  1895,  however,  a  new  Code  of  Procedure  was  adopted  which  pro- 
vided that  the  decisions  of  such  an  arbitration  are  inoperative  if 
"repugnant  to  compulsory  rules  of  law,"  and  it  is  further  provided 

1  Reichsgesetzblatt,  1909;  Branntweinsteuergesetz  vom  15.  Juli  1909,  S.  601;  Gesetz  wegen  Aendemng 
des  Brausteuergesetzes  vom  15.  Jiili  1909,  S.  695;  Gesetz  betreflend  Aenderung  im  Finanzwesen  vom  15. 
Juli  1909,  S.  757.  Mention  may  also  be  made  of  the  German  Southwest  African  diamond  rfigie  under 
which  arrangements  exist  between  the  Government  and  the  producers  of  diamonds  for  marketing  the 
output,  etc.  See  Demuth,  Der  Diamantenmarkt,  Karlsruhe,  i.  B.  19i:i,  p.  76.  It  should  be  noted, 
also,  that  the  Government  shortly  before  the  war  introduced  a  bill  for  establishing  a  monopoly  in  the 
wholesale  trade  in  illuminating  oil  from  petroleum,  to  be  exercised  by  a  company  whose  capital  stock 
waste  be  subscribed  to  both  by  the  Government  and  by  private  interests,  but  in  the  management  of 
which  the  Government  was  to  have  the  controlling  influence.  The  prices  to  becharged  by  this  company, 
as  well  as  the  profits  to  be  divided,  were  to  be  regulated  according  to  the  provisions  of  this  bill. 

»  Gesetz  v.  7.  Apr.  1870;  Reichsgesetzblatt  fiir  die  im  Reichsrate  vertretenen  Konigreiche  und  Lander, 
Jahrg.  1870. 

3  AUgemeine  Gerichtsordnung,  art.  273. 


266  EEPOET    OF    THE    COMMISSIONER   OF    CORPORATIONS. 

that  the  parties  can  not,  in  a  legal  sense,  renounce  their  right  of  ap- 
peal to  the  courts  in  such  cases. ^ 

Tlie  meaning  of  the  law  of  1870  regarding  cartel  agreements  has 
been  frequently  interpreted  by  the  courts.  A  cartel  of  oleum  pro- 
ducers, organized  in  1887  for  the  sale  of  oleum,  chiefly  in  the  export 
trade,  on  breach  of  the  agreement  brought  an  action  for  damages. 
The  suit  was  defended  on  the  ground  that  the  agreement  was  not 
enforceable  under  the  law  of  April  7,  1870.  The  highest  court  in 
Austria  held  that  the  agreement  was  invahd  and  that  no  claim  for 
damages  could  be  allowed.^  The  decision  turned  chiefly  on  the  defi- 
nitions of  the  words  in  the  law.  The  word  translated  above  as 
"manufacturers"  (Gewerbsleute)  was  held  to  include  not  only  crafts- 
men, l)ut  also  factory  producers,  the  court  pointing  out  that  the 
word  was  so  used  in  various  laws  and  that  there  was  no  reason  to 
suppose  that  the  legislator  had  intended  to  Umit  it  in  this  instance. 

Another  case  related  to  a  combination  of  chalk  producers  who  by 
agreement  had  estabUshed  a  common  selUng  bureau  in  Vienna.  The 
court  held  that  the  agreement  was  void  and  that  it  was  not  neces- 
sary to  show  that  there  had  been  an  actual  advance  in  prices,  as 
such  a  result  might  be  presumed  at  law  from  the  nature  of  the  agree- 
ment, which  provided  for  restricting  the  output.  The  court  also 
defined  the  term  "commodity"  (Ware)  to  include  not  only  finished 
goods  used  in  ordinary  consumption,  but  also  unfinished  goods  used 
further  in  manufacture.^ 

A  recent  case,  for  which  a  full  i*eport  of  the  decision  is  given  in  the 
public  press,  was  as  follows  :*  A  number  of  remf orced  concrete  con- 
struction concerns  formed  an  association  for  regulatmg  their  bids  on 
building  contracts,  under  a  written  agreement,  which  provided  among 
other  things  that  they  should  inform  each  other  concerning  under- 
takings on  which  they  proposed  to  bid,  and  should  come  to  an  agree- 
ment as  to  the  manner  in  which  the  bids  were  to  be  made  m  each 
case;  that  in  certain  cases  contributions  should  be  made  to  a  common 
fund  by  the  concern  which  was  awarded  the  undertaking;  that  viola- 
tions of  the  agreement  should  be  punished  by  fines ;  and  that  arbitra- 
tion should  be  resorted  to  for  the  determmation  of  disputed  matters. 
A  concern  which  had  been  awarded  a  certam  undertaking  shortly 
afterwards  withdrew  from  the  association  and  refused  to  pay  the  con- 
tribution in  respect  thereto  required  by  the  agreement,  on  the  ground 

1  Civilprozessordnung,  v.  1.  Aug.  1895,  sees.  595  and  598.  In  certam  cases  the  validity  of  agreements 
with  cartels  can  be  attacked  by  the  parties  who  purchase  from  them:  see  Einfiihrungsgesetz,  art.  XXIII, 
of  the  Civilprozessordnung,  and  Einfiihrungsgesetz,  art.  XXX,  of  the  Exekutionsordnung. 

2  Entsch.  V.  20.  Jan.  1898.  No.  242.  Sammlung  v.  Civilrechtlichen  Entseh.  des  K.  K.  Obersten 
Gerichtshofes,  Bd.  XXXV,  S.  10. 

3  Entsch.  V.  6.  Apr.  1899.  No.  3419.  Sammlung  v.  Civilrechtlichen  Entsch.  des  K.  K.  Obersten 
Gerichtshofes,  Bd.  XXXVI,  S.  199. 

■•  P.  Betonbauuntemehmung,  w.  Ed.  \.  u.  Konsorten.  Entsch.  d.  K.  K.  Obersten  Gerichtshofes  vom 
10.  Juni  1913;  reprinted  in  Kartell-Run dschau,  August  1913,  pp.  623,631. 


TEUST   LAWS  AND  UNFAIR   COMPETITION.  267 

that  the  contract  was  executed  after  withdrawal.  An  arbitration 
proceeding  to  which  the  said  concern  refused  to  be  a  party  adjudged  a 
fine.  The  case  was  appealed  to  the  highest  court  which  held  that 
the  lower  court  was  right  in  declarmg  that  the  arbitration  court  could 
not  disregard  the  provisions  of  sections  2  and  4  of  the  law  of  April  7, 
1870,  and  further  that  it  was  evident  from  the  by-laws  of  the  associa- 
tion regulatmg  bidding  that  the  agreement  was  invalid  under  that 
law,  as  well  as  from  the  fact  that  the  damages  claimed  were  based  on 
the  amount  by  which  the  price  of  the  undertaking  was  mcreased  in 
consecpience  of  the  cartel. 

In  1907  five  manufacturing  companies  made  an  agreement  regarding 
selling  prices  and  terms,  including  minimum  prices  for  sales  in  Austria- 
Hungary.  The  court  held  that  the  agreement  was  mvalid  under  the 
coalition  law,  that  it  was  not  material  whether  prices  had  actually 
been  advanced  or  not,  that  the  intent  to  advance  prices  appeared 
from  the  character  of  the  agreement,  that  the  limitation  of  the  agree- 
ment with  respect  to  time  and  space  did  not  relieve  it  of  illegality, 
that  the  number  of  participants  was  immaterial,  and  that  the  law 
related  to  commodities  in  general  and  not  merely  to  articles  of 
necessity.* 

While  the  inferior  courts  in  Austria  have  in  several  instances  given 
decisions  in  favor  of  the  legaUty  of  such  combinations,  the  judgments 
of  the  liighest  court  appear  to  have  been  almost  invariably  against 
them. 

Civil  law. — The  General  CivU  Code  of  Austria  ^  contains  two 
provisions  which  are  of  interest  in  this  connection.  Article  26  de- 
clares that  unpermitted  companies  as  such  have  no  rights,  either 
against  their  members  or  against  others,  and  that  they  are  incapable 
of  acquirmg  rights.  Unpermitted  companies  are  defined  as  those 
which  are  forbidden  by  the  political  laws,  or  which  are  clearly  repug- 
nant to  security,  public  order,  or  good  morals.  Article  878  is  to  the 
effect  that  whatever  can  not  be  done,  or  whatever  is  actually  impos- 
sible or  unpermitted,  can  not  be  the  subject  of  a  valid  agreement. 
Some  wi-iters  hold  that  these  provisions  would  have  application  to 
cartel  agreements  in  certain  cases,^  but  they  do  not  appear  to  have 
been  applied  by  the  courts. 

AccorcUng  to  an  ofTicial  German  publication,  a  decree  (Hofkanzlci- 
dekret)  of  August  27,  1838,  declares  that  agreements  to  prevent  com- 
petition in  bidding  at  public  auctions  are  invalid.*  The  same 
authority  states  that  a  cartel  having  the  form  of  an  association  can 
be  dissolved  under  section  6  of  the  Law  of  Associations  of  Noveml)er 
15,  1867,  as  being  contrary  to  law,  wliile  the  organization  of  a  cartel 

>  Entsch.  V.  7.  Mai  1912;  Die  Praxis  des  Obersten  Gerichtshofes,  No.  72,  Bd.  14,  p.  12-1. 
2  Allgemeuies  Biirgerliches  Gesotzbucli. 

'  rick:  PraktLscho  Fragen  des  ocsterreichLschen  Kartellrechtes;  Wien,  1913,  p.  31  et  seq. 
«  Deukschrirt  iiber  das  Kartellwesen;  Berlin,  1908,  IV.  Teil,  p.  7. 


268  REPORT  OF    THE   COMMISSIONER  OF   CORPORATIONS. 

in  the  form  of  a  stock  companj^  could  be  prevented  under  section  14 
of  the  Imperial  Patent  of  November  26,  1852,  as  not  in  accordance 
mth  the  public  interest.  A  combination  of  dextrin  manufacturers 
organized  an  association  with  limited  liability  and  sought  to  obtain 
official  registration.  This  was  refused  by  the  registry  court  on  the 
ground  that  the  association  was  not  of  the  kind  contemplated  by  the 
law,  but  a  combination  in  the  sense  of  section  4  of  the  Law  of  April 
7,  1870.  This  decision  was  affirmed  on  appeal  by  the  highest  court 
(Sept.  12,  1906).! 

Several  serious  efforts  to  enact  general  laws  controlling  cartels 
have  been  made  in  Austria,  the  &:"st  bill  (subsequently  amended) 
being  mtroduced  in  1897.^  In  1903  a  radical  departure  was  taken  in 
a  law  concerning  the  sugar  industry  which  fixed  the  quota  of  each 
refinery  and  was  intended  to  facilitate  the  formation  of  a  cartel.^ 
As  the  governing  commission  of  the  Brussels  International  Sugar 
Convention  held  this  arrangement  to  conflict  with  the  provisions  of 
the  treaty  in  such  a  manner  as  to  necessitate  the  imposition  of  a 
surtax,  this  law  was  repealed  in  the  same  year.  As  an  accompani- 
ment to  this  law,  a  bill  was  introduced  proliibiting  cartel  agreements 
concerning  the  division  of  the  mai'ket  in  the  purchase  of  sugar 
beets;  but  although  considered  in  several  subsequent  legislative 
sessions,  it  has  not  been  enacted  into  law.* 

Section  11.  Hungary. 

There  are  no  provisions  of  law  in  Hungary  which  specially  affect 
combmations,  except  section  128  of  the  Criminal  Code^  concerning 
Minor  Offenses  of  1879,  which  reads  as  follows: 

^Mioever  in  consequence  of  agreements,  promises  of  participation  in  profit  or  other 
compensation  or  any  advantage  attempts  to  frustrate  or  to  diminish  the  success  of  a 
public  auction ;  further,  whoever  obtains  on  this  basis  a  share  in  the  profit,  compen- 
sation or  other  advantage:  shall  be  punished  with  imprisonment  of  not  more  than 
two  months  and  a  tine  of  not  more  than  three  hundred  gulden. 

The  courts,  apparently  on  the  basis  of  this  law,  have  repeatedly 
held  that  combinations  or  cartels  which  aim  to  exclude  competition 
to  the  disadvantage  of  the  public  are  null  and  void.^ 

In  a  recent  case,  however,  the  highest  court  in  Hungary  took  a 
different  position.     No  official  report  of  this  case  has  been  secured, 

1  Adler  u.  Clemens,  Sammlung  handelsrechtlicher  Entscheidungen,  Bd.  XIII,  Nr.  2597,  S.  427. 

2  Regierungsvorlage,  Gesetz  v.—  iiber  Cartelle  in  Beziehung  auf  Verbrauchsgegenstande,  u.  s.  w.  1J4  der 
Beilagen  zu  den  Stenogr.  Protokollen  des  Abgeordnetenhauses,  XIV  Sess.,  1898. 

3  Gesetz  vom  31.  Janner,  1903,  betreflend  die  Regelung  der  individuellen  Vertheilung  des  Zuckereon- 
tingentes,  Reichsgesetzblatt,  1903,  S.  53. 

<  Regierungsvorlage,  Gesetz  v.—  betreffend  das  Verbot  der  Riibenrayonnirung  und  die  Lieferung  der  zur 
Zuckererzeugung  nothigen  Riibe,  1678  der  Beilagen  zu  den  St«nogr.  Protokollen  des  Abgeordnetenhauses, 
XVII  Sess.,  1903. 

6  Ungarisches  Strafgesetzbuch  iiber  Uebertretungen,  12-14,  Juni  1879. 

6  Denksehrift  iiber  das  Kartellwesen,  Berlin,  1908,  IV.  Teil,  p.  12;  Baumgarten  und  Meszl&y,  Kar- 
telle  und  Trusts,  Berlin,  1906,  pp.  281-283. 


TEUST   LAWS  AND   UNFAIR   COMPETITION.  269 

but,  according  to  a  statement  in  the  public  press,  the  facts  and  deci- 
sion of  the  court  were  as  follows:^  Several  firms  of  contractors  made 
an  agreement  regulating  their  participation  in  bidding  on  public  con- 
tracts, includmg  provisions  as  to  prices  and  conditions,  and  penalties 
for  breach  of  the  agreement.  A  party  to  the  agreement  who  disre- 
garded it  was  fined,  and  on  refusal  to  pay  the  penalty  was  sued  for 
payment.  The  defense  set  up  was  that  the  agreement  was  invalid. 
Judgment  was  given  against  the  defendant  and  on  appeal  was  upheld 
by  the  highest  court.     The  court  said  in  part: 

If  those  engaged  in  a  branch  of  business  combine  to  hinder  the  offer  of  cut  prices 
which  endanger  the  economical  operation  of  the  industry  in  order  thereby  to  main- 
tain a  reasonable  price  for  their  work,  an  agreement  pursuing  such  an  end,  and  not 
fixed  for  too  long  a  period  (it  was  for  five  years  in  this  case)  can  be  regarded  as  incon- 
sistent neither  with  the  interest  of  the  participants  nor  vnth  that  of  the  public  nor  as 
repugnant  to  good  mora's.  Persistently  low  jirices  developed  in  consequence  of  un- 
healthy competition,  for  instance,  can  result  in  a  crisis  in  the  branch  of  industry  in 
question.  A  combination  which  seeks  to  avoid  a  crisis  injurious  both  to  the  con- 
tractor and  to  the  party  employing  him  serves  also  the  interest  of  the  public.  Such 
a  combination,  which  furthermore  is  a  proper  factor  directed  to  the  maintenance  of 
a  branch  of  industry  and  whose  reason  for  existence  is  not  based  on  the  purpose 
of  frustrating  or  diminishing  the  results  of  public  biddings,  does  not  comprise  the 
active  elements  of  a  dealing  repugnant  to  section  128  Article  XL  of  the  Law  of  1879. 

It  appears  that  adjudication  of  the  validity  of  cartel  agreements 
can  be  avoided  by  providing  that  disputed  matters  shall  be  deter- 
mined by  private  arbitration,  the  decisions  of  such  a  tribunal  not 
being  subject  to  review  by  the  courts. ^ 

It  is  also  stated  that  according  to  certain  administrative  ordinances  ^ 
it  is  possible  for  the  governmental  authorities  in  certain  cases  to  dis- 
allow the  acts  of  associations  or  even  to  suspend  or  dissolve  associa- 
tions whose  by-laws  conflict  with  such  ordinances  or  which  endanger 
the  general  interests  or  the  pecuniary  interests  of  members  thereof.* 

Section  12.  France. 

In  France  both  the  criminal  and  the  civil  law  contain  provisions 
which  affect  the  legal  existence  of  industrial  combinations.  These 
laws  are  chiefly  found  in  the  general  codes  wliicli  were  enacted  shortly 
after  the  Revolution. 

Criminal  Laav. — The  principal  provision  of  the  Penal  Code  against 
cartels  is  found  in  article  419,  namely: 

Art.  419.  All  those  who  by  false  or  calumnious  reports  sown  by  design  in  the  com- 
munity, by  offers  of  prices  higher  than  those  asked  by  the  vendors  themselves,  by 
union  or  coalition  among  the  principal  possessors  of  the  same  merchandise  or  com- 
modity not  to  sell  or  to  sell  at  a  certain  price  only,  or  by  whatever  fraudulent  ways 

1  Pester  Lloyd,  Jan.  17,  1912. 

2  Baumgarten  und  Meszleny,  op.  cit.,  p.  283. 

3  Verordnungen  des  Ministers  des  Innern;  29.  -Vpril  1873,  2.  Mai  1875,  u.  26.  Feb.  1898. 
*  Baumgarten  und  Meszleny,  op.  cit.,  p.  284. 


270  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIOISTS. 

and  means,  shall  have  effected  the  advance  or  decline  of  the  prices  of  commodities 
or  merchandise  or  of  public  securities  above  or  below  the  prices  which  the  natural 
and  free  competition  of  trade  would  have  fixed,  shall  be  punished  with  imprisonment 
of  one  month  at  least  or  of  one  year  at  most  and  with  a  fine  of  five  hundred  francs  to  ten 
thousand  francs.  The  culprits  may,  fm-ther,  be  placed  by  decree  or  judgment  under 
the  surveillance  of  the  superior  police  during  two  years  at  least  and  five  years  at  most, 

Ai'ticle  420  of  the  same  code  provides  heavier  penalties  if  the  com- 
modities are  breadstuffs,  bread,  or  wine  or  other  potables.^ 

Article  419  of  the  Penal  Code  has  been  frequently  apphed  to  indus- 
trial combinations  or  cartels.  One  of  the  earhest  cases,  decided  in 
1838,  was  as  follows: 

Certain  soda  manufacturers  of  Marseille  combined  to  sell  all  their 
output  through  one  agent,  who  took  the  precaution  of  leasing  six 
factories  not  then  in  operation  for  the  purpose  of  preventmg  compe- 
tition. Prices  were  advanced  for  the  fuiished  product,  although  the 
price  of  the  raw  material  declined.  The  highest  court  in  France  de- 
clared that  this  combination  was  within  the  prohibition  of  article  41 9.^ 

In  another  early  case  the  same  court  declared  that  a  consoUdation  of 
competitors  into  a  single  company  was  not  an  illegal  coahtion  under 
article  419,  because  that  article  contemplated  a  pluraHty  of  persons 
which  did  not  exist  in  a  single  juristic  person  (personne  morale).^ 

In  1870  a  combination  was  made  of  all  the  important  manufac- 
turers of  iodine,  who  agreed  to  divide  the  field  which  supplied  the 
raw  material  and  to  fix  the  quantities  to  be  purchased  m  each,  and 
the  prices  to  be  paid  therefor;  they  agreed,  further,  to  dispose  of  the 
entire  output  of  the  manufactured  product  through  a  syndicate 
which  fixed  the  prices  and  other  conditions  of  sale.  The  court  held 
this  agreement  to  be  in  violation  of  article  419  of  the  Penal  Code 
as  well  as  invalid  under  the  civil  law,*  and  said  m  part  (p.  493) : 

It  results  from  these  statements  of  fact  and  conclusions  that  the  agreements  in 
litigation  have  organized  between  the  principal  manufacturers  of  iodine  and  the 
defendants  a  coalition  tending  to  give  to  the  merchandise  prices  above  or  below  the 
course  which  the  free  and  natural  competition  of  commerce  would  have  determined. 
WTience  it  follows  that  in  declaring  them  null  and  of  no  effect,  the  decree  which  is 
attacked,  far  from  violating  the  articles  invoked  in  the  appeal,  has  only  made  a  just 
application  of  Art.  419  of  the  Criminal  Code  and  1133  of  the  Civil  Code. 

One  of  the  most  interesting  and  important  cases  which  shows 
the  later  tendency  of  the  courts  was  that  of  a  combmation  of 
producers,  having  about  two-thirds  of  the  phosphate  production  of 
the  Somme  district,  who  agreed  to  apportion  and  limit  their  output 
and  to  fix  seUing  prices.     The  court  in  consideration  of  the  fact  that 

1  Code  P^nal,  arts.  419,  420.  The  provisions  of  the  last  sentence  in  the  section  quoted  above  appear  to 
have  been  abrogated  by  a  law  of  May  27, 1885. 

2  Mille  et  autres  fabricants  de  sonde  de  Marseille  c.  Ministfere  public,  Cour  de  Cassation,  31  ao&t,  1338; 
Journal  du  Palais,  1S38,  p.  391. 

3  Bulletin  des  arrets  de  la  Cour  de  Cassation  Criminelle,  du  25  Janvier,  1838,  p.  40. 

«Cournerie  c.  Pellieux  et  Mazd-Launay,  Cour  de  Cassation,  11  ft^vrier  1879;  Journal  du  Palais,  1879,  p. 
490. 


TRUST  LAWS  AND  UNFAIR   COMPETITION.  271 

the  combination  did  not  include  more  than  two-thirds  of  the  produc- 
tion of  the  Somme  district,  and  that  there  was  competition  from  pro- 
ducers elsewhere  in  France,  as  well  as  in  Belgium  and  other  countries, 
held  that  the  combination  did  not  comprise  the  principal  producers 
within  the  meaning  of  article  419.^ 

A  case  of  world-wide  notoriety  was  that  of  the  Secr6tan  copper 
corner  of  1887-1889.  Secretan  attempted  a  corner  in  copper  by 
making  individual  contracts  of  purchase  with  producers  in  various 
parts  of  the  world,  who  knew  his  purpose  and  expected  to  profit  by 
his  operations.  No  agreement  was  made,  however,  as  to  the  price  at 
which  Secretan  should  sell  the  copper.  The  court  stated  that  in  all 
respects  but  one  the  scheme  came  within  the  reach  of  article  419,  the 
defect  being  that  Secretan's  selling  price  was  not  fixed.  Hence,  the 
court  held  that  the  criminal  law  was  not  violated,  although  the  agree- 
ments themselves  (see  p.  272)  were  invahd  under  the  Civil  Code.^ 

A  more  recent  case  was  a  combination  of  manufacturers  in  an 
"association  with  a  collective  name"  wliich  was  alleged  to  have  been 
formed  to  suppress  all  competition  among  the  Hme  producers  of  St. 
Astier.  The  defendants  claimed  that  it  was  a  legal  association,  but 
the  lower  court  held  it  to  be  contrary  to  article  419  of  the  Penal 
Code,  because  it  aimed  to  fix  a  uniform  price  throughout  the  greater 
part  of  France.^ 

On  March  21,  1884,  an  act  was  passed,  entitled  "Law  regarding 
the  estabhshment  of  professional  syndicates."  Article  2  provides 
that  they  may  be  estabhshed  freely  without  authorization  of  the 
Government.     Article  3  of  this  law  provides  that — 

the  professional  syndicates  have  for  their  exclusive  purpose  the  study  and  defense  of 
economic,  industrial,  commercial  and  agricultural  interests. 

It  was  held  by  some  that  this  law  repealed  article  419  of  the  Penal 
Code,  but  in  the  case  of  a  mineral-water  combination  which  was 
condemned  under  article  419,  this  view  was  expressly  denied  by  the 
court,*  as  also  in  the  Secretan  case  cited  above. 

French  legal  writers  generally  find  the  following  elements  in  the 
offense  described  in  article  419,  namely,  (1)  plurahty  of  agents, 
(2)  principal  holders  of  a  commodity,  (3)  an  artificial  change  in 
price,  (4)  an  agreement  not  to  sell  except  at  a  certain  price.^ 

It  also  appears,  as  for  example,  in  the  phosphate  case  discussed 
above,  that  the  courts  take  account  of  the  circumstances  of  the  case 


>  Cajot  et  Cie.  c.  Ferry  et  May,  Cour  de  Paris,  14  a\Til,  1891;  Dalloz,  Jurisprudence  gtodrale,  1893,  Ft.  II, 
p.  70. 

2  Secretan  c.  Min.  Publ.,  Cour  de  Paris,  5  aodt,  1890;  Dalloz,  Jurisprudence  gdn^rale,  1893,  Pt.  I.,  p.  56- 

3  Mallebray  c.  Compagnie  gen^rale  des  Chaux  de  Saint- Astier  et  autres,  Tribunal  de  commerce  de  P6ri- 
gueux,  2  juin,  1899;  Journal  du  Palais,  1901,  Pt.  II,  p.  226.    For  judgment  on  appeal,  see  p.  272. 

«  A  .  .  .  et  autres  c.  Germain- Fernet,  Gourde  Lyon,  21  avril,  1896;  Journal  du  Palais,  1896,  Pt.  II,  p.  164. 
6  Cf.  Babied;  Les  syndicats  de  producteurs  et  detenteurs  de  marchandises,  Paris,  1893,  pp.  134-137; 
Colliez,  Trusts,  cartels,  comers,  Paris,  1904,  pp.  461-462. 


272  EEPOET   OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

and  in  particular  the  degree  of  control  the  combination  has  obtained 
in  deciding  whether  it  has  violated  the  law. 

Besides  article  419,  there  is  another  article  of  the  Penal  Code 
aimed  at  combinations,  namely,  article  412,  which  is  directed  at  com- 
binations to  destroy  competition  at  auctions.  This  article  reads  as 
follows : 

Art.  412.  Those  who,  in  the  sale  of  property,  of  usufruct  or  of  lease  of  movable  or 
immovable  things,  of  an  enterprise,  of  a  furnishing,  of  an  exploitation  or  of  any  serv- 
ice whatsoever,  shall  have  hindered  or  disturbed  the  freedom  of  auctions  or  public 
biddings,  by  means  of  acts,  force,  or  threats,  either  before  or  during  the  auctions  or 
public  biddings,  shall  be  punished  with  imprisonment  of  fifteen  days  at  least,  and 
of  three  months  at  most,  and  with  a  fine  of  one  hundred  francs  at  least  and  of  five 
thousand  francs  at  most. 

The  same  penalty  shall  apply  to  those  who  by  gifts  or  promises,  shall  have  kept 
bidders  away.^ 

Condemnations  have  been  obtaiued  against  persons  combining  in 
the  mamier  prohibited  by  this  section  ui  several  instances.^ 

Civil  Code. — Several  provisions  of  the  Civil  Code  have  application 
to  the  question  of  the  validity  of  combination  agreements. 

In  article  1108  the  essential  conditions  for  a  valid  contract  include 
a  lawful  ground.  Tlie  chief  articles  affectmg  the  validity  of  cartel 
agreements  are  as  follows: 

Art.  6.  Laws  which  concern  public  order  and  good  morals  may  not  be  set  aside  by 
particular  agreements. 

Art.  1131.  An  obligation  that  is  without  ground  or  is  based  on  a  false  ground  or  an 
unlawful  ground  can  have  no  effect. 

Art.  1133.  The  ground  is  unlawful  when  it  is  prohibited  by  law  or  when  it  is 
contrary  to  good  morals  or  public  order. 

Art.  1172.  Every  condition  of  an  impossible  thing,  or  contrary  to  good  morals,  or 
prohibited  by  law,  is  null  and  renders  null  the  agreement  which  depends  on  it. 

An  illustration  of  the  application  of  the  foregoing  articles  is  found 
in  the  case  of  the  combination  of  manufacturers  of  iodine,  already 
described  (p.  270).  The  court  on  appeal  declared  this  combination  to 
be  repugnant  to  article  1133  of  the  Civil  Code,  as  well  as  to  article 
419  of  the  Penal  Code.^ 

In  the  case  of  the  St.  Astier  lime  company,  the  facts  concerning 
which  have  abeady  been  stated  (see  p.  271),  the  court  on  appeal 
decided  the  company  to  be  invalid  under  the  Civil  Code;*  the  court 
said  in  part  (p.  231): 

*  *  *  that  it  sufiices  to  establish  that  the  obligation  of  the  various  contracting 
parties  had  an  unlawful  basis  and  purpose;  that  such  was  the  case  of  the  members 
of  the  association  criticised,  since  it  results  from  the  facts  and  circumstances  of  the 
case  that  the  said  association  had  been  formed  only  in  order  to  forestall  and  prevent 

1  Code  P&al,  art.  412. 

-  Gout  de  Cassation,  15  mai  1857;  Cour  de  Cassation,  8  Janvier  1863. 

"  Coiimerie  c.  Pellieux  et  Maz^Laimay ,  Cour  de  Cassation,  1 1  f^vrier,  1879;  Journal  du  Palais,  1879,p.  490. 
i  Mallebray  c.  Compagnie  g^ndrale  des  chaux  de  Saint- Astier  et  autres,  Bordeaux,  2  Janvier,  1900;  Jour- 
nal du  Palais,  1901,  Pt.  II,  p.  225. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  273 

the  foundation  at  Saint  Astier  of  competing  factories,  which  was  contrary  to  the 
principle  of  liberty  of  commerce  and  industry;  that  thus  the  agreement  attacked 
ought  to  be  annulled  also  by  application  of  articles  1131  and  1133  of  the  Civil 
Code.    *    *    * 

The  French  courts  have  developed  a  very  extensive  law  regarding 
unfair  competition  based  on  article  1382  of  the  Civil  Code,  but  no 
applications  have  been  noted  to  the  practices  of  combinations.  (See 
p.  5G9.) 

Special  laws. — In  comiection  with  the  laws  to  prevent  the 
destruction  of  competition  the  following  provision  in  a  French  mining 
decree  is  of  interest: 

It  is  prohibited  to  any  concessionaire  of  mines,  of  whatever  nature  they  maybe,  to 
unite  his  concessions  with  other  concessions  of  the  same  kind,  by  association,  acquisi- 
tion or  in  any  manner,  without  the  authorization  of  the  Government. ^ 

For  violation  of  this  decree  the  penalty  provided  is  the  same  as  for 
violation  of  article  419  of  the  Penal  Code.     (See  p.  269.) 

A  law  concerning  associations  enacted  in  1901  ^  provides  in  article 
12  that  an  association  chiefly  composed  of  foreigners  and  having  its 
principal  place  of  business  in  a  foreign  country  whose  operations  have 
the  effect  to  disturb  the  normal  conditions  of  the  market  for  securi- 
ties or  for  commodities,  under  conditions  affected  by  articles  75  to  101 
of  the  Penal  Code,^  may  be  dissolved,  and  if  the  directors,  etc.,  of 
an  association  so  dissolved  maintain  or  reestablish  it  contrary  to  law, 
they  shall  be  punished  by  fine  or  imprisonment.  This  law,  however, 
does  not  appear  to  have  had  any  practical  application. 

While  certain  Government  monopohcs  have  been  established  in 
France,  for  example,  in  tobacco,  there  do  not  appear  to  be  any 
instances  of  private  industrial  monopohes  estabhshed  by  law.* 

Section  13.  Italy. 

The  criminal  laws  of  Italy  concerning  persons  who  artificially 
aflfect  prices  generally  relate  only  to  those  who  use  fraud  or  violence. 
The  civil  law  is  substantially  similar  in  its  most  pertinent  sections 
to  that  of  France,  although  interpreted  more  liberally.  A  notable 
feature  of  Italian  legislation  is  the  establishment  of  a  compulsory 
cartel  in  the  sulphur  industry. 

Criminal  law. — The  principal  provisions  of  the  Italian  Penal 
Code,^  which  have   any  clear  relation  to  cartels,   are  articlf^s  165, 

1  Ddcret  du  23  oclobre,  lSo2,  No.  4567,  art.  1. 

2  Loi  relative  an  contrat  d'association  dii  1  jiiillct ,  VMM . 

3  These  articles  relate  chiefly  to  military  matters,  including  materials  of  war. 

*  A  bill  was  recently  introduced  in  the  Chamber  of  Deputies,  according  to  the  public  press,  which  pro- 
vided for  the  establislunent  of  a  company,  in  which  the  Government  should  be  a  stockholder,  for  the  purpose 
of  importing  and  refining  petroleum,  but  according  to  the  account  given,  monopoly  powers  were  not  to  be 
conferred  upon  it.    (See  National  I'elroleum  News,  March,  1914,  p.  52.) 

» Codice  Penalc. 

30035°— 16 18 


274  BEPOET  OF   THE   COMMISSIONER   OF   CORPOEATIONS. 

293,  299,  and  326.     Article  293,  in  the  first  paragraph,  provides  as 
follows : 

Art.  293.  Whoever,  by  spreading  false  reports,  or  by  other  fraudulent  means,  pro- 
duces upon  the  public  market  or  in  the  exchanges  of  commerce  an  increase  or  dimi- 
nution in  the  rates  of  wages,  produce,  merchandise  or  securities,  negotiable  on  the 
public  markets  or  admitted  to  the  lists  of  the  exchanges,  is  punished  with  imprison- 
ment of  from  three  to  thirty  months  and  with  a  fine  from  five  hundred  to  three  thou- 
sand lire. 

Heavier  penalties  are  provided  in  a  second  paragraph  of  this  section 
in  case  brokers  of  exchanges  are  guilty  of  a  Adolation  of  the  law. 
This  differs  from  article  419  of  the  French  Penal  Code,  in  being 
applicable  only  to  those  who  use  fraudulent  methods. 

Similar  in  general  character  to  this  law  is  article  326  of  the  same 

code,  wliich  provides  as  follows : 

Art.  326.  ^^^loever,  by  false  reports,  or  other  fraudulent  means  produces  a  scarcity 
or  dearness  of  victuals,  is  punished  with  imprisonment  of  from  one  to  five  years  and  with 
a  fine  of  from  five  hundred  to  five  thousand  lire;  to  which  penalty  is  added  temporary 
interdiction  from  public  offices,  extended  to  the  exercise  of  his  profession  if  the  cul- 
prit is  a  public  broker. 

Furthermore,  interference  with  the  freedom  of  industry  or  com- 
merce is  prohibited  in  article  165  as  follows: 

Art.  165.  Whoever,  by  violence  or  threats  restricts  or  impedes  in  whatever  manner 
the  freedom  of  industry  or  of  commerce,  is  punished  with  imprisonment  up  to  twenty 
months  and  with  a  fine  of  from  one  hundred  to  three  thousand  lire. 

Article  299,  which  relates  to  bidding  at  auctions,  provides  in  part 
as  follows: 

Art.  299.  Whoever,  by  force  or  threats,  gifts,  promises,  collusion  or  other  fraudulent 
means  impedes  or  disturbs  the  operation  of  public  auctions  or  private  bids  for  the 
account  of  the  public  administration,  or  procures  the  absence  of  the  bidders,  is  pun- 
ished vnih  imprisonment  from  three  to  twelve  months  and  also  with  a  fine  of  one 
hundred  lire. 

Greater  penalties  are  enforceable  if  the  parties  in  question  are 
clothed  with  a  pubHc  office.     The  same  section  provides  further: 

He  who  for  money  or  other  utility  given  or  promised  to  him  or  to  others  abstains 
from  competing  at  the  said  auctions  or  private  bids  is  punished  with  imprisonment 
up  to  six  months  or  with  a  fine  from  one  himdred  to  two  thousand  lire. 

A  condemnation  under  this  article  was  upheld  on  appeal.^ 
Civil  law. — The  chief  provisions  of  the  civil  law  ^  in  Italy  regarding 
the  relation  of  contracts  to  the  principles  of  good  morals  and  public 
order  (arts.  1119  and  1122  of  the  Ci\il  Code)  are  identical  with  those 
of  France  (arts.  1131  and  1133;  see  p.  272),  and  need  not  be 
repeated  here.^  Article  1104  of  the  Civil  Code  also  provides  that  for 
a  vahd  contract  it  is  necessary  that  there  be  a  lawful  gromid. 

1  p.  M.— Colombo,  Cassazione,  5  aprile,  1906;  Giurisprudenza  italiana,  Vol.  LVIII,  1906,  II.  p.  306. 

2  Codice  Civile. 

'  See  also  article  12  of  the  "Provisions  concerning  the  publication,  interpretation,  and  application  of 
the  laws  in  general,"  and  Art.  1160  of  the  Civil  Code,  which  is  similar  to  Art.  1172  of  the  French  Civil  Code. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  275 

The  interpretation  of  the  law,  however,  has  been  much  more  liberal 
in  Italy  and,  apparently,  cartel  agreements  have  never  been  held 
invalid.  In  a  case  decided  by  the  court  of  appeal  of  Naples  on 
July  2,  1900,  the  right  of  such  associations  to  regulate  prices,  etc., 
was  expressly  upheld.*  In  1903  the  court  of  cassation  of  Na])les 
declared  that  a  combination  of  producers  to  prevent  injurious  com- 
petition and  to  maintain  remunerative  prices  was  not  invalid  under 
the  civil  law.^     The  court  said  in  part  (p.  625) : 

The  court  of  appeals  has  properly  concluded  that  in  the  Penal  Code  there  is  no 
prohibitive  rule  in  this  respect.  Then  it  considered  if  it  could  find  any  prohibition 
in  article  1122  of  the  Civil  Code,  a  complement  to  article  1104  which  requires  as  an 
essential  to  a  contract  a  lawful  ground  for  an  obligation,  which  declares  that  the 
ground  is  unlawful  when  it  is  contrary  to  law,  to  good  morals  or  to  public  order. 
And  such  a  prohibition  it  did  not  find  in  these  pro\'isions  of  the  code,  nor  is  there 
any  agreement  therein  forbidden  by  law.  It  has  been  justly  observed  that  there  is 
nothing  unlawful  in  the  fact  of  the  association  or  union  and  in  the  assumption  of  obli- 
gation on  the  part  of  the  associates,  because  this  is  an  exercise  of  liberty  and  not  a 
\aolation  of  the  same,  and  because  the  limitation  of  the  acts  of  the  contracting  parties 
is  an  effect  characteristic  of  all  contracts. ^ 

In  a  more  recent  case  where  the  bakers  of  Parma  had  made  an  agree- 
ment which  expressly  provided  for  fixing  solhng  prices  the  court  held 
that  the  agreement  was  not  invalid.^ 

The  Italian  Ci^^l  Code  contains  in  article  1151  a  pro\dsion  prac- 
tically identical  with  that  of  the  French  civil  law  (art.  1382)  regard- 
ing mifair  competition,  namely: 

Art.  1151.  Whatever  act  of  a  person  causes  damage  to  another  obliges  him  by  the 
fault  of  whom  it  happened  to  compensate  the  damage. 

An  instance  of  the  application  of  this  provision  to  a  monopo- 
listic combination  is  found  in  the  following  case:  A  company 
called  Societa  Siilviati  Jesurum  C.  L.  was  formed  to  combine 
the  businesses  of  several  dealers  in  Venetian  specialties.  The 
same  parties  organized  another  company  called  the  Venice  Hotels 
(Ltd.),  which  arranged  to  direct  its  patrons  to  the  shops  of  the  first- 
mentioned  company.  Pauly  e  C,  a  rival  dealer  in  Venetian  special- 
ties, by  means  of  printed  advertisements,  warned  foreigners  in  Venice 
of  the  said  combination  and  soUcited  their  patronage,  and  was  sued 
for  damages  by  the  combination.  In  defense  the  claim  was  made  that 
the  combination  was  guilty  of  unfair  competition  and  that  the  combi- 
nation in  itseH  constituted  an  injury.  The  court  held  that  as  Pauly 
e  C.  was  established  after  the  formation  of  the  combination  the  ques- 
tion of  its  monopolistic  character  and  effects  was  purely  academic,  so 

1  Corte  d'Appello,  Napoli,  2  luglio,  1900;  Aimall  della  Giurisprudenza  italiana,  vol.  34,  marzo,  1900, 
pp.  460-462. 

2  Algranati  c.  Society,  Viteri^,  Corte  di  cassazlone,  Napoli,  26  maggio,  1903;  Monitore  dei  Tribunal!,  1903, 
p.  625. 

3  Soc.  fornal  o  pa.stai  c.  Finella,  Tribunale  di  Tarma,  25  fobbraio  1910,  Kivista  di  Diiutto  Commerciale, 
1910,  p.  280. 


276  REPORT  OF   THE   COMMISSIONER   OF   CORPORATIONS. 

far  as  the  defendant  was  concerned,  and  that  the  latter  had  no  stand- 
ing m  court  for  the  purpose  of  showing  that  the  combmation  was  con- 
trary to  the  freedom  of  commerce.^ 

Special  laws.^ — In  a  special  law  regarding  emigration  it  is  pro- 
vided that  in  case  of  a  combination  of  shipping  concerns  to  refuse 
transportation  to  emigrants  at  rates  approved  and  estabUshed  by 
the  Government  their  hcenses  shall  be  withdrawn.^ 

Compulsory  sulphur  cartel. — The  sulphur  mdustry  of  Sicily  was 
for  some  time  practically  controlled  by  the  Anglo-Sicilian  Sulphur 
Co.,  but,  on  account  of  competition  from  the  United  States,  that 
company  came  into  difficulties  and  thereby  a  sharp  crisis  developed 
in  the  Sicilian  industry.  For  this  reason  the  Italian  Parliament  in 
1906  established  a  compulsory  cartel.^ 

The  cartel  thus  established  by  law  embraces  all  the  sulphur  pro- 
ducers of  Sicily,  and  is  called  "Obligatory  Association  for  the  Sicil- 
ian Sulphur  Industry."  It  was  formed  for  12  years  dating  from 
August  1,  1906.  The  purpose  of  the  association  is  to  conduct  the  sale 
of  the  raw  sulphur  for  the  common  profit  of  the  members.  Sulphur 
for  export  to  Italian  or  European  markets  must  be  sold  at  the  same 
prices  to  all  who  desire  it.  The  price  of  the  sulphur  sold  in  Italy 
for  agriculture  must  not  exceed  the  average  price  of  sulphur  for  three 
years  preceding  less  5  per  cent.  The  association  has  the  sole  right  to 
sell  sulphur,  and  its  export  from  Sicily  by  others  without  its  assent  is 
forbidden.  The  cartel  may  estabhsh  by-laws  restricting  the  pro- 
duction of  sulphur  when  market  conditions  make  it  necessary,  but 
such  restriction  must  first  have  the  approval  of  the  Government. 

From  the  proceeds  of  sale  of  sulphur  is  deducted  (a)  the  cost  of 
administration  (not  to  exceed  1  lira  per  ton);  (b)  the  amount  neces- 
sary to  cover  the  expenses  incurred  in  connection  with  the  miners' 
credit  bank,  and  the  rebate  on  the  price  of  sulphur  sold  for  consump- 
tion in  Italy,  as  well  as  any  expenses  for  the  support  of  laborers 
deprived  of  employment  tlu"ough  a  restriction  of  production;  and  (c) 
a  tax  of  0.50  lira  per  ton  to  be  used  for  old  age  and  invalid  pensions 
for  sulphur  miners.  The  association  has  the  particular  duty  to  estab- 
lish and  operate  warehouses  in  Sicilian  ports  for  the  storage  of  sid- 
phur,  to  accumulate  funds  for  the  establishment  of  a  miners'  credit 
bank  to  make  loans  to  producers  of  raw  sulphur,  etc.,  at  interest 
not  exceeding  5  per  cent,  and  to  provide  for  old  age  and  invalid 
insurance  for  sulphur  miners. 

The  government  of  the  cartel  is  lodged  in  a  general  assembly  of  50 
delegates,  a  board  of  directors,  and  a  director  general.    The  director 

»  Societa,  Salviati  Jesurum  C.  L.  c.  Ditta  Pauly  e  C.,Tribimalo  di  Venezia,  14  aprile  1904;  Rivista  di 
Diritto  Comraercialo,  1904,  II,  p.  455. 

2  Legge  31  gennaio,  1901,  suUa  eniigrazione,  No.  23. 

3  Legge  portante  provcddimenti  e  Fistituzione  di  un  consorzio  obbligat orio  par  1  'industria  solfifera  siciliana, 
15  luglio,  1906,  N.  333.    A  translation  of  tliis  law  is  given  in  Exhibit  E  of  this  report  (see  p.  781). 


TRUST  LAWS  AND  UNFAIR   COMPETITION.  277 

general  is  named  by  the  Italian  Government.  The  general  assembly- 
is  partly  named  by  certain  Government  officials,  partly  by  certain 
chambers  of  commerce,  and  partly  elected  by  the  sulphur  producers. 
The  voting  power  of  the  cartel  members  is  based  on  the  quantity  of 
sulphur  produced.  Disputes  between  members  and  the  association 
are  settled  by  an  arbitration  court,  the  personnel  of  this  court  being 
prescribed  in  general  terms  in  the  law.  The  ItaUan  Government 
provided  a  loan  of  two  milUon  lire  at  a  low  interest  rate  for  starting 
the  miners'  credit  bank. 

By  a  subsequent  law  ^  certain  minor  modifications  were  made  in 
the  substantive  provisions,  including  the  right  to  sell  sulphur  below 
the  normal  price  in  certain  instances,  and  restricting  the  right  to 
open  new  mines  to  parties  furnishing  evidence  of  financial  ability  to 
conduct  operations  in  a  rational  and  efficient  manner,  while  various 
changes  were  also  made  with  respect  to  the  organization  and  govern- 
ment of  the  combmation. 

Citrus  Products  Law. — A  law  was  passed  on  July  5,  1908,'  which 
established  a  commission  for  the  promotion  of  the  citrus  products 
industry.  Among  other  things  the  commission  is  authorized  (1)  to 
furnish  certificates  of  analysis  of  certain  citrus  products  shipped,  ship- 
ment without  such  certificate  bemg  prohibited;  (2)  to  advance  money 
at  interest  to  producers  of  citrus  products  up  to  two-thhds  of  their 
value;  (3)  to  sell  for  the  producers  citrus  products  confided  to  it,  a 
minimum  selling  price  being  fixed  for  each  year;  (4)  to  levy  a  tax  on 
the  said  citi-us  products  analyzed  by  it,  in  order  to  provide  for  ex- 
penses of  administration,  etc.,  a  different  kind  of  tax  being  levied  on 
products  intrusted  to  it  for  sale  than  on  those  sold  by  others. 

Section  14.  Spain. 

There  are  various  provisions  of  the  Penal  Code  of  Spain  which 
punish  with  imprisonment  and  fine  those  who  disturb  the  natural 
course  of  prices  of  commodities,  securities,  or  other  things  which  are 
matters  of  contract,  as  determined  by  free  competition,  by  spreading 
false  reports  or  "any  other  artifice."  In  case  the  commodity  is  of 
prime  necessity,  the  maximum  penalties  shall  be  inflicted.^  Lesser 
penalties  are  provided  in  article  593  of  the  same  code  for  those  who 
commit  acts  of  a  similar  character  for  the  same  purpose,  where  the 
act  does  not  involve  a  delict,  but  the  distinction  between  the  two  is 
not  clear. 

To  attempt  to  keep  competitors  away  from  public  auctions  by 
thi'eats,  gifts,  promises,  or  other  artifices  m  order  to  influence  the 

iLegge  No.  301,  30  guigno,  1910,  concemente  i  provvedimenti  per  I'industriu  solfifera  sicUiana.  Gazz. 
Ufl.  1  luglio,  1910. 

« Legge  No.  404,  S  luglio  1908,  concemente  i  prowedimenti  per  favorire  il  commerclo  degli  agrumi  e  lore 
derivati  (Gazz.  Utf.  17  luglio  1908). 

« C6digo  Penal,  arts.  557, 558. 


278  EEPORT   OF   THE   COMMISSIONER  OF   COEPOKATIONS. 

prices  at  such  auctions  is  made  an  offense  by  article  555  of  the  Penal 
Code. 

The  Civil  Code  ^  makes  contracts  which  are  repugnant  to  good 
morals  null  and  void  (arts.  1116,  1271,  and  1275).  Article  1275  com- 
bines in  substance  the  provisions  of  articles  1131  and  1133  of  the 
French  Civil  Code  (seep.  272),  while  the  provisions  of  articles  1116  and 
1261  of  the  Spanish  law  are  similar  to  those  of  articles  1172  and  1108, 
respectively,  of  the  French  law.  Article  1902  of  the  Civil  Code,  which 
is  substantially  similar  to  article  1382  of  the  French  Civil  Code,  is 
applicable  to  unfair  competition,  but  no  instance  of  its  application 
to  combinations  has  been  noted. 

Section  15.  Portugal. 

The  Penal  Code  of  Portugal,^  in  a  section  of  the  code  entitled 
"Monopolies,"  in  article  275,  makes  it  an  offense  for  merchants  to 
conceal  supplies  of  daily  necessities  or  to  refuse  to  sell  them  to  any 
purchaser.  In  article  276  penalties  are  provided  for  those  who  by 
fraudulent  means  succeed  in  altermg  the  prices  of  commodities  or 
public  securities  which  would  result  from  free  competition;  in  case  of 
a  combmation  of  individuals  the  offense  occurs  with  the  commence- 
ment of  its  execution.  Article  278  makes  it  an  offense  to  keep  any- 
one away  from  an  auction  authorized  by  law  or  by  the  Government 
by  means  of  gifts  or  promises  or  to  embarrass  or  disturb  free  action 
by  violence  or  threats. 

There  are  certain  provisions  of  the  Civil  Code  which  relate  to  the 
validity  of  agreements.^  Article  10  declares  that  acts  committed  con- 
trary to  the  prohibitions  or  commands  of  the  law  are  void  unless  it  is 
otherwise  provided,  but  the  parties  interested  may  make  them  valid 
by  mutual  consent  if  the  law  which  is  infrmged  thereby  does  not  affect 
public  policy.  Article  671  provides  in  part  that  acts  contrary  to 
public  morals  or  to  obligations  imposed  by  the  law  can  not  be  made 
the  objects  of  a  legal  contract. 

Article  2361  of  the  Civil  Code,  Uke  article  1382  of  the  French  Civil 
Code  (see  p.  273),  is  applicable  to  unfair  competition. 

Section  16.  Switzerland. 

There  is,  as  yet,  no  general  criminal  law  in  Switzerland,  tliis 
matter  being  largely  within  the  jurisdiction  of  the  several  confederated 
Cantons. 

The  civil  law  of  Switzerland  contains  several  provisions,  the 
interpretation  of  wliicli  is  important  with  relation  to  industrial  com- 
binations. 

Civil  law. — Pertinent  provisions  of  the  civil  law  are  found  both 
in  the  Civil  Code  and  in  the  Law  of  Obhgations.     Article  27  of  the 

»  C6digo  Civil.  2  C6digo  Penal,  16.  de  Setembro  1886.  3  Codigo  Civil,  1S67,  arts.  10,  671. 


TRUST  LAWS  AND  UNFAIR   COMPETITION.  279 

Civil  Code^  declares  that  no  one  may  restrict  the  use  of  his  liberty 
to  an  extent  which  is  repugnant  to  law  or  good  morals.  Article  20 
of  the  Law  of  Obhgations  provides: 

Art.  20.  An  agreement  which  has  an  impossible  or  unlawful  content,  or  which  is 
repugnant  to  good  morals  is  void.^ 

Certain  other  articles  of  the  Law  of  Obligations  affect  the  vaUdity 
of  acts  or  agreements  which  are  contrary  to  good  morals,  namely, 
articles  19,  66,  163,  230,  and  326.  In  particular  it  may  be  noted 
that  accordmg  to  article  66  whatever  has  been  given  in  order  to  ob- 
tain an  illegal  or  immoral  result  can  not  be  demanded  back,  that 
according  to  article  163  a  conventional  penalty  can  not  be  demaiided 
if  it  is  intended  to  enforce  an  immoral  promise,  and  that  according 
to  article  230,  if  an  auction  is  interfered  with  in  an  unla^\'ful  or 
immoral  manner,  anyone  who  has  an  interest  therein  can  attack  it 
within  a  period  of  10  days. 

In  a  case  decided  in  1911,^  a  milk  deahng  company  had  broken  an 
agreement  with  a  milk  producers'  cartel  which  had  restricted  com- 
petition, and  it  set  up  in  defense  that  the  agreement  was  contra  bonos 
mores  and  invahd  under  section  17  of  the  Law  of  Obhgations  of  18S1, 
wliich  provided:  "Only  a  performance  which  is  possible  and  not 
unlawful  or  immoral  can  be  the  subject  of  an  agreement."  The 
court  said  in  part  (p.  211) : 

It  is,  however,  not  apparent  how  the  agreed  apportionment  of  the  milk  sales  between 
the  producer  and  dealers  *  *  *  is  immoral.  Forevidently  neither  the  interests  of 
the  milk  consumers  are  endangered  in  a  manner  that  can  be  called  an  insupportable 
monopolization  of  a  general  indispensable  article  of  food  on  account  of  artificial  price 
regulation,  nor  is  the  claim  of  the  defendant  true  that  the  maintenance  of  the  pro- 
hibition would  make  the  dealing  in  milk  impossible  for  it. 

An  interestmg  case,  of  which  a  detailed  statement  has  been  made 
in  the  press,  concerned  the  breach  of  a  grain  miUers'  cartel.  A  mem- 
ber, contrary  to  the  cartel  agreement,  sold  his  flour  directly.  The 
Federal  court  in  deciding  the  matter  considered  the  appUcation  of 
section  20  of  the  Law  of  Obhgations,  referred  to  above,  and  declared 
that  this  did  not  constitute  a  defense  merely  because  the  conven- 
tional penalty  imposed  was  very  large.  Judgment  was  given  for 
the  plaintiff,  and  the  conventional  penalty  which  was  applicable  was 
also  determined  by  the  court.* 

Protection  against  unfair  competition  is  found  in  sections  41  and 
48  of  the  Law  of  Obhgations,  but  no  application  of  these  rules  has 
been  noted  with  respect  to  combinations. 

1  Schweizerlsches  Zivilpesetzbuch  vom  10.  December  1907. 

2  Bundesge-setz  betreffend  das  Obligationenrecht  v.  30.  Miirz  1911. 

3  Entsch.  d.  Schweizerischen  Bundesgerichts,  1911,  Teilll.,  S.  205.  Urt.  v.  24.  Juni  1911  in  Sachen  Verband 
nordwestschweizerische  Milchgenossenschaften  gegen  Birsecksche  Produktions-  und  Konsumgenossen- 
schaft. 

*  Arrfet  du  31  mai  1913;  Kartell-Rundschau,  Nov.  1913,  pp.  903-905. 


280  REPORT   OF   THE   COMMISSIONER  OF   CORPORATIONS. 

Section  17.  Belgium. 

Formerly  both  the  Civil  and  Penal  Codes  in  Belgium  were  the 
same  as  in  France.  The  provisions  of  the  Civil  Code  are  still  the 
same  (see  p.  281),  but  the  provisions  of  the  Penal  Code  were,  in 
1866,  modified  in  part,  particularly  by  the  abrogation  of  the  prohi- 
bitions contained  in  articles  419  and  420  of  the  French  law.  Monopo- 
lizing G'accaparement)  is,  therefore,  no  longer  punishable.* 

Criminal  law.— The  principal  provisions  of  the  present  Penal 
Code  of  Belgium  wliich  are  pertinent  are  articles  310,  311,  and  314. 
Article  314,  which  forbids  combinations  to  prevent  competition  at 
auctions,  is  substantially  the  same  as  the  first  paragraph  of  article 
412  of  the  French  Penal  Code  (see  p.  272),  except  that  the  word 
"acts"  is  not  included  in  the  means  employed,  which  embrace  only 
force  and  threats,  and  need  not  be  quoted  here.  Article  311  is  a 
modification  of  article  419  of  the  French  code,  and  reads  as  follows: 

Persons  who  by  whatever  fraudulent  means  shall  have  caused  an  increase  or  decrease 
of  the  prices  of  produce  or  merchandise  or  of  public  securities  shall  be  punished  with 
imprisonment  of  one  month  to  two  years  and  with  a  fine  of  three  hundred  to  ten  thou- 
sand francs.^ 

This  Belgian  law,  unhke  the  French  law  (art.  419),  applies  only 
in  case  fraudulent  methods  are  used. 

Of  more  special  interest  is  the  first  paragraph  of  article  310  of  the 
Penal  Code,  namely: 

Every  person,  who  with  the  purpose  of  compelling  the  increase  or  decrease  of  wages, 
or  of  interfering  with  the  free  operation  of  industry  or  of  labor,  shall  have  committed 
violence,  proffered  insults  or  threats,  adjudged  fines,  prohibitions,  interdictions  or 
any  proscription  whatever,  either  against  those  who  labor  or  against  those  who  employ 
labor,  shall  be  punished  with  imprisonment  from  one  year  to  two  years  and  with  a 
fine  of  fifty  to  one  thousand  francs,  or  with  one  of  these  penalties  only.^ 

An  additional  paragraph  of  this  article  relates  to  actions  of  assem- 
blages of  labor,  etc. 

An  interesting  case  involving  an  interpretation  of  this  law  was 
briefly  as  follows:  A  combination  of  glass-makers  made  an  agree- 
ment in  1904,  which  organized  a  lockout  and  the  shutting  down 
of  the  works.  A  member  thereof  was  alleged  to  have  infringed 
the  agreement,  and  the  question  of  authority  being  disputed,  it  was 
agreed  to  submit  the  matter  to  arbitration.  The  defendant  com- 
pany declared  that  it  had  the  right  not  to  establish  a  lockout  with- 
out being  fined,  and  especially  that  such  fines  could  not  be  adjudged 

1  Pandectes  Beiges,  Bruxelles,  1878,  T.  I.,  p.  995.  Prior  to  1866  a  combination  of  forty  brewers  in  Ghent 
was  indicted  for  increasing  the  price  of  beer;  they  were  found  guilty  and  the  judgment  of  condemnation  was 
confirmed  in  the  highest  court  of  appeal.  De  Leener,  Organisation  Syndicale  des  chefs  d'industrie. 
Bruxelles,  1909,  Vol.  II,  p.  217. 

«  Code  Pdnal,  art.  311. 

3  Code  pdnal,  art.  310,  as  amended  by  the  law  of  May  30, 1892.  Nearly  similar  provisions  are  found  in 
article  416  of  the  French  Penal  Code. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  281 

without  violation  of  article  310.  The  last  claim,  however,  was  sub- 
sequently withdrawn.  The  arbitration  court  decided  against  the 
defendant  member.  Of  its  own  motion  the  local  magistracy  inter- 
vened ex  officio  to  annul  the  arbitration  on  the  ground  that  under 
article  1004  of  the  Code  of  Civil  Procedure  an  arbitration  court  could 
not  disregard  the  criminal  law.^ 

The  court  finally  annulled  the  arbitration  decision  in  1909,  after 
having  determined  as  a  necessary  prehminary  thereto  that  the  law  as 
expressed  in  article  310  did  prohibit  the  imposition  of  a  fme.^ 

Speaking  of  the  resolutions  of  this  combination  with  relation  to 
article  310,  the  court  said  in  part  (p.  86) : 

That  the  resolutions  were  highly  restrictive  of  the  liberty  of  the  participants  to  the 
agreement,  and  of  their  workmen;    *    *    *    _ 

Civil  law. — As  already  intimated,  the  Belgian  Civil  Code  in  arti- 
cles 6,  1108,  1131,  1133,  and  1172  preserves  in  identical  language  the 
articles  of  the  French  Civil  Code,  bearing  the  same  numbers  which 
have  been  quoted  above  (see  p.  272),  and  need  not  be  repeated 
here. 

The  courts,  apparently,  have  generally  upheld  the  validity  of  car- 
tel agreements.^  A  combination  of  glass  manufacturers  in  1872 
agreed  that  the  works  should  be  shut  down  for  a  certain  period  and 
that  those  conforming  thereto  should  participate  in  certam  contribu- 
tions agreed  to  by  aU  of  the  members.  One  of  the  concerns  refused 
to  pay  its  contribution  and  was  sued  therefor.  The  court  held  that 
the  contribution  was  a  lawful  obligation,^  and  said  in  part  (p.  177) : 

That  the  agreement  between  the  parties  was  not  an  attack  on  the  free  exercise  of 
industry  and  labor;  that  it  had  for  its  cause  an  excess  of  production  which  would 
involve  an  abnormal  decline  of  prices;  that  the  shutdown,  freely  agreed  to,  of  a  lim- 
ited number  of  furnaces  during  a  fixed  period  in  order  to  reestablish  a  fair  proportion 
between  production  and  the  needs  of  consumption  is  not  at  all  contrary  to  the  public 
interest. 

The  legality  of  combinations  of  employers  and  laborers  to  fix  the 
price  or  conditions  of  labor  is  shown  in  a  recent  judicial  decision.^ 
The  essential  facts  of  the  case,  as  well  as  the  chief  legal  distinctions 
made  by  the  court,  are  sufficiently  indicated  in  the  following  excerpt 
from  the  opinion  (p.  266) : 

Although  employers  and  laborers  have  the  right  to  combine  in  order  to  fix  the 
price,  the  conditions  of  labor,  etc.,  the  use  of  this  right  is  limited  and  the  abuse  of  it 
is  repressed  by  the  laws  wliich  protect  the  liberty  of  the  laborer  and  liis  work;  that 
it  is  permitted  to  trades-unionists  to  make  by-laws  which  govern  the  members  of  the 

>  De  Leener,  op.  cit.,  Vol.  II,  pp.  225-226. 

s  Procureur  general  etc.  c.  Socidtd  anonymedesverreriesdeL'ancreetc.,Courd'appel  deLidge,  2if6vTieT, 
1909.     Pasicrisie  Beige,  1909,  II,  p.  84. 
sCf.  De  Leener,  op.  cit..  Vol.  II,  p.  222. 

*  Ilansotte  et  Cle.  c.  Mondron  et  consorts,  Bruxelles,  29  mars  1S77;  Pasicrisie  Beige,  1S77,  Pt.  II,  p.  175. 
6  De  Beozieres  c.  De  Paepe,  Cour  d'Appel  de  Gand,  9  Janvier  1907;  Pasicrisie  Beige,  1907,  Pt.  II,  p.  2C4. 


282  EEPORT   OF    THE   COMMISSIONER   OF    CORPORATIONS. 

union  and  which  authorize  the  expulsion  of  a  member  who  disobeys  them ;  but  that 
in  advising  third  parties  of  tins  exchision  with  the  threat  that  they  will  be  exposed 
to  disagreeable  consequences  in  case  they  take  the  excluded  person  into  their  service, 
the  secretary  of  the  union  attacked  the  freedom  of  the  latter;  that  he  ought  to  com- 
pensate the  damage  caused  by  that  illicit  act. 

It  is  otherwise,  however,  with  respect  to  combinations  for  bidding 
at  pubhc  auctions.  In  an  action  for  damages  for  breach  of  an  oral 
agreement  to  avoid  competition  in  making  bids  to  furnish  materials 
to  the  State  railways,  the  court  held  that  while  article  314  of  the 
Penal  Code  woidd  not  apply  in  this  case,  the  agreement  as  shown 
by  the  record  was  invahd  under  articles  6,  1108,  1131,  and  1133  of 
the  Civil  Code  as  contrary  to  public  order,  and  based  on  an  unlawful 
ground.^ 

In  a  more  recent  case,  which  did  not  affect  bidding  on  public  con- 
tracts, a  different  conclusion  was  reached.  Certain  producers  of 
stone  formed  a  syndicate  through  which  they  agreed  to  sell  their 
product,  and  penalties  were  provided  for  violations  of  the  agreement. 
A  member  of  the  syndicate  who  sold  stone  contrary  to  the  agreement 
and  was  sued  for  the  conventional  penalties  set  up  the  defense  that 
the  agreement  was  invalid.  The  court  of  appeal  of  Brussels  found 
that  the  prices  of  the  syndicate  were  not  abnormally  high;  that  the 
syndicate  had  obtained  only  54  per  cent  of  the  contracts  for  which 
it  had  competed ;  that  it  did  not  bid  on  public  works ;  that  the  agree- 
ment was  made  for  five  years  only ;  and  that  it  covered  only  a  part  of 
the  output  of  the  members  of  the  syndicate.  The  Court  of  Appeal, 
reversing  the  judgment  of  the  lower  court,  held  that  the  agreement 
was  valid  and  said  in  part: 

That  no  provision  of  law  nor  principle  of  public  order  forbids  merchants  to  associate 
and  to  grant  an  exclusive  agency  of  sale  to  an  organization  created  by  them;  that  it 
can  not  be  disputed  that  the  right  to  trade  may  be  restrictea  in  a  certain  measure, 
that  such  an  agreement  does  not  violate  this  principle  in  so  far  as  it  does  not  stipu- 
late a  general  and  absolute  prohibition,  namely,  unlimited  as  to  time,  place,  and 
object. 2 

The  Belgian  Ci^il  Code  also  contains  in  article  1382  precisely  the 
same  provision  applicable  to  unfair  competition  which  is  found  in  the 
same  article  of  the  French  Civil  Code.     (See  p.  273.) 

The  agent  of  an  association  of  dealers  in  druggists'  'goods,  which 
aimed  to  enforce  fixed  resale  prices,  notified  members  of  the  associa- 
tion that  a  certain  dealer  was  interdicted  because  of  nonobservance 
of  the  regulations  of  the  association.  The  association  announced'in 
its  publications  its  intention  to  proceed  vigorously  against  the  delin- 
quent dealer  and  to  "quarantine"  him.  The  said  dealer  was  not  a 
member  of  the  association  and  had  no  general  agreement  with  them, 

>  Nyssens  et  de  Buyser  c.  Bodart,  Cour  d'Appel  de  Bmxelles,  5  mai  1904;  Pasicrisie  Beige,  1904,  Pt.  II, 
p.  240. 

2  Soci(5t4  cooperative  pour  la  vente  dii  petit  granit  c.  la  soci^te  anonymed'Ogn^Sprimont,  Cour  d'Appel 
de  BruxeUes,  24  juillet  1913;  Pasicrisie  Beige,  1913,  II,  pp.  314,  318. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  283 

though  with  respect  to  certain  articles  he  had  made  agreements  with 
the  manufacturers  not  to  sell  1)elow  the  established  price,  and  claimed 
that  he  had  kept  his  agreements.  The  dealer  brought  an  action  for 
damages  against  the  agent  of  the  association  for  procuring  the  refusal 
by  manufacturers  to  supply  him.  The  court  declared  that  the  free 
exercise  of  trade  and  industry  was  a  principle  of  public  order  accord- 
ing to  the  decree  of  March  17,  1791,  article  7,  and  that  an  infringe- 
ment of  that  principle  was  unlawful  even  though  the  acts  committed 
were  not  those  prohibited  in  articles  310  and  311  of  the  Penal  Code. 
The  court  held  that  the  defendant  was  not  permitted  to  resort  to 
practices  to  induce  all  or  a  certain  number  of  manufacturers  to  refuse 
to  sell  to  the  plaintiff  or  to  sell  only  at  a  price  which  made  it  impossible 
to  resell  at  a  profit.  The  court  held  further  that  there  was  ground 
for  an  action  for  damages,  but  referred  the  case  to  an  expert  account- 
ant for  conciliation  and  eventually  the  determination  of  how  much 
damage,  if  any,  had  been  sustained  by  the  plaintiff.  The  defendant 
was  also  required  to  pay  the  cost  of  publication  of  the  judgment  for 
the  benefit  of  the  plaintiff.* 

Section  18.  The  Netherlands. 

The  Penal  Code  of  the  Netherlands,  in  article  334,  prohibits,  un- 
der penalty  of  imprisonment,  all  those  who  seek  by  spreading  false 
reports  to  obtain  an  unlawful  advantage  over  another  in  the  increase 
or  decrease  of  the  price  of  commodities  or  securities.^ 

The  Civil  Code  in  articles  1371  and  1373  declares  that  an  agreement 
without  ground  or  based  on  a  false  or  unlawful  ground  is  invaUd, 
and  that  under  unlawful  grounds  are  comprehended  whatever  is  for- 
bidden by  law  or  is  contrary  to  good  morals  or  pubUc  order. ^ 

These  provisions  of  the  Civil  Code  are  not  construed,  apparently, 
to  render  invahd  a  combination  agreement. 

The  validity  of  a  cartel  contract  was  involved  in  the  following 
case:  A  combination  of  glass  manufacturers  known  as  the  "Kartel 
van  Glasfabrikanten  in  Nederland"  was  formed  in  1905.  The  arti- 
cles of  agreement  provided  that  the  members  should  not  alienate 
their  factories  except  under  certain  conditions  and  that  the  non- 
observance  of  this  provision  should  be  punishable  by  fine.  A  com- 
pany called  the  Naamlooze  Vennootschap  Zuid-HoUandscho  Glas- 
blazerij,  which  was  a  party  to  this  agreement,  sold  out  and  went  into 
liquidation  in  a  manner  contrary  to  the  provisions  of  the  agreement, 
and  was  sued  for  the  penalty.  An  arbitration  court  (which  has  a 
legal  status)  held  that  this  company  should  pay  the  fhie.'* 

1  Gripekoven  c.  S    .    .    .    Tribunal  de  Commerce  de  Bruxelles,  12  novembre  1907;  La  Belgique  Judici- 
aire,  1907,  p.  1405. 

2  Wetboek  van  Strafrecht,  art.  334. 

3  Burgerlijk  Wetboek,  arts.  1371,  1373. 

*  Arbitrale  Uitspraken;  Beslissing  van.  11  Nov.  1909;  van  Deventer  tegen  Maseland  en  N.  V.  Zuid-Hol- 
landsche  Glasblazerij.    AVeekblad  van  het  Rocht,  1910,  No.  8968,  p.  2. 


284  REPORT  OF   THE   COMMISSIONER  OF   CORPORATION'S. 

Another  case,  for  which^  however,  no  official  report  has  been  ob- 
tained, is  stated  to  be  substantially  as  follows:  An  association  of 
fruit  wholesalers  in  the  Netherlands  had  an  agreement  concerning 
prices  and  blacklists,  with  penalties  for  infractions  thereof.  A  mem- 
ber of  the  association,  contrary  to  the  agreement,  purchased  from 
blackUsted  firms,  and  was  sued  by  the  association  for  the  payment 
of  penalties.  The  court  held  that  the  association  was  established  to 
uphold  the  interests  of  its  members,  and  that  the  defendant  had 
injured  such  interests  and  gave  judgment  for  the  penalty  according 
to  the  agreement.^ 

The  Civil  Code  also  contains  in  article  1401  a  provision  applicable 
to  unfair  competition  substantially  similar  to  article  1382  of  the 
French  and  Belgian  codes. ^  No  application  of  this  provision  to  cartel 
practices  has  been  noted. 

Section  19.  Sweden. 

The  general  laws  of  Sweden  contain,  apparently,  no  provisions 
which  are  appUcable  to  combinations  to  control  the  market.^ 

Regulation  of  iron-ore  exports. — The  Swedish  Government 
made  an  agreement  with  an  iron-ore  mining  company  in  1907,  which 
is  of  significance  in  this  connection.  According  to  this  agreement  it 
has  become  a  shareholder  in  the  company  and  regulates  the  exporta- 
tion of  iron  ore.  The  general  basis  and  purposes  of  this  agreement 
are  set  forth  in  the  following  statement  of  the  Swedish  Prime  Minister 
in  1910: 

Formerly  our  laws  permitted  the  discoverer  of  an  ore  deposit  on  crown-land  to 
become  sole  owner  of  the  same.  This  system,  which  was  intended  to  promote  the 
discovery  of  new  ores,  was  changed  so  as  to  preserve  for  the  state  the  right  of  owner- 
ship and  the  control  of  those  ore  deposits,  first  to  the  effect  that  the  discoverer  receives 
one-half  and  the  state  the  other,  such  as  is  the  case  with  deposits  on  private  ground. 

Later  on,  all  claims  upon  crown-land  in  the  Northern  provinces,  where  the  state 
owns  extensive  areas,  were  prohibited  in  anticipation  of  legislation,  and  finally  it 
was  decided  this  year  to  lay  out  certain  areas  aroimd  the  great  ore  fields  as  govern- 
ment mining  fields  within  which  no  claims  shall  be  located. 

Very  likely  you  all  know  that  our  largest  iron  ore  resoiu-ces  are  in  Gellivare  and 
Kiirunavaara.  Wlien  the  government  decided  in  1898  to  build  a  railway  for  the 
exploitation  of  the  last  mentioned  mining  field,  the  idea  had  aheady  been  conceived 
that  a  limitation  of  the  export  was  desirable,  and  this  limit  was  put  down  at  1,200,000 
tons  a  year.  In  the  same  degree  in  which  it  became  more  and  more  obvious  that 
these  ore  resoiu-ces  were  enormous  and  could  easily  be  disposed  of,  the  demand  for 
an  increased  export  grew;  but  at  the  same  time  also  the  state  asserted  its  right  to 
regulate  the  exportation  in  such  a  manner  that  it  should  not  go  on  too  rapidly.  This 
situation  led  to  negociations  between  the  government  and  the  owners  of  the  ore  fields, 
with  the  results  that  an  agreement  was  entered  into  in  1907.     According  to  this  agree- 

>  Bond  van  Nederlandsch  Grossiers  in  Fruit  tegen  A.  Bosnak.    Amsterdam  Rechtbank,  7  Jmii  1910. 

2  Burgerlijk  Wetboek,  art.  1401. 

3  Raoul  de  la  Grasserie:  Les  Codes  Suedois  de  1734  (civil,  p§nal,  commercial)  suivis  des  lois  post^rieures 
promulg^es  jusqu'  k  ce  jour.,  Paris,  1895. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  285 

ment  the  state  became  the  owner  of  half  the  shares  in  the  company  that  now  owns 
the  mines  of  Gellivare  and  Kiirunavaara,  and  also  became  sole  owner  of  certain  other 
mining  fields  (Mertainen,  Ekstromsberg  and  others),  and  in  return  for  this  undertook 
to  carry  75  million  tons  of  ore  from  Kiirunavaara  and  19  million  tons  from  Gelli^^are 
at  a  certain  freight  during  a  period  of  25  years,  besides  which  certain  other  regulationa 
for  the  benefit  of  the  company  were  made.  These  quantities  have  by  a  later  agree- 
ment, in  connection  with  the  acquisition  of  the  Svappavaara  ore  field  by  the  state, 
been  somewhat  increased.  It  was  considered  also  to  involve  certain  benefits  for  the 
state  to  become  a  share-holder  in  a  limited  company,  but  on  entering  into  the  con- 
tract it  was  also  decided  that  the  state  at  the  end  of  25  years  shall  be  entitled  on  certain 
conditions  to  take  over  the  entire  number  of  shares.  The  agreement  may  with  every 
reason  be  said  to  have  been  advantageous  for  both  parties,  and  forms  a  good  example 
of  cooperation  between  the  state  and  the  individual.^ 

The  chief  provisions  of  the  agreement  of  1907,  stated  in  more 
detail,  were  as  follows:  (1)  The  State  assumes  the  possession  and  use 
of  all  the  iron  ore  deposits  of  Lapland,  except  in  the  Kiirunavaara 
and  GelUvare  districts,  and  receives  from  the  present  holders  with- 
out compensation  the  ore  deposits  in  certain  other  locahties  on  the 
condition  that  no  ore  produced  therefrom  shall  be  exported.  (2)  The 
Luosavaara-Kiirunavaara  Co.  receives,  in  addition  to  its  present  pos- 
sessions, the  right  to  exploit  all  State  iron-ore  lands  in  the  Eairuna- 
vaara  and  GeUivare  districts.  (3)  The*capital  stock  of  the  said  com- 
pany is  fixed  at  80,000,000  kroner,  one-haK  of  which  shaU  consist  of 
preference  shares  to  be  given  to  the  State;  the  State  is  also  given  the 
option  to  purchase  the  other  half  at  the  end  of  25  years  (1932),  or 
eventually  10  years  later  (1942);  if  the  State  exercises  its  option  of 
purchase  the  value  is  determined  by  an  arbitration  board  on  the  basis 
of  the  average  profit  of  the  years  1920  to  1929,  capitahzed  at  4  per 
cent.  Limitations  are  placed  on  the  ahenation  of  the  common  stock 
by  the  present  holders.  (4)  The  State  receives  no  dividends  on  its 
preferred  stock  before  1937,  but  instead  certain  royalties  on  every 
ton  of  ore  produced,  these  royalties  being  higher  for  the  later  than 
for  the  earlier  years.  (5)  The  total  quantity  of  ore  to  be  produced 
and  exported  by  the  said  company  in  the  25-year  period  ending 
1932  is  fixed  at  93,750,000  tons,  with  certain  additional  quantities 
for  following  years  if  the  State  does  not  then  exercise  its  option  of 
purchase;  the  exports  permitted  in  the  earher  years  are  limited,  and 
a  gradual  increase  to  a  fixed  maximum  is  provided  for;  Bessemer  ore 
can  not  be  exported  except  so  far  as  necessary  to  fulfill  existing  con- 
tracts. (6)  The  freight  rates  for  the  carriage  of  this  iron  ore  on  the 
State  railways  to  places  of  exportation  are  hkewise  fixed  in  the 
agreement.  (7)  The  State  also  agi-ees  that,  in  case  an  export  tax  is 
levied  on  ore,  a  drawback  to  the  full  amount  shall  be  paid  to  the  said 
company  on  the  ore  it  exports.^ 

>  A.  Lindman.    State  Control  of  Iron  Ore  Mining  in  Sweden.    Compte  Rendu,  XI  Congrfts  Geologique 
International,  Stockholm,  1!»10.    p.  289. 

-  Stahl  u.  Eisen,  Nov.  27,.1907,  pp.  1730-1738. 


286  EEPORT   OF   THE   COMMISSIONER  OF   CORPORATIONS. 

Section  20.  Norway. 

The  Penal  Code  of  Norway  *  in  section  273  makes  it  an  offense 
to  spread  false  reports  for  the  purpose  of  influencing  the  prices  of 
merchandise,  securities,  or  similar  articles.  Section  401  provides 
that  whoever,  for  the  purpose  of  obtaining  an  unrightful  gain  for 
himself  or  another,  dissuades  or  seeks  to  hinder  another  from  bidding 
at  a  pubhc  purchase  or  sale  by  means  of  deception  or  gifts  is  punish- 
able with  fine  or  imprisonment. 

The  civil  law  of  Norway  is  apparently  not  codified.  It  may  be 
noted  in  this  connection,  however,  that  a  French  commentator  states 
with  respect  to  aU  the  Scandinavian  countries,  that  the  civil  law 
admits  freedom  of  contract,  provided  that  agreements  are  not  con- 
trary to  pubhc  order,  to  good  morals,  or  to  compulsory  provisions  of 
law.- 

A  "Law  for  the  Acquisition  of  Waterfalls,  Mines,  and  other  Real 
Estate"  was  passed  on  September  18,  1909,  which  contains  restric- 
tions intended  to  prevent  monopoly.^  With  respect  to  water  power 
concessions  section  2  provides,  in  part,  as  foUows: 

If  it  is  a  company  -whicli  seeks  the  concession  conditions  may  be  made  to  prevent 
that  a  majority  of  the  parts  or  shares  of  the  company  shall  come  to  belong  to  anyone 
who  owns  or  uses  other  waterfalls  in  this  kingdom  or  who  owns  a  majority  of  shares  in 
any  other  company  which  owns  or  uses  waterfalls  in  this  kingdom. 

Further,  section  2  provides,  in  part,  as  follows: 

If  the  water  power  is  used  for  the  production  of  electrical  energy  the  concessionaire 
must  not,  without  the  sanction  of  the  proper  government  department,  enter  into  any 
agreement  for  an  artificial  increase  of  prices  of  power  in  this  kingdom. 

Section  21.  Denmark. 

In  the  Penal  Code  of  Denmark  no  provisions  have  been  noted  affect- 
ing the  lawfulness  of  combinations. "* 

The  civil  law  of  Denmark  is  apparently  not  codified.  The  princi- 
ples of  the  civil  law,  however,  are  apparently  the  same  as  in  Norway 
with  respect  to  the  vahdity  of  contracts. 

The  only  case  noted  with  respect  to  combinations  in  Denmark  is 
the  following:  A  combination  of  Danish  cement  factories  which  had 
advanced  the  prices  of  cement  in  Denmark  made  an  agreement  with 
a  cooperative  society  where])y  the  latter  was  to  purchase  its  cement 
exclusively  from  the  combination  and  was  allowed  a  discount  in 
price.  The  cooperative  society  sought  to  obtain  supplies  in  another 
manner  and  was  sued  for  breach  of  agreement.     Judgment  was  given 

1  Allgemeines  Biirgerliches  Strafgesetzbuch,  vom  22.  Mai  1902;  German  translation  by  Rosenfeld  and 
Urbye,  Berlin,  1!I04. 

2  Lehr,  Droit  Civil  Scandinave,  Paris,  1901,  p.  156. 

s  Lev  om  erhvervelse  av  vandfald,  bergverk  og  anden  fast  eiendom. 

4  Allgemeines  Biirgerliches  Strafgesetzbuch  vom  10.  Februar  1866;  German  translation  by  Bittl.  Berlin, 
1901. 


TRUST  LAWS  AND  UNFAIE   COMPETITION.  287 

for  the  plaintiff  by  the  Court  of  Commerce  of  Copenhagen  with  dam- 
ages.    The  decision  was  upheld  by  the  Supreme  Court  (1914).^ 

Section  22.  Russia. 

The  chief  provisions  of  the  law  affectmg  industrial  combmations 
in  Russia  are  found  in  section  242  of  the  new  Criminal  Code,  which 
received  imperial  sanction  on  March  22,  1903,  namely: 

Sec.  242.  A  merchant  or  manufacturer  who  increases  the  prices  of  victuals  or  other 
articles  of  prime  necessity  in  an  extraordinary  degree  in  accord  with  other  merchants 
or  manufacturers  dealing  in  the  same  articles  shall  be  punished  with  imprisonment. 

If  the  culprit  took  advantage  of  the  extreme  need  of  the  local  population  caused 
by  the  scarcity  of  these  articles,  he  shall  be  punished  with  imprisonment  of  not 
less  than  tliree  months. 

A  merchant  or  a  manufacturer  who  increases  the  prices  of  victuals  or  other  articles  of 
prime  necessity  in  an  extraordinary  degree  to  take  advantage  of  the  extreme  need 
of  the  local  population  caused  by  the  scarcity  of  such  articles,  is  subject  to  the  punish- 
ment fixed  in  paragraph  one  of  this  section. 

The  first  and  second  paragraphs  of  this  law  are  du'ected  against 
combinations  which  do  the  tiling  prohibited,  while  the  tliird  is 
directed  against  individuals  who  commit  the  same  act.  The  "ex- 
treme need"  referred  to  in  the  above  section  of  the  Criminal  Code,  as 
shown  by  the  official  explanation  of  the  motives  of  the  legislator, 
means  the  already  existing  need,  especially  where  caused  by  some 
calamity  ,2 

Although  the  Criminal  Code  of  1903  covers  a  field  of  law  similar  to 
though  not  in  all  respects  identical  with  that  of  the  Penal  Code  of 
1885,  it  does  not  appear  that  the  former  has  been  repealed,  inasmuch 
as  amendments  have  been  frequently  made  therein  subsequent  to 
1903.  Hence  the  chief  sections  of  the  Penal  Code  of  1885  relating  to 
combinations  are  likewise  given  here.^ 

Sec.  913.  For  a  conspiracy,  an  understanding  or  other  agreement  among  dealers  for 
the  purpose  of  increasing  prices  of  articles  of  consumption  the  culprits  shall  be  subject 
to  punishments  and  fines  provided  by  Section  1180  of  the  present  Code. 

Sec  1180.  In  case  of  a  conspiracy  among  merchants  or  manufacturers  for  the 
purpose  of  increasing  not  only  the  prices  of  victuals  but  also  of  other  articles  necessary 
for  consumption  or  for  an  undue  decreasing  of  the  price  with  a  view  to  impeding 
those  who  transport  or  supply  these  articles  and  thereby  preventing  also  their  further 
and  larger  supply  the  ringleaders  of  such  unlawful  agreements  shall  be  subject  to 
imprisonment  for  a  term  of  from  four  to  eight  months;  and  the  rest  of  them  who  only 
participated  therein  shall  be  punished,  in  accordance  with  the  degree  of  their  par- 
ticipation either  by  imprisonment  of  from  three  weeks  to  three  months;  or  by  a  fine 
not  exceeding  two  hundred  roubles. 

1  Faellesforeningen  for  Danmarks  BrugsforeniBgen  mod  A/S  Aalborg  rortland  Cement  Fabrik;  Hoje- 
steretstidende,  58  Aarg  (1914),  p.  819. 

'  Tagantsev;  Ugolovnoe  Ulozhenie,  22  marta,  1903  goda  (Criminal  Code,  Mar.  22, 1903).  S.  Tetersburg, 
1904,  p.  395. 

i*  Tagantsev;  Ulozhenie  o  nakazaniiakh  ugolo\iiykh  i  ispravitelnykh  1885  goda  (the  Penal  Code  on 
Criminal  and  Corrective  Punishments  of  1885),  16th  edition,  revised  and  enlarged.  S.  Petersburg,  1912, 
pp.  592,  746, 


288  KEPOET   OF   THE   COMMISSIONER  OF   COKPOEATIONS. 

If,  however,  such  a  conspiracy  caused  an  actual  scarcity  of  articles  of  prime  necessity 
and  this  led  to  a  disturbance  of  social  peace,  then  the  ringleaders  shall  be  punished  by 
the  deprivation  of  certain  special  rights  and  privileges,  in  accordance  with  Section  50 
of  this  Code,  and  by  imprisonment  for  a  term  of  from  one  year  and  four  months  to 
two  years;  and  the  rest  of  the  culprits  by  imprisonment  for  a  term  of  from  four  to  eight 
months. 

In  section  121  of  the  Code  for  Safeguarding  the  National  Food 
Supply  ^  merchants  or  manufacturers  are  enjoined  from  committing 
acts  similar  to  those  prohibited  in  section  1180  of  the  Penal  Code  of 
1885,  and  in  section  127  of  the  same  code  the  municipal  authorities 
are  authorized  in  certain  cases  to  prevent  arbitrary  increases  in  the 
prices  of  prime  necessities  by  prescribing  definite  prices  for  the  same. 

The  Civil  Code,  in  section  1528,  provides  that  a  contract  shaU  not 
be  repugnant  to  the  laws,  to  good  morals,  or  to  pubhc  order.^ 

In  March,  1903,  the  Petrikov  (in  Poland)  Circuit  Court  refused  to 
entertain  a  petition  of  14  Polish  glue  manufacturers  against  one  of 
their  members  who  had  violated  the  syndicate  agreement.  The 
court  held  that  "no  person  was  bound  to  respect  an  agreement  which 
is  repugnant  to  law,  to  good  morals,  or  to  social  order."  ^ 

A  sugar  refiners'  syndicate  was  formed  consisting  of  about  200 
members  for  the  apportiomnent  of  the  output  in  the  domestic  market 
and  for  the  compulsory  export  of  surplus  production  under  regu- 
lations of  the  syndicate  and  fines  were  provided  for  breaches  of  the 
agreement.  A  member  of  the  syndicate  violated  certain  provisions 
of  the  agreement  relating  to  export  and  a  fine  was  levied  in  accordance 
with  tlie  terms  of  the  agreement.  Action  was  brought  by  the  seven 
managers  of  the  syndicate  in  the  Circuit  Court  of  Kiev  to  collect  the 
fine.  The  court  held  that  the  bill  was  defective  with  respect  to  the 
parties  bringing  the  suit  and  that  the  agreement  was  defective  in  re- 
spect to  the  methods  of  enforcing  the  agreement,  but  the  court  did 
not  pass  upon  the  validity  of  the  agreement  itself.  Appeal  was  taken 
on  April  10,  1895,  from  this  decision  to  the  Court  of  Appeals  of  Kiev 
but  was  denied.* 

However,  on  November  20,  1895,  the  first  law  regulating  tlie  out- 
put and  exportation  of  sugar,  which  is  described  below,  was  enacted 
and  this  practically  established  a  compulsory  Government  control  of 
the  sugar  industry  in  substantially  the  manner  aimed  at  by  the 
syndicate. 

According  to  a  recent  statement  in  the  public  press  ^  certain  mem- 
bers of  a  coal  cartel  ("Produgol")  who  desired  to  withdraw  there- 

1  Svod  Zakonov  (v.  XIII);  Ustav  o  obezpechenii  narodnavo  prodovolstviia;  Dobjovolskii,   Ed.,  St. 
Petersburg,  1913,  Part  3,  p.  070. 

2  Svod  Zakonov  (v.  10,  Pt.  1,  Ed.  1900.). 

3  Rafifalovich;  Promyshlennye  sindikaty,  St.  Petersburg,  1904,  p.  -19. 

*  Otehet  po  delu  sindikata  sakharozavodchikov  s  O.  N.  Baskakovoi  (Report  on  the  case  of  the  sugar 
refmers'  syndicate  versus  Mrs.  O.  N.  Baskakova),  Kiev,  1895,  pp.  5,  80-90,  91-110. 
s  Kartell-Rundschau,  April,  191-1,  p.  276. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  289 

from  brought  an  action  to  have  the  agreement  anniilled»  The  Com- 
merce Court  of  St.  Petersburg  declared  the  cartel  agreement  invalid. 
The  case  was  appealed,  but  later  the  parties  settled  it  out  of  court. 
It  was  stated,  further,  that  criminal  prosecution  was  contemplated 
by  the  Ministry  of  Justice. 

To  what  extent  the  courts  have  made  practical  application  of  these 
laws  is  not  known  but,  in  any  case,  the  Russian  Government  has  in 
several  mstances  given  encouragement  to  the  formation  of  cartels. 
It  appears,  moreover,  that  in  Russia  the  decisions  of  the  courts  are 
not  legal  precedents,  but  follow  administrative  poHcy. 

Regulation  of  sugar  industry. — On  account  of  the  disorgan- 
ized condition  of  the  sugar-refining  industry,  due  to  excessive  pro- 
duction and  the  export  of  sugar  at  extremely  low  prices,  which  in 
turn  threatened  an  important  source  of  public  revenue,  the  Russian 
Government,  by  a  law  of  November  20,  1895,  instituted  an  elaborate 
system  of  Government  regulation.^  This  policy  was  adopted,  ap- 
parently, for  the  purpose  of  so  regulating  the  domestic  production 
as  to  prevent  a  demoralization  of  the  sugar  industry,  and  to  afford 
by  indirect  means  a  bounty  on  the  exportation  of  sugar.  Accordmg 
to  the  existing  tariff  laws  of  certain  countries.  Government  bounties 
on  sugar  exported  subjected  such  sugar  to  discrioainatory  treatment 
in  the  countries  of  importation.^ 

The  Russian  Government  determined,  first,  how  much  sugar 
would  be  requu'ed  for  consumption  in  the  domestic  market,  and  then 
divided  this  quantity  among  the  several  factories  in  the  following 
manner:  Each  factory  was  to  have  a  minimum  quantity  of  60,000 
poods,  regardless  of  its  output,  and  the  rest  of  the  quantity  required 
for  domestic  consumption  was  divided  among  them  in  proportion 
to  the  previous  output  of  each.  The  total  quantity  allotted  for 
domestic  consumption  was  subject  to  a  so-called  normal  excise  tax. 
The  factories  were  also  requked  to  keep  a  reserve  stock  of  sugar 
to  be  used  for  domestic  consumption  ia  case  the  Govermnent  should 
find  it  desirable  to  increase  the  quantity  to  be  sold  under  the  normal 
tax.  Such  sale  might  be  ordered  in  case  the  domestic  price  exceeded 
a  normal  level  of  prices  determined  by  the  Government.  The  surplus 
sugar  above  the  quantity  fixed  for  domestic  consumption  and  for  the 
obhgatory  reserve  had  to  be  exported  or  carried  over  to  the  follomng 
year,  because  if  sold  ia  the  domestic  market  it  would  be  subject 
to  a  double  excise  tax,  wliich  was  prohibitory.  The  export  sugar 
was  exempt  from  all  taxation,  while  a  practically  proliibitory  import 
tax  was  estabhshed  so  that  very  little  foreign  sugar  was  imported. 

>  Preyer:  Die  rassische  Zuckerindustrie,  Leipzig,  1908,  p.  49.  A  translation  of  this  law  is  given  in 
Exiiibit  F  of  this  report.    (See  p.  789.) 

'  It  may  be  noted  that  the  system  established  by  the  Russian  Government  under  the  law  of  Nov.  20, 1S95 
was  held  by  the  Supreme  Court  of  the  United  States  to  provide  in  effect  a  bounty  within  the  meaning 
of  the  tariff  laws  of  the  United  States.    Downs  v.  United  States,  187  U.  S.,  496  (1902). 

30035°— 16 19 


290  EEPORT   OF   THE   COMMISSIONER   OF   COEPOEATIONS. 

The  right  to  sell  sugar  in  the  domestic  market  under  the  normal 
tax  could  be  transferred  from  one  factory  to  another,  and  as  certain 
factories  were  more  advantageously  situated  for  the  export  trade, 
they  frequently  sold  this  right  with  respect  to  certain  quantities  of 
sugar  to  other  factories  which  were  thus  enabled  to  sell  corresponduig 
quantities  in  the  domestic  market  in  addition  to  their  regular  allot- 
ments. The  value  of  such  rights  so  transferred  depended  chiefly 
on  the  current  difference  in  the  domestic  and  export  prices,  and  this 
amount  was  generally  regarded  as  being  substantially  a  bounty  on 
the  exportation  of  sugar. 

As  the  domestic  prices  were  high,  it  was  an  advantage  to  export 
sugar  even  at  a  loss,  or  to  produce  sugar  and  carry  it  over  to  the  next 
year,  because  the  total  production  of  a  factory  in  one  year  was  the 
basis  for  determining  how  much  it  could  produce  and  sell  in  the 
domestic  market  in  the  following  year.  In  a  practical  sense,  the 
chief  defect  of  the  law  was  that  there  was  too  much  incentive  given 
to  increase  production. 

The  law  was  modified  May  12,  1903,  to  prevent  a  too  rapid  increase 
in  production  by  fixing  the  total  quantity  apportioned  to  each 
factory,  so  that  an  actual  increase  in  production  would  not  entitle  it 
to  an  increase  in  the  quota  for  domestic  consumption.^ 

In  1907  Russia  became  a  party  to  the  Brussels  International  Sugar 
Convention,  under  special  conditions,  i.  e.,  preserving  its  customs  and 
excise  tax  system,  but  limiting  its  export  to  a  fixed  quantity,  except 
overland  to  oriental  markets.^ 

Subsequent  legislation  indicates  that  import  duties  on  sugar  were 
lowered  and  export  drawbacks  suspended  in  order  to  keep  domestic 
sugar  prices  below  the  prescribed  limits.^  Recently  the  Government 
apportioned  the  total  quantity  of  sugar  exported  among  the  various 
refiners.^ 

Section  23.  Koumania. 

Legislation  in  Roumania  is  chiefly  of  interest  in  connection  with 
special  regulations  made  concerning  the  petroleum  industry.  The 
Penal  Code,''  in  article  351,  contams  a  prohibition  against  mter- 
ference  with  free  competition  in  public  auctions,  which  is  similar  to 
article  412  of  the  French  law.  (See  p.  272.)  The  most  important 
provisions  of  the  civil  law  regardmg  the  validity  of  contracts  appear 
to  be  nearly  the  same  as  those  of  France  and  Italy;  articles  5,  948, 
966,  968,  and  1008  of  the  Roumanian  Civil  Code "  are  nearly  identical 

1  Preyer:  Die  russische  Zuckermdustrie,  Leipzig,  1908,  p.  73. 

2  Journal  des  Fabricants  de  Sucre,  21  Janvier,  1914. 

3  Decree  of  Apr.  1.5,  1910:  Sobranie  Uzakonenii,  1910,  ch.  681, 
i  iDid.,  1912,  pt.  1,  ch.  2024. 

sCodicele  Penal. 
6  Cpc^iceie  Civile. 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  291 

ill  phraseology  with  articles  6,  1108,  1131,  1133,  and  1172,  respec- 
tively, of  the  French  Civil  Code  (see  p.  272),  and  need  not  be  given 
in  detail  here.  The  Roumanian  Civil  Code  in  article  998  has  a  pro- 
vision applicable  to  unfair  competition,  which  is  also  practically 
identical  with  article  1382  of  the  French  law.     (See  p.  273.) 

Apportionment  of  domestic  sale  and  price  regulation  op 
PETROLEUM. — Several  powerful  oil  companies,  largely  controlled  by 
German  banks,  through  combination,  had  at  times  fixed  the  prices 
of  illuminating  oil  in  the  domestic  market,  while  another  company 
owned  by  Standard  Oil  interests  apparently  threatened  to  seize  the 
whole  domestic  business  by  cutting  prices.  Whichever  of  these 
parties  won,  the  immediate  effect  on  the  small  Roumanian  refiner, 
as  well  as  the  final  result  to  the  public,  was  viewed  with  apprehension 
by  the  Government,  and  in  1908  a  law  was  passed  for  the  legal 
apportionment  of  domestic  sales  of  illuminating  oil  and  the  regula- 
tion of  domestic  prices.^ 

The  original  apportionment  of  the  domestic  sales  was  in  general 
based  on  rated  annual  capacity  of  crude-oil  consumption,  but  the 
refineries  which  had  a  capacity  of  less  than  40,000  tons  and  more 
than  10,000  tons  were  given  200  per  cent  in  addition,  while  those 
having  a  capacity  of  less  than  10,000  tons  were  given  400  per  cent 
in  addition.  The  Finance  Ministry  each  year  determines  the  total 
domestic  requirement  of  illuminating  oil  and  informs  each  refinery 
of  the  quantity  allotted  to  it  for  the  year.  Additional  quantities  of 
oil  may  be  produced  for  export  or  for  storage  under  strict  Government 
control.  Refineries  not  equipped  to  refine  illuminating  oil  of  required 
c[uality  are  forbidden  to  produce  any. 

The  maximum  domestic  selling  prices  are  fixed  by  the  Government, 
on  the  basis  of  the  average  price  of  crude  oil,  and  in  addition  3.50  to 
4.50  lei  (francs)  for  refining  cost  and  profit.  The  price  may  be 
changed  every  three  months,  and  the  refineries  notified  thereof  by 
the  council  of  ministers. 

Heavy  penalties  of  fine  and  imprisonment  are  provided  for  refiners 
who  break  the  law,  especially  after  the  first  offense,  and  for  officials 
who  are  guilty  of  aiding  them  therein. 

Pro^^sion  is  also  made  for  the  establishment  by  the  Government 
of  local  reservoirs  or  tanks  to  lease  to  small  refiners  at  a  rental  of  10 
per  cent  of  the  investment  cost  to  cover  interest  and  amortization. 

This  law  was  amended  in  1910  by  making  seven  instead  of  three 
classes  of  refiners  and  giving  to  the  small  producers  very  much  larger 
quotas  in  proportion  to  their  capacity.^ 

>  Law  concerning  the  apportionment  of  the  total  requirements  of  illuminating  petroleum  among  the 
refineries  of  the  country;  Law  of  Apr.  10,  1908  (o.  s.).  Summarized  from  German  translation  in  Denk- 
schrift  uber  das  Karteilwesen,  Berlin,  1908,  IV.  Teil,  pp.  151-154.  A  translation  of  this  law  is  given  it* 
Exhibit  G  of  this  report.    (See  p.  794.) 

•  Daily  Consular  Reports,  Aug.  17, 1910,  p.  S24. 


292  KEPOET   OF   THE   COMMISSIONER  OF   COEPOKATIONS. 

Section  24.  Turkey. 

The  Penal  Code  of  Turkey  ^  contains  in  article  238  a  provision 
against  interfering  with  free  competition  in  auctions  similar  to  article 
412  of  the  French  Penal  Code.  (See  p.  272.)  Article  239  of  the 
Turkish  Penal  Code,  which  prohibits  combinations  to  effect  changes 
in  the  prices  of  commodities  or  securities  is  nearly  identical  in  verbiage 
with  articles  419  and  420  of  the  French  Penal  Code  (See  p.  269) .  The 
penalties  are  doubled  for  combinations  affecting  breadstuils  and 
potables,  fuel  and  other  objects  of  primary  necessity. 

Section  25.  Greece. 

Penal  Code. — There  are  several  provisions  of  the  Penal  Code  ^ 
which  are  of  interest  in  this  connection. 

Article  407,  which  is  similar  to  article  419  of  the  French  Penal 
Code,  is  as  follows: 

Art.  407.  "WTioever  with  the  intention  to  discredit  moneys  not  "withdrawn  from 
circulation,  or  to  change  their  legally  determined  value,  or  with  the  intention  to 
increase  the  price  of  wares,  public  securities,  or  other  objects  offered  for  sale  above 
the  ordinary  price  formed  through  free  commerce,  or  to  depress  under  the  same,  or 
to  hinder  the  sale  of  such  articles,  or  to  compel  a  definite  price,  knowingly  spreads 
false  reports  or  facts,  if  this  occurs  in  consequence  of  an  agreement  made  among  sev- 
eral, sball  be  punished  with  imprisonment  up  to  six  months  and  with  a  fine  of  fifty 
to  one  thousand  drachmas,  otherwise  with  imprisonment  up  to  two  months  and  a 
fine  of  from  twenty  to  two  hundred  drachmas. 

Article  436  prohibits  interference  with  competition  at  auctions: 

Art.  436.  WTioever  at  public  auctions  hinders  free  competition  through  force  or 
threats,  or  intentionally  removes  or  keejis  a  bidder  away  through  gifts  or  promises, 
shall  be  punished  with  imprisonment  up  to  three  months. 

Besides  these  prohibitions  regarding  serious  offenses  there  are  three 
provisions,  articles  585,  586,  and  671,  regarding  "minor  offenses"  for 
which  the  penalties  are  generally  less  severe.  The  first  of  these  con- 
tains prohibitions  similar  to  those  of  the  ancient  English  statutes 
against  engrossing,  regrating,  and  forestalling.     (See  p.  2.) 

Art.  585.  WTioever  seeks  to  keep  another  from  access  to  the  markets;  whoever 
overbids  the  prices  asked  by  the  sellers,  whoever  seeks  to  force  other  buyers  or  sell- 
ers from  the  market,  dealers  in  victuals  and  middlemen,  who  buy  up  on  the  way 
victuals  destined  to  the  market  or  in  order  to  remove  them  from  free  commerce  and 
to  draw  them  exclusively  to  themselves,  make  secret  agreements  with  the  sellers, 
must  pay  fines  of  from  10  to  200  drachmas. 

Art.  586.  Tradesmen  entitled  to  sell  victuals  who  without  lawful  causes  of  hin- 
drance do  not  provide  themselves  with  the  prescribed  supplies,  conceal  the  same  in 
case  of  demand  from  the  authorities,  refuse  to  deliver  against  payment  to  any  buyer, 
or  agree  to  dispose  of  certain  victuals  only  at  definite  times,  in  certain  order,  or  at 
prices  above  the  rates  fixed  by  the  authorities,  are  punished  by  a  fine  of  from  30  to 
300  drachmas. 

1  Das  tiirkische  Strafgesetzbuch,  German  translation  by  E.  Nord,  Berlin,  1912. 

2  Strafgesetzbuch  des  Kdnigreiches  Griechenland  (1834).    (Ofiacial  translation.) 


TRUST  LAWS  AND   UNFAIR  COMPETITION.  293 

It  is  furtiier  provided  in  article  587  that  if  the  offenses  prohibited 
in  articles  585  and  586  are  committed  in  periods  of  public  disorder 
penalties  of  arrest  shall  be  imposed  in  addition  to  fines. 

Only  the  first  paragi'aph  of  article  671  is  given  below;  the  second 
paragraph  relates  to  the  disposition  of  defective  goods. 

Art.  671.  "Wlioever  through  curtailment  in  measure  or  weight,  or  through  deficient 
quality  of  salable  articles,  or  through  excessive  demand  in  price  or  wages  ^dolatea 
the  rules  of  any  existing  rate  regulation,  incurs  a  fine  of  from  30  to  300  drachmas. 

Special  laws. — The  production  of  currants  and  the  manufacture 
of  wine  therefrom  is  one  of  the  most  important  economic  activities  of 
Greece.  The  fruit  is  also  used  for  other  purposes,  including  the  mak- 
ing of  alcohol.  Unsatisfactory  conditions  led  to  the  establishment  of 
a  special  bank  in  1899  which  centralized  in  a  large  measure  the  pur- 
chase and  sale  of  currants.  For  the  further  amelioration  of  the 
currant  trade  a  law  was  passed  on  June  21,  1904,  forbidding  the 
extension  of  cun"ant  plantations.  On  July  17,  1905,  a  law  was  passed 
establishing  a  company  called  the  ' '  Privileged  Company  for  Promoting 
the  Production  and  Commerce  in  Currants,"  which  ratified  an  agree- 
ment between  the  executive  branch  of  the  Government  and  two  banks 
concerning  the  regulation  of  the  currant  trade,  and  provided  the 
legislation  necessary  to  enforce  the  provisions  of  the  agreement.  This 
company  was  established  with  a  capital  stock  of  20,000,000  francs 
and  a  20-year  concession  terminable  after  10  years  by  Government 
purchase.  It  is  required  to  advance  money  to  the  producers  on  their 
crops  in  order  to  prevent  currants  being  dumped  at  low  prices  and  also 
to  purchase  at  the  end  of  the  campaign  all  currants  offered  to  it  at 
minimum  prices,  fixed  according  to  quality.  Various  other  privileges 
and  obligations  were  attached  to  the  company's  charter.  It  was  also 
provided  that  alcohol  for  commercial  use  might  be  produced  only  from 
cun-ants  or  grapes.  By  a  law  of  March  27,  1910,  the  overproduction 
of  currants  was  met  by  providing  for  a  systematic  destruction  of 
inferior  currant  vines,  compensation  being  made  to  the  owners.^ 

Section  26.  Brazil. 

The  laws  of  Brazil  are  of  interest,  particularly  with  respect  to  the 
provisions  made  in  the  customs  laws  and  in  the  special  laws  regard- 
ing the  valorization  of  coffee.^ 

I  For  general  infonnation  on  this  subject  see  Basiliu:  Griechenland,  Jalirbuch  fiir  vergleichende  Rechts- 
wissenschaft  und  Volkswirtschaft,  1910,  pp.  1597-1598,  and  Struck:  Zur  Landeskunde  von  Griechenland, 
1912,  pp.  103-104,  and  for  details  respecting  the  Privileged  Company  see  Society  Priviligioo  pour  Favoriser 
la  Production  et  le  Commerce  du  llaisin  de  Corinthe,  Statuts,  Conventions  et  Lois,  Athfcnes,  1905. 

'It  also  appears  that  the  Brazilian  Government  a  few  years  ago  made  arrangements  which  recently 
expired  whereby  exclusive  privileges  were  conferred  with  respect  to  the  mining  and  the  exportation  of 
mining  monazite  sand,  a  material  used  in  the  manufacture  of  gas  mantles.  Deutsches  Handels-Archiv, 
190S,  I.  Th.  p.  277;  lb.  II.  Th.  p.  ■igs;  J.  P.  Krusch,  Die  Versorgmig  Deutschlands  mit  metallischen 
Rohstofifen,  Leipzig,  1913. 


294  REPOET   OF    THE   COMMISSIONER  OF   CORPORATIONS. 

Customs   law. — The   customs   law   of  Brazil  provides   that   the 

President  of  the  Republic  is  authorized^ 

To  modify  the  rate  of  import  duties,  even  to  the  extent  of  permitting  free  entry 
during  a  certain  period,  for  articles  of  foreign  origin  whch  can  compete  with  similar 
national  products,  when  these  are  produced  or  marketed  by  trusts.' 

Coffee  valorization. — Owing  to  the  overdevelopment  of  coffee 
plantations  in  certain  States  of  the  Republic,  and  to  an  extraordinary 
crop  in  the  season  1901-2,  the  stocks  of  coffee  were  greatly  increased, 
and  the  financial  position  of  the  coffee  planters  was  thereby  rendered 
precarious.  Various  methods  were  considered  for  preventing  the 
increase  of  stocks,  as,  for  example,  the  burning  of  a  portion  of  the 
coffee  crop,  while  some  restriction  ot  new  plantations  was  accom- 
plished through  special  taxation.  The  Government  also  tried  to 
alleviate  the  situation  by  reducing  the  export  tax  on  coffee,  namely, 
from  13  per  cent  to  11  per  cent  ad  valorem.^ 

In  1905  the  movement  for  the  so-called  valorization  of  coffee  was 
initiated,  and  on  December  29,  1905,  a  law  was  enacted  by  the  State 
of  Sao  Paulo  laying  a  tax  of  3  francs  on  each  bag  of  coffee  containing 
60  kilos  (132.3  pounds)  exported  in  order  to  obtain  a  basis  for 
financing  this  scheme. 

In  the  following  year  (Feb.  26,  1906)  three  States — Sao  Paulo, 
Minas  Geraes,  and  Rio  de  Janeiro — made  an  agreement  knowni  as 
the  "Convenio  de  Taubate,"  of  which  the  most  significant  features 
were  substantially  as  follows :  ^  That  coffee  should  be  maintained  in  the 
domestic  markets  at  minimum  prices  of  55  to  65  francs  per  bag  (7.9  cents 
to  9.34  cents  per  pound)  for  a  standard  grade  (No.  7  American), 
such  price  to  be  subsequently  raised  to  70  francs  if  the  market 
permitted;  that  the  export  of  coffee  inferior  to  No.  7  should  be  dis- 
couraged and  such  coffee  kept  for  home  consumption  instead;  that 
a  surtax  of  3  francs  per  bag  be  levied  on  aU  coffee  exported  from 
the  contracting  States,  the  proceeds  to  be  used  for  valorization 
purposes;  that  the  existing  tax  laws  to  hinder  the  planting  of  new 
areas  be  continued  for  two  years  and  eventually  longer;  that  the 
State  of  Sao  Paulo  be  authorized  to  borrow  £15,000,000  on  the 
security  afforded  by  the  surtax,  and  the  joint  responsibihty  of  the 
three  States;  that  the  advantages  resulting  from  the  agreement 
should  be  apportioned  among  the  three  States  according  to  the 
amount  of  surtax  collected,  and  that  the  agreement  should  take 
effect  after  ratification  by  the  President  of  the  Republic.^ 

'  Actos  do  Poder  Legislative,  Lei  N.  2919 — de  31  Dez.,  1914,  sec.  2,  IX.  A  similar  provision  has  been 
in  eflect  since  1907. 

=  Dettmann,  Das  Moderne  Brasilien,  Berlin,  1912. 

3  Translations  of  this  and  other  important  agreements  relating  to  this  subject  are  given  in  Exhibit  H  of 
this  report.    (See  p.  797.) 

<  Petition  in  equity.  United  States  of  America  r.  Herman  Sielcken  et  al.,  Washington,  Government 
Printuig  Office,  1912. 


TRUST   LAWS  AND  UNFAIR  COMPETITION,  295 

The  loan  provided  for  in  the  agreement  was  intended  to  be  used 
for  the  purpose  of  buying  and  carrying  large  stocks  of  coffee.  By  a 
second  convention  of  July  4,  1906,  between  these  three  States,  the 
minimum  prices  were  reduced  and  provision  made  for  imdertakmg 
the  work  without  the  approval  of  the  President.  A  Federal  decree 
of  August  6,  1906,  however,  approved  these  conventions  after  making 
some  modifications.  Subsequently  they  were  further  modified  in 
some  particulars,  especially  as  to  the  minimum  domestic  prices. 

To  further  promote  the  valorization  plan  the  quantity  which  could 
be  exported  was  Imiited.  On  August  25,  1908,  Sao  Paulo  passed  a 
law  which  practically  limited  the  export  of  coffee  from  the  State  to 
9,000,000  bags  for  the  crop  year  beginning  July  1,  1908,  to  9,500,000 
bags  for  the  next  crop  year,  and  to  10,000,000  bags  for  succeeding 
years,  by  le^'ydng  an  additional  ad  valorem  tax  of  20  per  cent  on  coffee 
exported  in  excess  of  the  quantities  specified.  This  law  also  increased 
the  surtax  on  exported  coffee  to  5  francs  per  bag  and  authorized  a 
loan  of  £15,000,000  for  carrying  out  the  measures  necessary  "for  the 
defense  of  coffee"  and  for  the  consolidation  of  temporary  financial 
obligations  connected  therewith.  The  Federal  Government  sanc- 
tioned this  law  by  an  act  of  December  9,  1908,  guaranteed  the  loan  of 
£15,000,000  arranged  for,  requu-ed  that  certain  stocks  of  coffee  owned 
by  Sao  Paulo  be  made  an  additional  guarantee,  and  made  certain 
other  provisions  intended  to  give  the  Government  greater  security. 

To  finance  this  valorization  scheme  several  loans  previously  made 
were  consolidated  in  a  loan  of  £15,000,000  obtained  according  to  a 
contract  made  with  J.  Henry  Schroeder  &  Co.,  of  London;  Society 
Generale,  of  Paris;  and  the  Banque  de  Paris  et  des  Pays-Bas  on 
December  11,  1908. 

On  the  same  day  the  bankers  and  representatives  of  Sao  Paulo 
made  an  agreement  for  the  organization  of  a  committee  of  seven  to 
exist  10  years,  which  was  given  extensive  power  with  respect  to  the 
sale  of  the  Brazilian  coffee  in  the  United  States,  Europe,  etc.,  and 
the  payment  of  the  moneys  due  the  bankers.  In  particular,  Sao 
Paulo  agreed  to  sell  at  auction  through  the  committee  500,000  bags 
of  its  stocks  in  1909-10,  600,000  bags  in  1910-11,  700,000  bags  in 
1912-13,  and  the  same  quantity  in  each  succeeding  year;  further, 
additional  quantities  not  to  exceed  these  obUgatory  quantities,  for 
each  year,  respectively,  might  be  sold  to  meet  the  demands  of  the 
trade,  provided  that  the  prices  were  not  less  than  specified,  namely, 
47  francs  for  "good  average"  and  50  francs  for  "Havre  type  superior" 
per  50  kilos.  It  was  also  provided  that  additional  quantities,  if 
needed  by  the  trade,  might  be  sold  at  a  price  to  be  agreed  to  by  the 
Government. 

With  the  money  borrowed  from  the  bankers  the  State  of  Sao  Paulo 
purchased  great  quantities  of  coffee  and  placed  it  in  storage;  the 


296  EEPOET  OF   THE   COMMISSIONER  OP   CORPORATIONS. 

total  quantity  so  accumulated  on  December  31,  1907,  appears  to 
have  been  8,146,123  bags.  Several  million  bags  were  purchased 
later,  while  even  larger  quantities  were  sold  durmg  the  same  period, 
so  that  in  1912  it  was  estimated  that  not  more  than  5,000,000  bags 
remamed  in  the  hands  of  the  committee.  During  the  period  1906 
to  1912  the  prices  of  coffee  in  foreign  markets  were  decidedly  increased. 

Section  27.     Argentina. 

The  Penal  Code,^  in  article  206,  imposes  penalties  on  those  who 
solicit  or  offer  gifts  or  promises  in  order  not  to  take  part  in  public 
auctions  or  those  who  fcignedly  present  themselves  as  bidders. 

The  Civil  Code  ^  contains  ninnerous  provisions  wliich  are  of  interest 
in  this  connection.  Articles  21  and  564  contain  provisions  substan- 
tially similar  to  articles  6  and  1172,  respectively,  of  the  French  Civil 
Code,  and  article  536  practically  combines  the  provisions  of  articles 
1131  and  1133  of  the  same  code.     (See  p.  272.)     Article  987  declares: 

Art.  987.  The  object  of  jural  acts  must  be  things  which  are  in  commerce  or  which 
for  a  special  reason  have  not  been  prohibited  to  be  the  object  of  a  jural  act,  or  acts 
which  are  not  impossible,  invalid,  contrary  to  good  morals,  or  prohibited  by  the 
laws,  or  which  do  not  oppose  the  liberty  of  action  or  of  conscience,  nor  prejudice 
the  rights  of  a  third  person.  Jural  acts  which  are  not  conformable  to  this  provision 
are  null  as  if  they  had  no  object. 

Provision  is  made  in  article  1081  for  several  ways  by  wliich  the 
nulhty  of  a  jural  act  may  be  judicially  determined,  whicli  declares  in 
part  that  it  may  be  sought  by  the  public  minister  in  the  interest  of 
morality  or  of  the  law. 

In  article  1143  the  law  provides  a  possible  remedy  against  unfair 
competition,  the  text  of  this  article  being  substantially  similar  to 
article  1382  of  the  French  Civil  Code. 

According  to  The  Board  of  Trade  Journal  issued  by  the  English 
Government,^  a  bill  was  introduced  in  the  Legislature  of  Argentma 
on  August  30,  1913,  wliich  provided,  among  other  tilings,  that  every 
contract  or  combination  of  any  kind  regarding  commerce  or  transport 
is  forbidden  when  its  object  is  to  produce  artificial  alterations  to  the 
prejudice  of  the  consumer  in  the  prices  of  articles  of  consumption  or 
of  prime  necessity,  that  the  directors  of  a  legally  constituted  company 
who  take  part  in  the  transaction  are  to  be  held  2)ersonally  responsible, 
that  on  a  second  offense  by  the  directors  or  representatives  of  such 
company  it  may  be  dissolved^  and  that  a  limited  liability  company  or 
its  agency  which  is  guilty  of  repeated  offenses  may  be  fined  from 
10,000  to  500,000  pesos. 

1  C6cligo  Penal. 

2  C6digo  Civil,  1900  ed. 

3  The  Board  of  Trade  Journal,  Sept.  25, 1913,  p.  742. 


TRUST  LAWS  AND  tJNPAIE   COMPETITION'.  297 

It  is  understood  that  this  bill  was  introduced  on  account  of  an 
alleged  combination  among  meat  packers,  but  that  it  failed,  largely 
on  account  of  the  opposition  of  the  stock  raisers.^ 

Section  28.   Colombia. 

A  provision  of  the  Commercial  Code  of  Colombia  has  been  noted 
which  is  so  pertinent  to  this  subject  that  it  deserves  mention.  Article 
6  of  this  code  reads  as  follows  :^ 

Art.  6. — The  establishment  of  companies  (Sociedades  anonimas)  contrary  to  good 
morals,  to  public  order  and  to  legal  regulations  is  prohibited;  as  well  as  those  which 
do  not  deal  with  a  real  object  and  one  of  lawful  business,  or  which  tend  to  a  monopoly 
of  the  necessities  of  life  or  of  any  branch  of  industry. 

Section  29.  Mexico. 

In  Yucatan,  Mexico,  a  public  commission  has  been  established  to 
regulate  the  price  of  henequen  or  sisal  fiber.  This  commission  is 
entitled  "Comision  Reguladora  del  Mercado  de  Henequen,"  and  was 
created  in  accordance  with  a  State  law  enacted  in  August,  1911. 
This  law  authorizes  the  governor  to  appoint  a  commission,  of  which 
he  is  also  a  member  ex  officio,  who  shall  engage  in  the  purchase  of 
sisal  fiber  with  a  view  to  a  better  regulation  of  the  price.  A  Govern- 
ment loan  of  5,000,000  pesos  was  also  authorized  to  be  placed  at  the 
disposal  of  the  commission  for  this  purpose,  and  in  order  to  meet  this 
loan  a  tax  was  provided  to  be  levied  on  unmanufactured  henequen 
at  rates  ranging  from  one-half  centavo  to  1  centavo  per  kilogram, 
according  to  the  price  of  the  fiber  in  Yucatan.  The  commission  is 
directed  to  maintain  through  its  mercantile  operations  an  equilibrium 
between  supply  and  demand  and  to  aid  in  directing  excess  produc- 
tion to  new  outlets.  Tlie  law  also  provides  that  any  profits  arising 
from  the  mercantile  transactions  of  the  commission  shall  be  applied 
to  promote  and  further  the  manufacture  of  fiber  within  the  State  of 
Yucatan.  This  commission  began  operations  in  1912.  The  fiber 
growers  have  organized  an  association  to  cooperate  with  this  commis- 
sion and  have  agreed  to  use  it  as  a  central  selling  agency. 

Section  30.  Japan. 

There  is  apparently  no  law  specifically  relating  to  trusts  or  combi- 
nations in  Japan.  Article  48  of  the  Commercial  Code,''  which  is 
similar  in  some  respects  to  section  138  of  the  German  Civil  Code,  reads 
as  follows: 

Art.  48.  If  a  business  association  acta  contrary  to  the  public  order  or  good  morals, 
the  court  may  dissolve  it  on  the  application  of  the  Attorney-Greneral  or  by  exercising 
its  executive  power. 

I  Report  of  the  Royal  Commission  on  the  Meat  Export  Trade  of  Australia,  1915,  pp.  20, 21. 
'  Ley  de  l>vS,S  (21  de  Febrero)  que  reforma  el  C6digo  de  Comercio. 
3  The  Commercial  Code  of  Japan,  by  Yang  Yin  Hang.    Boston,  1911. 


298  REPORT   OF    THE   COMMISSIONER   OP   CORPORATIONS. 

A  similar  provision  with  regard  to  foreign  business  associations 
having  branch  offices  in  Japan  is  found  in  article  260,  which  follows: 

Art.  260.  If  a  representative  of  a  foreign  business  association  establishing  a  branch 
office  in  Japan  commits  any  act  contrary  to  the  public  order  or  good  morals  during 
the  management  of  the  business  of  the  association,  the  court  may  upon  the  application 
of  the  attorney-general  or  by  its  own  executive  power  order  tlie  branch  office  to  be 
closed. 

Article  262  of  this  code  provides  penalties  for  disobedience  to  or- 
ders of  the  court  made  in  pursuance  of  article  260.  The  pertinent 
parts  of  this  article  read  as  follows: 

Art.  262.  Promoters,  members  managing  the  businessof  a  business  association,  direc- 
tors, representatives  of  foreign  business  associations,  auditors,  or  liquidators  are  pun- 
ished by  a  fine  of  from  ten  yen  to  one  thousand  yen  in  the  following  cases: 

******* 

9.  When  they  act  contrary  to  an  order  of  the  court  issued  according  to  the  provision 
of  Art.  260. 

It  is  not  known  whether  any  judicial  application  of  these  laws  has 
been  made  with  respect  to  combinations  which  restrict  competition. 

Where  a  trade  name  and  business  or  a  business  alone  is  transferred 
articles  22  and  23  of  this  code  provide  for  restricting  future  competi- 
tion by  the  transferor  with  the  transferee,  if  no  express  agreement  has 
been  made  regarding  it.  As  these  articles,  however,  are  of  more 
particular  interest  with  regard  to  the  question  of  unfair  competition 
the  texts  are  given  in  Chapter  X.     (wSee  p.  695.) 

Section  31.  China. 

No  satisfactory  data  have  been  found  regarding  the  laws  of  China 
in  respect  to  combinations  in  restraint  of  trade,  but  a  comparatively 
recent  work  based  on  original  sources  makes  the  following  statement 
concerning  this  subject.^  In  this  quotation  the  Chinese  characters 
for  the  titles  of  the  laws  referred  to,  etc.,  are  indicated  by  asterisks 
and  the  references  to  authorities  are  omitted: 

Arrangements  to  artificially  influence  the  market  are  contrary  to  law.  For  a  person 
to  unduly  depress  or  raise  prices  to  suit  his  own  convenience  entails  a  penalty  of  eighty 
blows;  and  undue  profit  arising  therefrom  will  be  treated  as  theft. 

Trade  combinations. — Our  railway  directors  and  shipping  agents  would  be  in  gaol 
in  a  very  short  time,  if  they  ventured  on  their  ordinary  practices  in  China,  under  the 
clause  ****** — ^1.  e.,  the  law  against  'ruffians  establishing  conferences  and  preventing 
shippers  chartering  outside  vessels';  and  the  originator  of  the  combination  to  raise 
sales  would  be  sent  to  military  servitude  on  the  borders  after  a  month's  cangue,'^ 
while  those  who  combined  with  them  would  get  one  hundred  blows  and  throe  years' 
transportation.  So  in  the  case  of  Chang  Hao  **  and  others,  where  some  licensed  ship- 
ping agents  and  others  who  combined  to  raise  the  rates  on  a  demand  for  transport  aris- 
ing were  so  sentenced. 

1  Alabaster:  Notes  and  Commentaries  on  Chinese  Criminal  Law,  I-ondon,  1899,  p.  545. 

2  A  form  of  punishment  similar  to  pillory. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  299 

Corners. — Forbidden.  So  in  the  case  of  a  corner  in  bread  stuffs  denounced  by  spe- 
cial edict  from  the  Thi'one ;  and  the  Governor-General  of  the  province  wherein  the  case 
arose  was  directed  to  enquire  into  these  practices  and  punish  the  offenders  ******. 

Section  32.  International  law. 

No  treaties  have  been  noted  which  affect  directly  the  la^vfulness  of 
combination  agreements. 

The  nearest  approach  to  such  international  regulation,  apparently, 
was  the  Brussels  treaty  of  March  5,  1902,  regarding  sugar  legislation, 
which  has  been  referred  to  above.  (See  pp.  268,290.)  This  treaty  was 
signed  by  Germany,  Austria-Hungary,  Belgium,  Spain,  France,  Great 
Britain,  Italy,  The  Netherlands,  and  Sweden.  The  following  provi- 
sions are  specially  noteworthy.  Article  1  of  this  treaty  provided  that 
the  signatories  should  suppress  direct  or  indu'ect  bounties  wliich  would 
benefit  the  production  or  exportation  of  sugar  and  should  not  estab- 
lish such  bounties  during  the  term  of  the  treaty.  Article  3  provided 
that  the  import  duties  on  imported  sugar  should  not  exceed  the  inter- 
nal taxes  on  sugar  of  domestic  production  by  more  than  6  francs  per 
100  kilograms  for  refined  sugar  or  5.50  francs  for  other  kinds  of  sugar. 
Article  4  provided  that  the  signatories  should  levy  a  special  import 
tax  on  the  imports  of  sugar  from  comitries  which  allowed  bounties  on 
the  production  or  exportation  of  sugar,  the  amount  of  the  tax  to  be 
equal  to  the  value  of  the  bounty.  Article  7  provided  for  the  creation 
of  a  commission  to  decide  certam  questions,  to  collect  information, 
and  to  supervise  the  execution  of  the  treaty.  This  treaty  was  made 
for  a  term  of  five  years,  commencing  September  1,  1903,  vni\\  provi- 
sions for  its  continuance  from  year  to  year,  for  the  admission  of  other 
States  and  for  the  withdrawal  of  signatory  States  on  prescribed 
notice.  Russia  became  a  member  in  1907  under  special  conditions 
(see  p.  290),  and  there  were  other  changes  with  respect  to  the  States 
adhering  to  the  treaty.  On  March  17,  1912,  the  treaty  was  prolonged 
for  five  years,  the  following  States  being  signatories:  Germany,  Aus- 
tria-Hungary, Belgium,  France,  Luxemburg,  The  Netherlands,  Peru, 
Russia,  Sweden,  and  Switzerland.  Rules  were  established  for  with- 
drawal, and  special  provisions  were  again  made  regarding  Russia. 
Great  Britain  was  not  a  party  to  this  agreement. 

The  relation  of  this  treaty  to  the  international  regulation  of  cartels 
is  found  in  the  fact  that  certain  governments  had  established  export 
bounties  on  sugar,  and  that  in  some  cases  the  apportionment  of  these 
bounties  among  producers  was  affected  by  the  existence  of  cartels 
which  regulated  production  and  exportation  and  wliich  depended 
largely  on  the  existence  of  such  bounties  to  maintain  their  organiza- 
tion. As  already  pointed  out  (see  p.  268),  Austria-Hungary  passed  a 
law  in  January,  1903,  which  fixed  the  quotas  of  })roduction  of  sugar 
manufacturers ;  but  tliis  was  held  by  the  commission  wliich  was  cstab- 


300  EEPOET   OF   THE   COMMISSIONEE  OP   CORPOEATIOKS. 

lished  under  this  treaty  to  be  repugnant  to  the  provision  forbidding 
the  granting  of  indirect  bounties,  and  so  this  law  was  repealed  in  July, 
1903.  On  the  other  hand,  when  Russia  became  a  signatory  to  the 
treaty  it  was  under  the  special  condition  of  preserving  its  customs  and 
excise  system  with  respect  to  sugar  wliich  would  apparently  have  been 
inconsistent  with  the  general  provisions  of  the  treaty. 

The  Russian  Government,  which  did  not  take  part  in  the  original 
estabhshment  of  the  treaty  in  1902,  held  that  its  system  of  regulating 
the  sugar  industry  was  not  equivalent  to  a  grant  of  bounty,  and  the 
Minister  of  Finance  in  Russia  at  that  time,  Mr.  de  Witte,  through  the 
Russian  Ministry  of  Foreign  Aff  ah*s,  intimated  to  the  representatives 
of  the  signatory  powers  that  the  Russian  Government  was  willing  to 
negotiate  concerning  a  treaty  which  should  look  to  the  prevention  of 
conditions  which  tend  to  the  elevation  of  domestic  prices  and  the 
depression  of  prices  in  mternational  trade  with  respect  to  aU  impor- 
tant commodities,  whether  on  account  of  bounties,  industrial  combi- 
nations, or  otherwise.^ 

1  Raflalovich,  Trusts,  Cartels  &  Syndicats.    Paris,  1903,  pp.  196-198. 


CHAPTER  VI. 

UNFAIR  METHODS  OF  COMPETITION  FROM  THE  BUSINESS  AND 

ECONOMIC  VIEWPOINT. 

Section  1.  Introductory. 

About  the  subject  of  unfair  competition  centered  a  large  share  of 
the  debate  on  trust  legislation  during  the  third  session  of  the  Sixty- 
third  Congress  (1914).  It  was  discussed  in  connection  with  the  act 
creating  the  Federal  Trade  Commission  as  well  as  the  Clayton  Anti- 
trust Act.  In  the  former  "  unfair  methods  of  competition  in  com- 
merce" are  declared  unlawful/  and  the  Federal  Trade  Commission 
is  directed  "  to  prevent  persons,  partnerships,  or  corporations,  except 
banks  and  common  carriers  subject  to  the  acts  to  regulate  commerce, 
from  using  unfair  methods  of  competition  in  commerce."  This  gen- 
eral prohibition  of  unfair  competition  is  supplemented  in  the  Clay- 
ton Antitrust  Act^  by  prohibition  of  certain  specific  practices, 
including  price  discrimination  and  exclusive-dealing  requirements. 
It  is  the  purpose  of  this  chapter  to  indicate  how  the  term  "  unfair 
competition  "  and  other  similar  terms  have  been  applied  by  economic 
writers  and  by  business  men,  and  to  describe  some  of  the  competitive 
acts  which  have  been  complained  of  as  unfair. 

No   DEFINITION   OF   UNFAIR   METHODS   OF   COMPETITION   ATTEMPTED   IN 

THIS  CHAPTER. — It  is  not  intended  in  this  chapter  to  define  the  mean- 
ing of  "unfair  methods  of  competition,"  nor  is  the  term  capable, 
probably,  of  exact  definition  in  brief  terms.  Indeed,  the  unfairness 
may  often  depend  as  much  on  the  circumstances  as  on  the  method 
itself.  The  purpose  here  is  merely  to  indicate  methods  of  com- 
petition which  some  persons  have  viewed  as  unfair  without  attempt- 
ing to  pass  upon  their  fairness  or  unfairness.  Citation  here  does 
not  indicate,  therefore,  any  conclusion  that  the  action  or  practice 
cited  should  or  should  not  be  considered  unfair,  still  less  that  it  is 
among  the  "unfair  methods  of  competition"  which  Congress  has 
prohibited.  Some  of  the  methods  included  in  this  chapter  might 
perhaps  be  regarded  by  Congress  and  by  a  majority  of  people  as 
legitimate  and  proper.  Nevertheless,  the  presentation  of  various  and 
sometimes  conflicting  views  may  throw  some  light  on  the  question  of 
the  unfairness  of  particular  practices  when  they  come  up  for  actual 
decision. 


1  See  p.  128.  =  See  p.  132. 

301 


302  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

This  chapter,  dealing  with  business  and  economic  rather  than 
legal  opinions,  excludes  the  decisions  of  courts  on  the  legality  of  cer- 
tain methods  of  competition — a  subject  treated  in  the  following  chap- 
ters of  this  report.  However,  complaints  in  antitrust  suits  are  occa- 
sionally cited  here  on  the  same  basis  as  other  complaints,  namely, 
to  show  that  some  persons  have  regarded  the  methods  complained 
of  as  unfair. 

The  enumeration  of  devices  here  given  is  not  exhaustive.  Neither 
are  the  several  designations  of  the  kinds  of  unfair  competition 
always  mutually  exclusive.  They  are  intended  to  follow  in  general 
the  views  that  have  been  expressed  and  the  complaints  that  have 
been  made,  and  this  inevitably  results  in  some  crossing  of  classifi- 
cation. 

Kinds  of  competition. — The  natural  rivalry  between  one  manufac- 
turer and  another,  between  one  dealer  and  another,  each  striving  for 
business  and  profits,  constitutes  the  competition  which  has  been 
called  "  the  life  of  trade." 

This  competition  may  be  classified  according  to  the  class  of  traders 
engaged  in  it,  the  point  at  which  competition  occurs,  the  size  and  cir- 
cumstances of  competitors,  and  the  fairness  or  unfairness  of  the  com- 
petitive methods. 

Competition  by  classes  of  traders. — Competition,  as  the  term  is 
here  used,  may  be  subdivided  by  classes  of  traders  as  follows : 

1.  Between  producers  of  raw  materials. 

2.  Between  manufacturers. 

3.  Between  dealers,  wholesale  or  retail. 

4.  Between  concerns  combining  several  stages  in  the  process  of 
production  and  distribution. 

There  is,  however,  competition  between  competitors  one  or  both 
of  whom  are  engaged  in  more  than  one  stage  in  the  process  of 
production  and  distribution.  If  a  single  concern  combines  the 
functions  of  raw-material  producer,  manufacturer  of  primary  prod- 
ucts, manufacturer  of  secondary  products,  wholesale  distributor,  and 
possibly  also  retail  distributor,  thus  putting  the  product  into  the 
hands  of  the  final  consumer,  its  competition  with  a  concern  engaged 
only  in  manufacturing,  or  a  concern  engaged  only  in  mining,  is 
relatively  much  more  limited  in  points  of  contact  than  that  between 
two  like  concerns. 

Point  at  which  competition  occurs. — The  point  in  the  process  of 
production  and  distribution  at  which  competition  occurs  is  different 
in  different  cases;  it  may  take  place  at  almost  any  stage  of  the 
process.  There  is  a  kind  of  competition  in  each  concern's  develop- 
ment of  its  own  internal  productive  efficiency.  Competition  is  most 
obvious,  however,  at  the  points  where  the  competing  units  come  into 
contact  with  outsiders,  and  it  is  conspicuous  in  proportion  as  this 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  303 

contact  takes  the  form  of  a  struggle  for  something  of  which  each 
competitor  must  have  less  as  the  others  have  more.  The  points  of 
contact  with  outsiders  are  chiefly  connected  with  the  hiring  of  labor, 
the  purchase  of  raw  material  or  goods,  and  the  sale  of  the  product  or 
commodity.  Usually  the  competitor  appears  to  be  not  so  keenly 
aware  that  his  supply  of  raw  material  or  goods  and  of  labor  is  lim- 
ited by  the  purchases  or  the  hirings  of  others.  At  the  selling  end, 
however,  the  demand  almost  always  appears  limited,  and  each  com- 
petitor feels  sharply  that  his  sales  will  tend  to  be  less  as  his  neighbor's 
are  greater.  At  this  pomt,  therefore,  competition  is  usually  most 
conspicuous.  At  any  one  of  these  stages  the  methods  of  competition 
may  be  fair  or  unfair. 

Inequalities  in  size  and  other  circumstances  or  competitors. — 
Mere  differences  in  size  may  also  make  competition  one  sided,  even 
where  no  competitor  works  in  more  than  a  single  stage  of  the 
process  of  production  and  distribution.  A  company  of  ample  capi- 
tal, large  plants,  extensive  credit,  experimental  departments,  and  an 
elaborate  selling  organization  may  be  able,  in  some  cases,  to  buy 
more  cheaply  its  raw  materials,  to  manufacture  its  products  more 
economically,  and  to  undersell  its  competitors.  Mere  size,  however, 
does  not  necessarily  create  serious  inequality  of  competitive  condi- 
tions. Some  of  the  larger  "trusts"  are  notoriously  inefficient,  and 
their  independent  competitors  do  a  large  and  increasing  business. 

The  possession  of  unusually  good  supplies  of  raw  materials,  the 
location  of  plants  close  to  raw  materials,  or  to  markets,  often  give 
special  advantages  to  some  competitors.  Unusually  capable  workmen 
or  particularly  able  management,  newer  or  better  machinery,  the 
ownership  or  control  of  patents  or  special  processes,  are  also  factors 
which  may  give  a  concern  special  advantages. 

Such  special  advantages  in  competition  have  usually  been  regarded 
as  fair,  except  perhaps  where  monopolization  exists  with  respect  to 
natui-al  resources,  or  where  advantage  has  been  taken  of  large  capital 
resources  to  extend  credits  abnormally. 

Section  2.  Fair  and  unfair  methods  of  competition. 

Some  methods  of  competition  are  universally  recognized  as  proper 
and  legitimate,  such  as  supplying  goods  of  better  quality  for  the  same 
price  or  goods  of  the  same  (juality  at  a  lower  price,  and  more  prouipt 
or  more  satisfactory  service.  Dishonest  methods  are  condemned  by 
most  persons  not  immediately  profiting  by  tlieir  employment,  such  as 
false  weights  and  measures  or  passing  off  one  commodity  for  another. 
There  is  a  great  intermediate  field  of  practices  which  lie,  in  varying 
degrees,  under  the  shadoAv  of  general  disapproval,  and  the  shadow 
is  slowly  shifting.  For  instance,  in  the  early  days  of  railroads  it 
may  have  generally  seemed  right  that  the  shipper  of  10  qarloads 


304  EEPOET  OF   THE   COMMISSIONER  OF   CORPOEATIONS. 

should  have  a  lower  freight  rate  than  the  shipper  of  1,  as  it  now 
seems  to  most  people  that  the  shipper  of  a  carload  should  have  a 
lower  rate  than  the  shipper  of  a  hundredweight.  To  most  people  the 
reduction  for  10  cars  seems  just  no  longer.  Such  an  advantage  is 
now  generally  conceived  as  unfair  where  the  shipments  are  in  carload 
lots,  and  to  attempt  to  get  it  is  condemned  as  an  unfair  method  of 
competition.  A  thing  which  may  have  once  seemed  fair  is  now 
deemed  unfair,  because  it  has  been  found  to  lead  to  the  inevitable 
destruction  of  the  less  favored,  and  hence  to  monopoly  and  to  the 
oppression  of  producers  of  raw  materials,  manufacturers,  and  con- 
sumers. 

Competition  does  not  necessarily  involve  any  direct  dealings  with 
competitors.  It  consists  largely  in  dealings  with  other  persons. 
Since  every  act  of  competition  affects  persons  who  are  not  com- 
petitors, it  follows  that  every  such  act,  while  it  may  be  judged  as 
either  fair  or  unfair  tow\ard  competitors,  may  also  be  judged  as  either 
fair  or  unfair  toward  others.  For  instance,  selling  cotton  goods  for 
woolen  or  imitating  a  competitor's  trade-mark  may  be  unfair  both 
to  the  competitor  and  to  the  consumer.  In  its  relation  to  the  con- 
sumer it  may  be  called  fraudulent.  In  its  relation  to  a  competitor 
it  may  be  called  unfair  competition. 

That  is,  when  any  act  is  viewed  as  an  act  of  competition  it  is 
usually  viewed  in  its  relation  to  competitors,  and  to  call  it  unfair 
competition  is  to  call  it  unfair  to  competitors.  Yet  the  conception 
of  fairness  in  competition  wdiich  prevails  at  any  given  time  is  largely 
determined  by  the  prevailing  conception  of  what  is  good  for  persons 
other  than  the  competitors.  Indeed,  it  seems  likely  that,  among  us 
and  at  the  present  time,  the  fairness  of  a  competitive  method  is 
judged  chiefly  by  what  is  believed  to  be  its  ultimate  effect  on  con- 
sumers of  the  products  which  the  competitors  sell  or  on  producers 
of  raw  materials  which  the  competitors  buy. 

The  seller  w^ho  reduces  prices  has  long  been  viewed  wdth  approval 
by  general  public  opinion  and  by  the  law.  Agreements  of  sellers  to 
keep  up  prices  have  long  been,  and  still  are,  in  those  situations  Avhere 
trade  is  restrained,  illegal.  Sellers,  wdiolesale  or  retail,  used  gen- 
erally to  make  different  prices,  as  a  matter  of  course,  to  different 
customers.  The  price  was  reached  by  a  process  of  bargaining,  and 
depended  largely  on  skill  in  bargaining.  These  methods  seemed 
good  largely  because  they  seemed  advantageous  to  the  consumers. 
Yet  price  making  by  bargaining  is  now  in  many  fields  looked  at 
more  or  less  askance,  and  in  some  fields  it  is  condemned  by  law,  and 
both  bargaining  and  price  reductions  are  under  some  circumstances 
called  unfair  competition.  While  the  cry  of  unfair  competition  in 
such  cases  is  sometimes  raised  by  the  competitors  themselves,  or  in 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  305 

their  behalf,  it  is  as  often  used  by  persons  whose  chief  interest  is  in 
the  consumers. 

Price  making  by  bargaining  was  first  strongly  condemned  in  the 
field  of  railway  transportation.  Transportation  prices  had  often 
been  fixed  by  bargaining,  like  other  prices,  for  the  larger  shippers 
and  for  the  better  bargainers.  Here  bargaining  began  to  be  felt 
as  unfair,  primarily  to  those  shippers  that  paid  the  higher  rates, 
and  it  was  forbidden  by  laAv  some  years  ago.  More  recently  the 
notion  of  unfairness  has  extended  to  some  kinds  of  reduction  in  the 
prices  of  commodities.  Manufacturers  who  fix  resale  prices  for 
their  branded  and  trade-marked  goods,  and  some  dealers  in  such 
goods,  protest  that  dealers  who  cut  the  prices  so  fixed  are  unfair  to 
their  competitors  and  to  the  manufacturers.  On  the  other  hand,  many 
view  this  fixing  of  resale  prices  by  manufacturers  as  itself  unfair. 
The  price  reductions  that  are  more  widely  condemned  are  those  that 
are  conceived  as  temporary  and  for  the  purpose  of  later  charging 
prices  based  on  monopoly,  and  so  unduly  high.  In  the  special  rail- 
way rates  referred  to,  the  persons  first  thought  of  as  injured  are 
the  weaker  shippers,  ayIio  have  to  pay  the  higher  rates;  but  the 
popular  feeling  of  injustice,  while  based  partly  on  the  injury  to 
such  shippers,  relates  perhaps  more  to  the  damage  which  the  con- 
sumers will  suffer  when  the  strong  shippers  have  the  field  to  them- 
selves and  can  fix  the  consumer's  price  at  a  high  level.  Of  similar 
origin  is  the  condemnation  of  local  pi-ice  cutting,  where  the  appar- 
ent purpose  is  to  destroy  a  relatively  weak  competitor.  The  elimi- 
nation of  weak  competitors  has  been  regarded  as  a  normal  incident 
of  competition,  but  their  elimination  by  prices  loAver  than  cost  is  felt 
to  be  a  public  calamity  and  a  wrong  as  soon  as  it  is  found  to  be 
followed  by  prices  higher  than  before. 

On  this  point  Prof.  W.  H.  S.  Stevens  says  :^ 

"  Fair  competition,"  in  an  economic  sense,  signifies  a  competition  of  economic 
dr  productive  efficiency.  On  economic  grounds  an  organization  is  entitled  to 
remain  in  business  so  long  and  only  so  long  as  its  production  and  selling  costs 
enable  it  to  hold  its  own  in  a  free  and  open  market.  As  the  productive  and 
selling  efficiency  of  competitors  increases,  marginal  concerns  which  are  unable 
to  keep  pace  will  gradually  lose  their  market  and  ultimately  discontinue  busi- 
ness. But  in  such  an  elimination  there  is  nothing  not  economically  fair  to  all 
concerned.  If  all  have  an  equal  chance  to  survive,  it  is  economically  proper 
that  those  failing  through  lack  of  efficiency  should  be  destroyed.  The  com- 
munity is  entitled  to  the  most  efficient  service  that  can  be  given.  Inefficient 
lirganizations  constitute  a  burden  to  the  community,  and  no  justification  can 
be  found  for  their  continued  existence. 

Unfortunately  competition  is  not  always  conducted  under  such  conditions  of 
equal  opportunity  in  a  free  and  open  market.  Productive  and  scaling  efficiency 
alone  do  not  always  permit  an  organization  to  survive,  owing  to  the  introduction 

1  Political  Science  Quarterly,  June,  1914,  pp.  282,  283. 
30035°— 16 20 


306  EEPOET  OF   THE   COMMISSIONER  OF   COEPOEATIONS. 

of  methods  and  practices  which  destroy  the  freedom  of  the  market,  which 
hamper  tlie  productive  or  selling  efficiency  of  other  units,  and  whicli  prevent 
efficient  potential  competitors  from  becoming  actual  rivals.  Such  artificial 
restrictions  are  clearly  unfair,  since  they  hinder  or  prevent  other  organizations 
from  competing  to  the  extent  which  their  productive  and  selling  efficiency  may 
warrant.  If  there  be  a  sound  basis  for  competition,  it  lies  in  the  preservation 
of  the  economically  efficient  and  the  destruction  of  the  inefficient.  It  follows 
that  methods  which  destroy  the  efficient  along  with  the  inefficient  are  economi- 
cally unjustifiable  and  must  be  regarded  as  unfair. 

This  bases  the  distinction  of  fair  and  unfair  competition  on  con- 
siderations of  economic  advantage  to  the  public.  Prof.  John  Bates 
Clark  takes  the  same  view : 

The  victory  of  the  efficient  is  something  society  can  not  afford  to  do  without, 
however  much  it  might  wish  to  spare  the  vanquished.  So  that  in  this  case  it  is, 
after  all,  the  means  used  and  not  the  ijurpose  that  tilts  the  scale  of  judgment 
from  approval  to  condemnation,  and  "  unfair  competition "  comes  to  mean 
virtually  any  practice  whose  natural  result  is  to  make  survival  depend  on  other 
qualities  than  industrial  efficiency.^ 

To  the  same  effect  also  speaks  Prof.  Henry  Rogers  Seager.^  After 
enumerating  certain  advantages  of  the  trusts — saving  in  selling  ex- 
pense, saving  in  cross  freights,  and  others — which  he  declares  to  be 
legitimate,  he  enumerates  three  lines  of  policy  (the  obtaining  of  dis- 
criminating railroad  rates,  local  price  discrimination,  and  exclusive- 
dealing  contracts),  which,  he  says,  critics  of  the  trusts  charge  "are 
squarely  opposed  to  the  general  interest  and  therefore  illegitimate." 

Use  or  the  term  "  unfair  competition  "  and  other  like  terms. — 
The  phrase  "unfair  competition,"  used  at  first  in  a  merely  descrip- 
tive way,  has  gradually  come  to  a  quasi-technical  employment  in 
economic  discussion.^  In  the  index  of  volume  1  of  the  Reports  of 
the  Industrial  Commission,  published  in  1900,*  it  is  used  to  cover 
statements  of  witnesses  on  "  destructive  competition "  in  the  sense 
of  severe  and  continued  price  cutting ;  on  "  illegitimate  competition," 
in  the  sense  of  "  cutting  of  prices  below  the  cost  of  production  " ;  and 
on  local  price  discrimination.  The  exact  phrase  "unfair  competi- 
tion "  appears  to  have  been  used  in  only  one  case  by  a  witness  re- 
ported in  that  volume,  and  then  on  the  suggestion  of  a  member  of 
the  commission.^ 

iThe  Control  of  Trusts,  by  John  Batos  Clark  and  John  Maurice  Clark   (1912),  p.  103. 

=  Introduction  to  Economics  (third  ed.,  1905),  p.  491. 

3  In  a  letter  of  Apr.  18,  1879,  to  the  chairman  of  the  special  committee  on  railroads  of 
the  New  York  Assembly  (Hepburn  Committee),  signed  by  W.  H.  Vanderbilt,  president  of  the 
New  York  Central  &  Hudson  River  R.  R.  Co.,  and  H.  J.  Jewett,  president  of  the  New  York, 
Lake  Erie  &  Western  R.  R.  Co.,  the  phrase  "  unfair  competition"  was  applied  to  the  action 
of  the  Grand  Trunk  Ry,  in  making  through  rates  between  Liverpool  and  Chicago  less  than 
the  ordinary  water  and  rail  rates  combined.  In  the  same  letter  the  phrase  "  unfair  dealer  " 
was  applied  to  "  anyone  who  offers  his  goods  at  or  below  cost."  (Proceedings  of  the  Special 
Committee  on  Railroads  of  the  New  York  Assembly  (1879),  Vol.  I,  pp.  50,  57.) 

*  Report  of  the  Industrial  Commission,  vol.  1,  p.  1275. 

s  Ibid.,  p.  623. 


TRUST   LAWS  AND  UNFAIE  COMPETITION.  307 

In  the  passage  quoted  above  from  Prof.  Clark's  book,  which  was 
published  in  1912,  the  phrase  "  unfair  competition  "  is  put  in  quotation 
marks  to  indicate  its  quasi-technical  use.  But  Prof.  Seager,  writing 
some  years  earlier,  says  "  illegitimate " ;  and  this  and  like  descrip- 
tive and  explanatory  words — "  unfair  practices,"  "  destructive  com- 
petition," "  predator}^  competition,"  etc. — have  till  recently  been 
often  used  in  i^lace  of  "  unfair  competition." 

Few  attempts  have  been  made  by  economic  writers  to  define  "  un- 
fair competition,"  or  to  enumerate  fully  the  kinds  of  conduct  they 
consider  it  to  include.  Only  incidentally  and  by  illustration  have 
such  writers  usually  indicated  the  meaning  they  give  to  such  a  term. 

Francis  Walker,  in  a  paper  read  at  the  meeting  of  the  American 
Economic  Association  in  1909,  mentioned  as  illustrations  of  "  unfair 
competition"  or  "unfair  methods  of  competition":  Local  i)rice 
cutting,  preventing  competitors  from  getting  supplies  and  facilities, 
bogus  independent  companies,  espionage  by  corrupting  employees, 
and  "  certain  kinds  of  exclusive  contracts."  ^ 

Prof.  F.  W.  Taussig,  in  his  Principles  of  Economics  (1911),  speaks 
of  "the  devices  of  '  unfair'  competition — railway  favors,  discrimina- 
tions in  prices,  factors'  agreements,  advertising  devices."^  Under 
"  discriminations  in  prices  "  Prof.  Taussig  includes  local  price  cutting 
and  cutting  the  price  of  one  article  of  a  combination's  line  "  in  order 
to  bankrupt  a  rival  who  produces  that  one."  Apparently  he  also 
meant  to  include,  or  at  least  to  bring  under  the  same  degree  of  cen- 
sure or  question,  simple  "cutthroat  competition  "  for  the  purpose  of 
eliminating  rivals — "  sales  at  prices  ruinously  low,  designed  to  force 
the  rival  into  bankruptcy  or  absorption."  ^  The  factors'  agreement 
Prof.  Taussig  defines  as  "a  contract  with  a  dealer  (wholesale  or 
retail)  by  which  he  agrees  to  sell  only  goods  produced  by  the  com- 
bination."-* Of  "advertising  devices"  Prof.  Taussig  says:  "Mere 
effronterj-  in  puffing  your  wares  is  an  important  factor  in  modern 
trade."  Advertising  "  is  often  a  means  of  useful  competition.  But 
sometimes  it  is  a  weapon  of  destructive  competition.  *  *  *  Plen- 
tiful cash  is  the  sine  qua  non  of  an  effective  advertising  campaign. 
The  large  producer,  or  would-be  monopolist,  has  here  again  a  tactical 
advantage.  The  same-  is  true  of  other  devices  for  popularizing  your 
goods — prizes,  premiums,  gifts,  pictures,  what  not.  These  delude  the 
purchaser  into  the  belief  that  he  is  getting  something  for  nothing. 
Like  mendacious  advertising,  they  rest  on  the  gullibility  of  mankind 
and  are  effective  in  proportion  as  they  are  carried  out  on  a  large 
scale."* 

1  Pulilications  of  the  American  Economic  Association,  third  scries,  Vol.  XI,  No.  1  (Papers 
and  Discussions  of  the  Twenty-second  Annual  Meeting  i,  pp.  291,  308-;>10,  319. 
-  F.  W.  Taussig,  Principles  of  Economics,  vol.  2,  p.  xv ;  contents  of  eh.  63. 
3  Ibid.,  vol.   2,  p.  427. 
Mbid.,  vol.  2,  p.  428. 


308  KEPOKT  OF   THE   COMMISSIONER  OF   COEPORATIONS. 

John  Bates  Clark,  in  " The  Control  of  Trusts "  (1901),  enumerated 
three  kinds  of  "  unfair  dealing,"  as  follows : 

The  first  is  local  discrimination  in  prices.     *     *     * 

Again,  discriminations  may  be  made,   not  between  different  localities,  but 
between  different  grades  of  goods  on  tlie  general  price  scale.     *     *     * 
Thirdly,  the  trust  may  refuse  to  sell  goods  at  all  under  certain  conditions. 

Prof.  Clark  also  condemned  railroad  discriminations  in  connection 
with  the  discussion  of  the  above  methods.^ 

J.  B.  and  J.  M.  Clark,  in  The  Control  of  Trusts  (1912),  make  no 
formal  enumeration  of  the  practices  they  include  under  the  term 
"  imfair  competition,"  but  they  appear  to  have  especially  in  mind 
local  price  cutting,  single-commodity  price  cutting,  and  factors' 
agreements  (exclusive-dealing  requirements).-  "Unfair  practices" 
and  "  destructive  competition  "  are  used  in  this  book  as  synonyms  of 
"  imfair  competition."  ^  J.  B.  Clark,  one  of  the  authors  of  this  book, 
does  not  seem  to  use  the  phrase  "unfair  competition"  in  his  book 
entitled  "The  Problem  of  Monopoly"  (1904)  ;  but  the  three  prac- 
tices just  referred  to  are  there  condemned  under  the  term  "  cutthroat 
competition,"*  and  the  same  condemnation  covers  the  obtaining  of 
railroad  discriminations.^ 

Charles  R.  Van  Hise,  president  of  the  University  of  Wisconsin,  in 
Concentration  and  Control  (1912)  uses  the  phrase  "unfair  competi- 
tion "  only  incidentally.  It  does  not  occur  in  the  index,  except  in  a 
reference  to  the  statement  that  in  Germany  the  laws  are  "  very  severe 
against  unfair  competition";  and  an  examination  of  the  text  has 
revealed  no  other  use  of  it  but  the  following :  "  The  grosser  forms  of 
unfair  competition,  such  as  espionage  of  business  competitors,  bribing 
of  men  in  the  employ  of  competitors,  etc.,  should  be  prohibited."  ^ 

In  one  case  he  uses  the  phrase  "  illegitimate  competition  "  to  cover 
fighting  brands,  bogus  competitors,  price  discrimination,  exclusive 
contracts,  and  espionage.'^  Of  "  unfair  practices,"  he  says :  ^  "  Unfair 
practices  must  be  prohibited,  and  unfair  advantages  must  not  be  per- 
mitted. Only  so  will  it  be  possible  to  retain  competition."  Some 
of  the  more  important  practices  which  he  here  proposes  to  pro- 
hibit are: 

Common-carrier  discriminations. 

Bogus  independents. 

Espionage  on  competitors  and  bribery  of  competitor's  employees. 

1  John  Bates  Clark,  "  The  Control  of  Trusts  "  (1901),  pp.  33-34,  64,  74,  and  76. 
-J.  B.  and  J.  M.  Clark,  The  Control  of  Trusts    (1912),  p.  90,  chapter  summary;   pp. 
96,  97. 

^  Ibid.,  p.  31,  chapter  summary;  p.  96,  chapter  heading  and  summary;  pp.  96,  97. 

*  J.  B.  Clark,  The  Problem  of  Monopoly,  pp.  33-36,  48,  49. 

Mbid.,  pp.  32,  33. 

»  Charles  R.  Van  Hise,  Concentration  and  Control,  p.  226. 

'Ibid.,  p.   143. 

*Ibid.,  pp.  225,  226. 


TKUST   LAWS  AND   UNFAIR  COMPETITION.  309 

Exclusive-dealing  arrangements. 
Local  price  cutting. 

In  other  places  Dr.  Van  Hise  mentions  as  "  unfair  practices  "  the 
following :  ^ 

Misrepresenting  competitor's  goods. 

Selling  machines  which  resemble  those  of  competitors  "  at  a  very  low 
figure." 

Purchase  [and  suppression]  of  patents  and  preventing  inventors  "  from 
putting  their  inventions  on  the  market." 

Unjustifiable  suits  and  threats  of  suits,  to  intimidate  competitors. 

Distributing,  for  purix)ses  of  intimidation,  statements  regarding  the  num- 
ber of  competitors  who  have  failed. 

As  "  unfair  methods,"  without  which,  "  it  is  asserted,  with  the 
support  of  a  pertinent  array  of  facts,  that  the  great  combinations 
could  not  exist,"  Senator  Theodore  E.  Burton,  in  "  Corporations  and 
the  State"  (1911),  names  local  price  cutting,  one-commodity  price 
cutting,  and  exclusive-handling  requirements.^ 

Prof.  Edward  Dana  Durand,  in  his  recent  book,  The  Trust  Prob- 
lem,^ mentions  railroad  discriminations,  price  discriminations,  bogus 
independents,  and  exclusive  patronage  requirements  as  types  of  un- 
fair competition.  He  expresses  the  opinion,  however,  that  "  in  by  no 
means  all  industries  is  it  possible  for  a  combination,  however  com- 
prehensive, to  add  much  to  its  power  by  unfair  competitive  meth- 
ods."* On  this  point  he  is  at  odds  with  those  who  hold  that  the 
power  of  a  monopolistic  combination  "  rests  mainly  on  unfair  com- 
petitive methods  or  on  special  privileges.^     He  says :  "^ 

The  Tobacco  Trust,  I  feel  sure,  was  far  from  owing  the  whole  of  its  power  to 
unfair  competitive  methods  or  to  special  monopoly  privileges.  Freight  charges 
on  tobacco  are  such  a  small  element  in  cost  that,  even  if  the  trust  had  special 
favors  in  this  respect,  they  could  have  counted  but  little  in  competition.  The 
trust  did  make  considerable  use  of  price  discrimination  as  a  nietliod  of  warfare 
against  competitors.  It  maintained  bogus  independent  companies.  It  sought  to 
make  exclusive  contracts  with  dealers.  The  conditions  of  the  trade,  however, 
are  sucli  tliat  these  practices  could  not  wholly  account  for  monopoly  power. 
The  ability  of  the  trust  to  maintain  its  dominant  position  was  largely  due  to  its 
readiness  to  buy  up  competitors  at  good  prices,  and  to  the  readiness  of  competi- 
tors to  submit  to  the  amalgamation  process. 

Prof.  J.  W.  Jenks,  in  "The  Trust  Problem,"  applies  the  phrase 
"  destructive  competition  "  to  local  price  cutting.^ 

Prof.  Lewis  H.  Haney,  in  "  Business  Organization  and  Combina- 

J  riiarlos  R.  Van  Iliso,  Concoptration  and  Control,  p.  100. 

2  Theodore  K.  Burton,  Corporudons  and  the  State  (I'.tll),  p.  110. 

»  Edward  Dana  Durand,  The  Trust  Problem,  1915,  pp.  17,  19,  20,  21,  22. 

« Ibid.,  p.  21. 

Mhld.,  p.  11. 

«  Ibid.,  p.  20. 

■'J.  W.  .Tenks,  The  Trust  Problem  (rev.  ed.,  1909),  p.  G6. 


310  EEPORT  OF   THE   COMMISSIONER  OF    CORPORATIONS. 

tion"  (1913),  lists  certain  methods  of  "illegitimate"  competition  ris 
follows : 

Bribery  of  the  employees  of  competitors. 

Abuse  of  patents. 

Secret  control  of  so-called  competitors. 

Price  discrimination. 

Discrimination  in  granting  credit. 

Preventing  purchasers  from  dealing  with  competitors. 

At  another  place  Prof.  Haney  says: 

But  competition  may  also  be  legally  or  ethically  illegitimate.  *  *  *  u^. 
bates,  bribery,  secret  control  of  nominally  competing  plants,  and  the  like,  have 
existed  under  a  system  of  "  unrestrained  "  competition,  and  such  practices  are 
not  only  wrong  but  unlawful.  Refusing  to  sell  to  retailers  who  also  buy  of 
competitors  and  cutting  prices  on  certain  special  articles  or  certain  grades  of 
product  may  or  may  not  be  unlawful,  but  the  common  sense  of  the  community 
or  society  regards  such  practices  as  wi'oug.  Competition  by  terrorism  is  no 
beneficent  thing.     It  is  piracy.  ^ 

A  list  of  unfair  competitive  methods  was  given  in  a  recent  article 
by  Prof.  William  S.  Stevens,  as  follows :  ^ 

Classified  according  to  their  elementary  characteristics,  it  is  possible  to  dis- 
tinguish the  following  11  forms  of  unfair  competition : 
I.  Local  price  cutting. 
II.  Operation  of  bogus  "  independent "  concerns. 
III.  Maintenance  of  "  fighting  ships  "  and  "  fighting  brands." 
IV.  Lease,  sale,  purchase,  or  use  of  certain  articles  as  a  condition  of 

the  lease,  sale,  purchase,  or  use  of  other  required  articles. 
V.  Exclusive  sales  and  purchase  arrangements. 
VI.  Rebates  and  preferential  contracts. 

VII.  Acquisition   of   exclusive   or   dominant   control    of   machinery   or 
goods  used  in  the  manufacturing  process. 
VIII.  Manipulation. 

IX.  Blacklists,  boycotts,  white  lists,  etc. 
X.  Espionage  and  use  of  detectives. 
XI.  Coercion,  threats,  and  intimidation. 

Section  3.  List  of  methods  of  competition  which  have  been  regarded  as 
unfair. 

Since  the  methods  of  competition  are  of  infinite  variety,  it  is  obvi- 
ously impossible  to  specify  all  that  may  be  regarded  as  unfair.  The 
following  list  is  believed,  however,  to  cover  most  of  the  methods 
that  have  been  so  condemned  by  economic  writers  and  publicists 
and  have  thus  far  attained  any  considerable  importance.  Not  every 
method  listed  w^ill  seem  unfair  to  all  people,  or  perhaps  to  most. 
Sometimes,  indeed,  complaint  is  noted  of  two  lines  of  conduct,  one 
of  which  is  the  opposite  of  the  other.  Fixing  resale  prices  and  cut- 
ting fixed  resale  prices,  defining  the  channels  of  trade  and  refusal 

1  Lewis  H.  Haney,  Business  Organization  and  Combination,  pp.  366,  371-372. 
-  Political  Science  Quarterly,  June,  1914,  p.  i!83. 


TEUST    LAWS   AND    UNFAIR   COMPETITION.  311 

to  observe  defined  channels,  each  is  felt  as  injurious  by  one  group 
or  another,  and  is  therefore  condemned  by  it  as  unfair. 

Local  pi'ice  cutting. 
One-commodity  price  cutting. 
Price  reductions  in  general. 
Use  of  trading  stamps,  coupons,  and  the  like. 
Excessive  credits. 
Reductions  of  price  for  quantity. 
Special  advantages  in  transportation  (rebates,  etc.). 
Fixing  resale  prices. 
Bogus  independents. 
Exclusive-dealing  requirements. 
Full-line  forcing. 
Inducing  breach  of  contract. 
Enticement  of  competitors'  employees. 
Espionage  by  corruption  and  bribery. 
Secret  commissions. 
Misrepresenting  competitors. 
Abuses  in  advertising. 
Passing  off  goods  for  those  of  another. 
Shutting  off  competitors'  credit. 

Shutting  off  materials,  supplies,  or  machines  from  competitors. 
Acquiring  stock  iu  competing  companies  for  purpose  of  reducing  or  destroying 
competition. 

Wrongful  and  malicious  suits. 

Intimidation. 

Fixing  channels  of  trade. 

Section  4.  local  price  cutting. 

The  buyers  of  most  articles  are  more  numerous  than  the  sellers, 
and  a  reduction  of  the  price  seems  to  benefit  more  people  than  it  in- 
jui'es.  In  general,  therefore,  it  is  naturally  regarded  as  a  public  bene- 
fit. But  a  large  corporation  may  cut  its  prices  below  cost  till  its 
competitors  are  destroyed  and  then  recoup  its  losses  by  making  its 
prices  higher  than  before.  It  may  make  its  reduction  only  in  locali- 
ties reached  by  a  certain  competitor  which  cover  but  a  small  part 
of  its  own  field,  and  so  may  constantly  secure  a  profit  on  its  total  busi- 
ness, while  the  competitor  meets  ruinous  losses.  The  ultimate  result 
of  such  a  process  is  high  prices,  based  upon  a  practical  monopoly. 
AVhen  this  result  is  observed  the  process  is  often  felt  to  be  injurious 
to  the  general  interest.  At  the  same  time  sympathy  for  the  out- 
matched competitors  reenforces  the  dislike  of  consumers  for  the  final 
high  prices,  and  this  method  of  competition  is  frec^uently  pronounced 
unfair. 

The  criticism  does  not  usually  extend  to  sales  of  damaged  or  de- 
fective stock,  nor  to  the  "special  sales"  which  merchants  advertise, 
nor  to  price  cutting  Avhicli  is  not  conceived  to  be  directed  toward 
establishing  a  monopoly. 


312  EEPOKT  OF   THE   COMMISSIONER  OF   COEPORATIONS. 

Speaking  of  local  price  cutting,  Louis  D.  Brandeis  says:  "With 
the  exception  of  the  railroad  rebate,  cutthroat  competition  was  the 
most  powerful  of  all  the  weapons  which  the  Standard  Oil  Co.  em- 
ployed. It  was  the  most  powerful  of  all  weapons  employed  by  the 
Tobacco  Trust.  The  Standard  Oil  Trust  would  cut  the  price  in  the 
districts  where  a  competitor  established  himself,  and  thus  destroy 
him,  meanwhile  reimbursing  itself  for  the  cut  in  that  region  by 
charging  high  prices  elsewhere."  ^  In  a  report  on  the  petroleum  in- 
dustry, a  former  Commissioner  of  Corporations  criticized  the  Stand- 
ard Oil  Co.  on  account  of  "  startling  discriminations  in  prices,"  and 
said :  "  It  is  evident  that  the  Standard  charges  a  price  which  is  pro- 
portionate to  the  extent  of  its  monopoly  in  a  given  place  and  reduces 
prices  in  proportion  to  the  degree  of  competition  which  it  may  meet." 
According  to  this  report  the  Standard's  prices  for  medium-grade 
illuminating  oil,  after  deducting  freight,  in  December,  1904,  varied 
in  cities  of  more  than  100,000  inhabitants  from  G.4  cents  at  Cincinnati 
to  14.4  cents  at  Denver.  The  price  in  New  York  City,  less  freight, 
was  4  cents  higher  than  in  Cincinnati  and  2^  cents  higher  than  in 
Philadelphia.^ 

In  its  suit  against  the  United  States  Steel  Corporation  the  Govern- 
ment sought  to  prove  unfair  competition  l)y  putting  in  evidence  the 
following  extract  from  the  minutes  of  the  Carnegie  Steel  Co.  (sub- 
sidiary of  the  United  States  Steel  Corporation)  under  date  of  Sep- 
tember 23,  1902 : 

The  Tin  Plate  Co.  are  covered  by  contracts  np  to  tlie  1st  of  December.  At 
that  time  tliey  anticipate  niakuig  a  heavy  cut  in  prices,  wliich  they  think  will  put 
90  per  cent  of  their  competitors  out  of  business.  If  this  move  proves  as  successful 
in  securing  business  as  is  expected  the  Sheet  Steel  Co.  will  probably  reduce  to 
an  equivalent  basis.  Roth  companies  figure  that  they  can  then  run  full  for  at 
least  the  first  half  of  next  year.' 

A  complementary  practice  is  that  of  biddmg  up  prices  of  materials 
in  localities  where  competitors  appear  as  buyers.  Such  a  practice  was 
complained  of  by  a  former  Commissioner  of  Corporations  with  respect 
to  the  Standard  Oil  Co.,  which  was  alleged  to  have  forced  several 
independent  pipe  lines  out  of  business  by  paying  extravagant  prices 
for  crude  oil  in  the  territories  where  they  operated.*  Crude-oil  pro- 
ducers have  also  complained  that  when  the  Standard  had  got  hold  of 

1  To  Trevent  Discrimination  in  Prices  and  to  Provide  for  Publicity  of  Prices  to  Dealers 
and  the  Public  :  Hearings  before  the  Committee  on  Interstate  and  Foreign  Commerce, 
House  of  Representatives,  63d  Cong.,  2d  and  3d  sess.,  on  H.  R.  13305.  pp.  4,  5. 

2  Report  of  the  Commissioner  of  Corporations  on  the  Petroleum  Industry,  Pt.  II,  pp. 
xxxviii,  xxxlx,  4.51. 

s  United  States  r.  U.  S.  Steel  Corporation  and  others.  In  the  District  Court  of  the 
United  States  for  the  District  of  New  Jersey,  October  term,  1914.  Brief  for  the  United 
States,  Pt.  II,  p.  354. 

*  Report  of  the  Commissioner  of  Corporations  on  the  Petroleum  Industry,  Pt.  I,  p.  25. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  313 

the  competing  lines,  the  "  premiums ''  on  crude  oil  in  their  territory 
were  taken  off.^ 

Section  5.  One-commodity  price  cutting. 

A  company  that  sells  several  articles  or  several  brands  can  cut  the 
price  of  one  article  or  brand  and  still  make  a  large  profit  on  its  busi- 
ness as  a  whole,  while  destroying  the  profits  of  competitors  whose  line 
is  less  varied.  A  brand  on  which  the  price  is  cut  in  this  manner  is 
often  called  a  "  fighting  brand."  In  a  report  on  the  tobacco  industry 
a  former  Commissioner  of  Corporations  complained  of  certain  com- 
petitive practices,  which  may  be  concisely  summarized  as  follows: 
The  American  Tobacco  Co.  dominated  the  cigarette  business  in  the 
early  nineties,  but  its  plug  business  was  comparatively  small.  It 
set  about  securing  a  dominating  position  in  this  line  also.  As  a 
weapon  in  this  campaign  it  used  one  brand* of  plug  tobacco,  Battle 
Ax,  the  retail  price  of  which  was  cut  from  50  to  30  cents  a  pound, 
and  the  wholesale  price  of  which,  less  internal-revenue  tax,  was  put 
at  one  time  as  low  as  7  cents.  In  territories  where  certain  well-known 
rival  brands,  such  as  Lorillard's  Climax  and  Liggett  &  Myer's  Star, 
were  favorites,  men  were  sent  through  the  country  distributing  sam- 
ples; they  presented  a  plug  of  Battle  Ax  to  every  man  they  saw. 
During  the  four  years  1895,  1896,  1897,  and  1898,  the  company  made 
a  net  loss  on  its  plug  business  of  $3,300,000.  But  it  effected  its  pur- 
pose by  obtaining  during  these  years  and  the  years  immediately 
following  a  substantially  monopolistic  control  of  the  plug-tobacco 
market.^ 

In  the  suit  of  the  United  States  against  the  American  Tobacco  Co., 
the  court  was  asked  by  the  independent  tobacco  manufacturers  to  re- 
strain the  neAV  corporations  after  the  dissolution — 

From  giving  away,  selling  at  or  below  the  cost  of  manufacture  and  distribu- 
tion, any  of  its  products,  or  adopting  any  other  method  of  cutthroat  competition 
for  the  purpose  of  destroying  or  of  acquiring  the  business  or  trade  of  a  com- 
petitor. 

Louis  D.  Brandeis  refers  to  this  and  other  restraints  asked  for  by 
the  independents  as  "  restraint  upon  unfair  competition."  ^ 

Dealers  in  a  commodity  sometimes  complain  of  its  use  as  a 
"leader"  by  other  dealers,  of  whose  trade  it  is  a  comparatively 
unimportant  part.  Thus,  the  president  of  the  American  Surgical 
Trade  Association  said  in  1914:  "One  member  has  complained  very 
bitterly  of  pharmaceutical  houses  making  a  practice  of  selling  sur- 


1  Report  of  the  Industi-ial  Commission,  vol.  1,  p.  394,  395. 

-  Report  of  the  Commissioner  of  Corporations  on  the  Tobacco  Industry,  rt.  I,  pp.  9G, 
305-.''>7.''.. 

••'  Control  of  Corporations,  Persons,  and  Firms  Engaged  in  Interstate  Commerce  :  Report 
of  the  Committeo  on  Interstate  Commerce,  United  States  Senate,  C2d  Cong.,  Pursuant  to 
S.  Res.  98,  with  Hearings,  Digest,  and  Index ;  pp.  1221,  1222. 


314  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

gical  instniments  at,  and  below,  cost,  as  a  leader,  in  the  hope  of  being 
able  to  sell  the  doctor  a  line  of  their  own  preparations."  ^ 

Section  6.  Price  reduction  in  general. 

Any  reduction  of  price  is  often  felt  to  be  unfair  by  manufacturers 
and  dealers  who  are  interested  in  maintaining  a  higher  price.  Thus, 
the  president  of  the  American  Surgical  Trade  Association  said  in  his 
annual  report  for  1914: 

There  has  come  directly  under  my  observation  but  one  extremely  flagrant 
case  of  price  cutting  on  surgical  instruments.  In  this  case  a  physician  in  one 
of  the  larger  of  our  north  Texas  towns  sent  out  a  list  on  which  he  invited  bids. 
Several  houses  quoted  regular  list  prices  less  10  per  cent  for  cash,  while  one  of 
the  eastern  houses  quoted  as  high  a  discount  as  10  per  cent  and  5  per  cent  for 
cash,  but  even  this  did  not  get  the  order,  a  Cincinnati  institution  having  quoted 
a  flat  dollars-and-cents  pric^  which  drew  the  order.  The  house  which  quoted 
the  10  per  cent  and  5  per  cent  for  cash  offered  as  an  apology  that  this  doctor 
had  written  them  on  numerous  occasions  for  prices,  but  that  they  were  never 
able  to  draw  an  order  on  the  regular  10  per  cent  cash  discount,  and  conse- 
quently they,  in  this  particular  instance,  simply  took  a  chance  by  quoting  an 
extra  5  per  cent.  This  is  a  theory  of  eastern  competition  which  southern  and 
western  houses  find  very  hard,  and,  we  think,  very  unfair.'' 

Section  7.  Use  of  trading  stamps,  coupons,  and  the  like. 

The  American  Tobacco  Co.  has  made  effective  use  of  the  coupon 
or  premium  system — giving  with  each  package  of  certain  goods  a 
coupon,  tag,  or  other  mark,  redeemable  in  "  premiums."  The  system 
is  said  to  lend  itself  readily  to  local  price  discrimination,  and  to  be 
especially  effective  in  making  sales  because  it  enlists  the  interest  of 
the  whole  family  in  the  kind  and  quantity  of  tobacco  consumed  by 
the  user.  For  years  the  business  of  the  tobacco  combination  along 
this  line  was  so  great  that  it  maintained  a  separate  corporation  to  re- 
deem its  coupons.  It  is  alleged  that  a  small  company  can  not  effec- 
tively compete  with  a  large  one  in  af)plying  the  premium  system,  and 
that  this  system  tends  toward  monopoly,  under  present  industrial 
conditions.  It  has  therefore  come  to  be  widely  condemned  as  unfair. 
Says  one  writer,  addressing  the  members  of  the  National  Association 
of  Retail  Druggists,  "  Do  you  want  to  stop  the  tobacco-drug  trust 
from  strangling  you  with  a  so-called  coupon  system  that  is  nothing 
less  than  a  trust-issued  currency  ?  "  ^ 

The  dislike  of  the  system  among  merchants  is  not  confined,  how- 
ever, to  the  smaller  sort.  Marshall  Field  &  Co.  were  reported  to  have 
announced  on  April  9,  1915,  that  all  merchandise  involving  the  dis- 
tribution of  profit-sharing  coupons  would  be  dropped  from  their 

1  President's  report,  American  Surgical  Trade  Association,  June  15,  1914  :  Proceedings 
of  the  Pourteentti  Annual  Meeting  of  the  American  Surgical  Trade  Association,  pp.  8,  9. 

-  Proceedings  of  the  Fourteenth  Annual  Meeting  of  the  American  Surgical  Trade  Asso- 
ciation, p.  9. 

^  Interstate  Trade :  Hearings  before  the  Committee  on  Interstate  Commerce,  United 
States  Senate,  G3d  Cong.,  2d  sess.,  on  P.ills  Relating  to  Trust  Legislation,  p.  1419. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  315 

wholesale  and  retail  business;  and  in  this  connection,  according  to 
the  Journal  of  Commerce,  "  a  member  of  the  firm  of  R.  H.  Macy  & 
Co.  authorized  a  statement  as  follows :  '  We  are  opposed  to  all  profit- 
sharing  coupon  schemes  or  any  other  promise  to  give  something  for 
nothing.' "  ^ 

Section  8.  Excessive  credits. 

A  bill  submitted  to  the  Senate  Committee  on  Interstate  Commerce 
in  1914  provided : 

*  *  *  the  sale  or  offer  for  stilc  of  commodities  upon  *  *  *  terms 
which  extend  or  promise  to  extend  tlie  date  of  final  payment  beyond  one  year 
from  the  date  of  actual  shipment  of  the  commodities  sold  or  offered  for  sale, 
shall  be  prima  facie  proof  of  the  purpose  or  intention  to  injure  or  destroy  com- 
petitors.^ 

The  report  of  a  former  Commissioner  of  Corporations  on  the  In- 
ternational Harvester  Co.  criticized  the  long  credits  given  by  that 
company  on  certain  kinds  of  farm  machiner}^,  and  said : 

There  is  a  very  general  complaint  from  competing  manufacturers,  especially 
the  smaller  concerns,  that  the  International  Harvester  Co.  uses  these  long 
credits  as  a  means  of  wresting  trade  from  its  rivals.  *  *  *  There  is  no 
doubt  that  the  smaller  competitors  of  the  International  Harvester  Co.  find  this 
situation  very  difficult  to  meet,  because  their  financial  resources  are  generally 
inadequate  to  do  business  in  that  way.  The  International  Harvester  Co.  is 
enabled  to  pursue  this  policy  of  granting  long  terms  because  of  the  large  re- 
sources which  it  acquired  through  combination.'' 

Section  9.  Reductions  of  price  for  quantity. 

It  is  usually  admitted  that  large  buyers  should  have  lower  prices 
than  small  buyers,  but  persons  who  admit  this  sometimes  complain 
that  the  actual  differences  are  unfairly  large.  Thus  the  secretary  of 
the  National  Federation  of  Retail  Merchants  says: 

I  recognize  the  fact,  as  do  all  small  business  men,  that  the  man  who  buys  in 
large  quantities  is  entitled  and  should  be  entitled  to  buy  at  a  less  price,  but  that 
difference  in  price,  especially  when  both  transactions  are  cash,  should  not 
amount  to  as  much  as  would  be  a  gross  reasonable  profit.  *  *  *  To  avoid 
having  the  mail-order  house  establish  a  competitive  factory,  the  manufactui'er 
often  makes  the  mail-order  house  a  price  low  enough  to  persuade  him  not  to 
establish  his  own  factory,  and  I  haven't  the  slightest  doubt  that  in  thousands  of 
cases  to-day  the  mail-order  house,  by  reason  of  this  indirect  intimidation  of  the 
manufacturer  is  buying  many  items  of  merchandise  at  a  less  price  possibly 
than  they  can  be  manufactured.  *  *  *  rpj^^  question  I  particularly  desire 
to  ask  you  at  this  time  is,  would  this  section  5  cover  this  kind  of  unfair  com- 
petition? It  is  the  most  serious  and  far-reaching  unfair  competition,  we  believe, 
that  the  small  business  man  has  to  deal  with.'' 

1  The  Journal  of  Commerce  and  Commercial  Bulletin,  New  York,  Apr.  10,  1915,  p.  5. 

2  Interstate  Trade:  Hearings  before  the  Committee  on  Interstate  Commerce,  United 
States  Senate,  O.'kl  Cong.,  2d  sess.,  on  Bills  Relating  to  Trust  Legislation,  pp.  1004,  1065. 

•■'Report  of  the  Commissioner  of  Corporations  on  the  International  Harvester  Co.,  pp. 
287,  288.     See  also  pp.  320-32:?  of  that  report. 

*  Interstate  Trade :  Hearings  before  the  Committee  on  Interstate  Commerce,  United 
States  Senate,  G3d  Cong.,  2d  sess.,  on  Bills  Relating  to  Trust  Legislation,  pp.  1419,  1420. 


316  REPORT  OF   THE   COMMISSIONER   OF   CORPORATIONS. 

Vincent  J.  Farley,  publisher  of  a  tobacco-trade  publication,  says: 

Here  is  an  example:  A  manufacturer  of  a  product  nationally  advertised,  in 
great  demand,  allows  a  lower  price  to  a  jobbing  firm  buying  $100,000  worth  at 
a  time.  That  jobbing  firm  will  sell  to  the  retail  trade  at  a  lower  price  than  the 
competing  and  less-favored  jobbers  can  buy  wholesale.  As  a  result  you  have  a 
monopoly  in  the  jobbing  business.^ 

There  is  some  support  for  the  proposal  that  each  kind  of  manu- 
factured goods  shall  be  sold  at  a  uniform  price  per  unit.  One  man 
says: 

Force  every  manufacturer  of  an  article  entering  into  interstate  commerce 
to  name  a  price  on  that  article  at  his  factory  door  and  make  a  good  healthy 
penal  sentence  fall  on  anyone  quoting  or  billing    *     *     *     any  other  price.^ 

Louis  D.  Brandeis  believes  that  in  a  comparatively  few  years  the 
law  will  forbid  the  giving  of  quantity  discounts,  "  because,"  he  says, 
"  I  think  it  is  fraught  with  very  great  evil.  The  practice  of  giving 
quantity  discounts  menaces  the  small  retail  business."  ^  In  another 
place  Mr.  Brandeis  says : 

If  we  wish  to  preserve  the  small  dealer  from  destruction  we  may  be  com- 
pelled to  require  that  all  retailers,  large  or  small,  be  enabled  to  purchase  the 
same  article  at  the  same  price,  applying  the  one-price  policy  throughout. 
Many  enlightened  manufacturers  have  already  abandoned  the  practice  of  giving 
quantity  discounts,  coming  to  this  conclusion,  that  if  they  wish  to  preserve  the 
small  retailer  they  must  do  so.* 

Section  10.  Special  advantages  in  transportation  (rebates,  etc.). 

In  several  industries  the  dominant  producers  control  the  only  or 
the  best  available  means  of  transportation.  For  anthracite  coal,  the 
control  of  the  mines  rests  in  the  same  hands  as  the  control  of  the 
railroads  over  which  it  is  hauled  to  market.  In  a  suit  brought  by  the 
Government  its  officers  complained  that  the  roads  kept  do^vn  the 
value  of  coal  at  the  mines  and  recouped  themselves  by  very  high 
freight  rates,  and  thus  kept  down  the  value  of  coal  land  till  they  had 
bought  up  practically  all  of  it.  Moreover,  the  principal  anthracite 
railroad,  the  Eeading,  it  was  asserted,  granted  rebates  to  its  asso- 
ciated coal  company,  the  Philadelphia  &  Eeading  Coal  &  Iron  Co., 
by  carrying  its  freight  charges,  to  the  extent  of  millions  of  dollars, 
as  a  debt  without  interest  on  its  books.^ 

1  Trust  Legislation  :  Hearings  before  the  Committee  on  the  JiKlieiary,  House  of  Repre- 
sentatives, 63d  Cong.,  2(1  scss.,  on  Trust  Legislation,  p.  534. 

"  Interstate  Trade :  Hearings  before  the  Committee  on  Interstate  Commerce,  United 
States  Senate,  63d  Cong.,  2d  sess.,  on  Bills  Relating  to  Trust  Legislation,  p.  1436.  See 
also  ibid.,   p.   1110. 

3  To  Prevent  Discrimination  in  Prices  and  to  Provide  for  Publicity  of  Prices  to  Dealers 
and  to  the  Public  :  Hearings  before  the  Committee  on  Interstate  and  Foreign  Commerce, 
House  of  Representatives,  C'.d  Cong.,  2d  and  3d  sess.,  on  II.  R.  13305,  p.  45;  statement  of 
Louis  D.  Brandeis,  Jan.  n,  1915. 

*  Ibid.,  p.  43. 

6  United  States  v.  Reading  Co.  et  al.  In  the  District  Court  of  the  United  States,  East- 
ern District  of  Pennsylvania.      Brief  for  the  United  States   (May,  1914),  p.  55. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  317 

A  similar  criticism  was  made  by  a  former  Commissioner  of  Cor- 
porations with  respect  to  the  iron-ore  trade : 

The  dominating  position  in  tlie  ore  industry  enjoyed  by  tlie  Steel  Coniora- 
tion  *  *  *  is  heightened  because  of  its  very  marlved  degree  of  control  of 
the  transportation  of  ore  in  the  Lake  Superior  district.  The  corporation  owns 
two  of  the  most  important  ore  railroads.  *  *  *  The  net  earnings  of  these 
ore  railroads,  which  are  chiefly  from  the  ore  traffic,  are  phenomenal.  This 
has  the  practical  effect  of  reducing  the  Steel  Corporation's  net  cost  of  ore  to 
itself  at  upper  lake  ports,  and,  on  the  other  hand,  of  increasing  that  cost  to 
such  of  its  competitors  as  are  dependent  upon  the  corporation's  railroads  for 
transportation.^ 

A  more  widespread  condition  is  rate  discrimination  in  favor  of 
powerful  interests  on  public  means  of  transportation  which  they 
do  not  directly  control.  This  is  a  question  which  State  legislatures 
took  up  nearly  50  years  ago,  and  which  for  30  years  has  had  the 
attention  of  Congress.  It  is  frequently  asserted  that  it  was  railroad 
discrimination  that  gave  the  Standard  Oil  Co.  its  first  predominance 
and  that  gave  it  the  wealth  with  which  it  afterwards  built  its  private 
means  of  transportation.  Discriminations  so  enormous  as  to  abso- 
lutely crush  out  all  competition  have  probably  been  eliminated  by 
the  law,  but  discrimination  by  various  indirect  means  has  not  been 
wholly  eliminated.  Less  than  10  years  ago  a  former  Commissioner 
of  Corporations  found  and  severely  condemned  freight  arrangements 
which  shut  out  competitors  of  the  Standard  Oil  Co.  from  extensive 
regions.-  From  time  to  time  the  Interstate  Commerce  Commission 
brings  to  light  discriminations  which,  if  smaller  than  those  of  many 
3'^ears  ago,  are  far  from  unimportant. 

Section  11.     Fixing  resale  prices. 

Fixing  of  resale  prices  1)y  manufacturers  is  regarded  l)y  some  as 
an  unfair  method  of  controlling  the  market.  Bruce  Wyman,  for- 
merly ]5rofessor  of  law  at  Harvard  University,  Avrote  as  follows  in 
an  article  on  "  Unfair  competition  by  monopolistic  corporations  " : 

But  there  are  other  policies  by  which  many  trusts  have  gained  their  domi- 
nating position,  the  illegality  of  which  has  not  been  so  clear.  Such  an  excluding 
policy  a.s  the  I'efusal  to  sell  to  retailers,  who  persist  in  buying  anything  of  a 
rival  manufacturer,  is  one  example.  *  *  *  Fixing  the  prices  at  which  the 
product  may  be  resold  is  in  the  same  class.  The  monopolies  which  are  keeping 
their  position  by  these  policies  have  no  economic  justification,  and  for  them 
there  can  be  no  defense.  I  believe  that  the  law  should  punish  such  discrimina- 
tory practices  as  these  so  severely  that  no  one  would  take  the  risk  of  employing 
tlieni.* 

^Report  of  the  Commissioner  of  Corporations  on  the  Steel  Industry,  Ft.  I,  p.  60. 

-  Report  of  the  Commissioner  of  Corporations  on  the  Transportation  of  I'etroleum,  May 
2,  1900  ;  many  passages,  especially  the  summary,  pp.   1-28. 

^The  Annals  of  the  American  Academy  of  I'olitical  and  Social  Science,  vol.  42,  July, 
1912,  p.  GO. 


318  KEPORT   OF   THE   COMMISSIONER   OE   CORPORATIONS. 

On  the  other  hand,  some  hold  that  refusal  to  adhere  to  resale  prices 
fixed  by  manufacturers  is  unfair.  Louis  D.  Brandeis  is  one  of  the 
best-lmown  advocates  of  this  position.  He  says  that  to  sell  an  adver- 
tised article  below  its  regular  price  "  is  not  only  unfair,  but  it  is  in 
effect  a  slander  of  the  reputation  of  the  article."  ^  A  department 
store  makes  a  leader  of  such  an  article,  he  says,  and  thereby  ruins  the 
trade  in  it.  The  small  stores  will  cease  to  sell  it  when  they  can  not 
sell  it  at  a  profit,  and  then  the  department  stores  will  drop  it  also 
when  it  has  lost  its  value  for  advertising  purposes.^ 

Special  complaint  against  such  price  cutting  is  made  on  behalf  of 
the  small  retailers.  "  The  trust  department  stores,  chain  stores,  and 
mail-order  houses  are  cutting  prices  on  standard  branded  articles 
which  are  in  great  public  demand.  They  use  it  as  a  bait  against  the 
independent  dealer."  The  small  dealer  suffers,  it  is  said,  and  some- 
times is  driven  out  of  business.^ 

At  the  meeting  of  the  Chamber  of  Commerce  of  the  United  States 
of  America  in  February,  1915,  a  special  committee  presented  "A 
Brief  Concerning  the  Maintenance  of  Resale  Prices."  The  brief 
presents  arguments  on  both  sides  and  avoids  the  formal  and  definite 
presentation  of  an  opinion;  but  it  is  the  evident  purpose  of  the 
committee  to  support  the  fixing  and  maintenance  of  resale  prices. 

Section  12.  Bogus  independents. 

The  popular  feeling  against  monopoly  is  so  strong  that  many 
people  dislike  to  buy  from  a  trust.  Prudent  men  therefore  like  to 
avoid  the  appearance  of  monopoly,  however  much  they  desire  the 
substance.  So  they  sometimes  maintain  separate  organizations  to 
simulate  competition,  and  to  secure  the  trade  of  persons  who  Avould 
avoid  them  if  the  facts  were  known. 

This  practice  has  been  found  and  condemned  with  respect  to  the 
petroleum  and  harvesting-machine  industries  by  former  Commis- 
sioners of  Corporations.  Thus,  when  an  independent  oil  company 
began  to  sell  in  a  particular  neighborhood,  the  Standard  Oil  Co.,  it 
is  alleged,  would  put  in  another,  professedly  independent  but  ac- 
tually controlled  by  itself.  In  reducing  prices  on  oil  sold  under  its 
own  name  it  would  keep  a  step  behind  its  competitor ;  but  .the  bogus 
independent  would  keep  a  step  ahead  till  the  real  independent  was 

1  To  Prevent  Discrimination  in  Prices  and  to  Provide  for  Publicity  of  Prices  to  Dealers 
and  to  the  Public  :  Hearings  before  the  Committee  on  Interstate  and  Foreign  Commerce, 
House  of  Representatives,  63d  Cong.,  2d  and  3d  sess.,  on  H.  R.  13305,  p.  15,  statement  of 
Louis  D.   Brandeis,  Jan.  9,   1915. 

-  Ibid.,  pp.  16,  23. 

^  Interstate  Trade :  Hearings  before  the  Committee  on  Interstate  Commerce,  United 
States  Senate,  63d  Cong.,  2d  sess.,  on  Bills  Relating  to  Trust  Legislation,  p.  1449,  state- 
ment of  Nicholas  Bhrlich,  of  Brooklyn,  N.  Y.,  president  of  the  Independent  Retail  Tobac- 
conist Association  of  America,  Brooklyn  branch. 


TBUST   LAWS  AND   UNFAIR   COMPETITION.  319 

put  out  of  business.^  Complaint  was  made  that  in  several  instances 
the  International  Harvester  Co.  concealed  its  control  of  formerly 
independent  plants  and  held  them  out  to  the  public  as  still  inde- 
pendent for  a  year  or  two  years  after  it  had  acquired  them.^ 

The  Government  in  a  suit  against  the  American  Press  Association, 
which  furnished  four-fifths  of  the  plate  matter  used  by  newspapers 
in  the  United  States,  complained  that — 

It  maintained  for  many  years  in  different  cities  of  the  United  States  liouses 
known  under  otlier  names  and  understood  by  newspapers  generally  to  be  inde- 
pendent concerns.  Its  plan  of  operation  was  that  if  it  did  not  desire  to  sell 
to  a  customer  at  a  certain  price,  or  if  it  lost  a  customer  by  reason  of  the  prices 
it  was  charging,  it  would  have  one  of  these  houses  procure  the  business  at  such 
price  as  might  be  necessary  to  obtain  it.* 

A  former  Commissioner  of  Corporations  complained  that  the 
American  Tobacco  Co.  made  frequent  use  of  bogus  independents  for 
purposes  of  competition.  One  instance  out  of  many  reported  is  that 
of  H.  N.  Martin  &  Co.,  of  Louisville,  Ky.,  two-thirds  of  whose  capital 
stock  was  bought  in  1903  by  persons  connected  with  the  American 
Tobacco  Co.  The  change  of  control  was  kept  secret,  and  H.  N. 
Martin  &  Co.  was  caused  to  cut  its  prices  below  cost,  in  an  aggressive 
campaign  against  several  independent  plug-tobacco  companies  of  the 
Middle  AVest.  By  1905  the  Martin  company  was  bankrupt ;  but  the 
cost  of  the  two-thirds  interest  to  the  American  Tobacco  Co.  people 
was  small  in  comparison  with  the  damage  they  had  done  to  others.* 

A  former  Commissioner  of  Corporations  complained  that  the 
Standard  Oil  Co.  sometimes  used  bogus  independents  to  bid  up  the 
price  of  crude  oil  in  order  to  kill  off  independent  pipe  lines. 

The  object  obviously  is  to  prevent  clamor  on  the  part  of  the  producers 
throughout  the  entire  field,  who,  if  the  Standard  paid  such  premiums  in  its  own 
name,  might  naturally  demand  the  same  prices  for  their  i)roduct  as  were  paid  in 
the  limited  areas  affected  by  the  competition  of  rival  lines.* 

Section  13.  Exclusive-dealing  requirements. 

Powerful  companies  can  often  increase  their  power  by  discrimi- 
nating against  persons  who  buy  from  their  competitors.  The  dis- 
crimination may  take  the  form  of  higher  prices,  or  the  form  of 
refvisal  to  sell  at  all.  Perhaps  the  best  known  case  is  that  of  the 
United  Shoe  Machinery  Co.,  which  leases  certain  of  its  machines,  on 
the  condition  that  the  lessee  forfeits  his  right  to  use  them  if  he  uses 

1  Report  of  the  Commissioner  of  Corporations  on  the  Petroleum  Industry,  Pt.  II,  pp.  57, 
58,  668. 

-  Report  of  the  Commissioner  of  Corporations  on  the  International  Harvester  Co.,  pp. 
29G-299. 

3  United  States  v.  We:rtern  Newspaper  Union  et  al. ;  petition,  quoted  in  Hearings  before 
the  Committee  on  the  .ludiciary,  House  of  Representatives,  6od  Cong.,  2d  sess.,  on  trust 
legislation,  p.  1666. 

'Report  of  the  Commissioner  of  Corporations  on  the  Tobac-eo  Industry,  Pt.  I,  p.  110. 

^  Report  of  the  Commissioner  of  Corporations  on  the  Petroleum  Industry,  Pt.  I,  p.  26. 


320  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

any  similar  machines  made  by  others.  This  has  for  years  been  a  mat- 
ter of  loud  protest,  both  from  the  company's  competitors  and  from 
shoe  manufacturers. 

A  former  Commissioner  of  Corporations  complained  that  the 
American  Tobacco  Co.  formerly  gave  a  special  discount  of  6  per  cent 
to  certain  jobbers  on  condition  that  they  handle  no  cigarettes  or 
tobacco  but  those  of  its  manufacture. 

This  agreement  was  attacked  in  the  courts  of  Massachusetts,  and  the  Ameri- 
can Tobacco  Co.  was  compelled  to  give  up  this  method  of  exclusive  control  of 
jobbing  houses  in  New  England  territory.* 

Complaint  was  also  made  to  the  Industrial  Commission  that  the 
Continental  Tobacco  Co.  refused  altogether  to  sell  to  some  jobbers 
because  they  sold  goods  of  other  manufacturers.^  Wlien  the  tobacco 
combination  was  dissolved  the  independent  tobacco  manufacturers 
asked  the  court  to  place  certain  restraints  on  the  corporations  which 
succeeded  to  its  business.     Among  them  was  the  following : 

From  refusing  to  sell  to  any  jobber  any  brand  of  snuff  or  cigarettes  or  smok- 
ing or  chewing  tobacco  manufactured  by  it,  which  is  indispensable  in  the  par- 
ticular market.  It  should  also  be  restrained  from  giving  any  rebates,  allow- 
ances, or  other  special  inducements  to  those  who  use  its  goods  exclusively  or 
give  preference  to  them  over  the  goods  of  competitors.^ 

The  International  Harvester  Co.  formerly  used  a  commission- 
agency  contract,  by  which  dealers  were  re(iuired,  under  heavy  penal- 
ties, to  handle  the  company's  harvesting  machinery  exclusively.  A 
former  Commissioner  of  Corporations  said  on  this  subject  in  1913 : 

In  1905,  however,  at  a  time  when  antimonopoly  proceedings  against  the  com- 
pany were  threatened  in  several  States,  the  exclusive  clause  was  eliminated 
from  the  contract  and  has  not  been  restored  since.  *  *  *  Since  the  elimina- 
tion of  the  exclusive  clause  from  dealers'  contracts  other  means  have  not  in- 
frequently been  employed  to  secure  the  same  end.  In  a  considerable  number 
of  cases  reported  to  the  Bureau  from  different  parts  of  the  United  States  sales- 
men of  the  International  Harvester  Co.  have  endeavored  to  prevent  the  han- 
dling of  goods  made  by  competing  manufacturers  by  threatening  to  discontinue 
the  dealer's  agency  for  the  harvesting  machines  of  the  International  Harvester 
Co.  *  *  *  In  the  sections  of  the  United  States  visited  by  agents  of  the 
Bureau  it  was  found  that  many  dealers  hesitate  to  take  up  the  sale  of  inde- 
pendent makes  of  harvesting  machines,  fearing  to  lose  the  contract  for  some 
brand  of  the  International  Harvester  Co.'s  machines  if  they  do  so.* 

The  power  to  impose  such  restrictions  depends  on  control  of  some 
article  which  is  necessary  to  the  buyer  or  which  it  is  at  least  advan- 
tageous to  him  to  have.    Often  the  power  depends  on  a  legal  monop- 

1  Report  of  the  Commissioner  of  Corporations  on  tlie  Tol)acco  Industry,  Pt.  I.  p.  311. 

2  Report  of  the  Industrial  Commission,  Vol.  XIII   (1901),  pp.  306,  334. 

^  Control  of  Corporations,  Persons,  and  Firms  Engaged  in  Interstate  Commerce :  Report 
of  the  Committee  on  Interstate  Commerce,  United  States  Senate,  62d  Cong.,  Pursuant  to 
S.  Res.  98,  with  Hearings,  Digest,  and  Index,  p.  1222. 

♦  Report  of  the  Commissioner  of  Corporations  on  the  International  Harvester  Co.,  pp. 
304,  305. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  321 

oly,  such  as  a  patent  or  a  trade-mark.    But  in  other  cases  the  power 
arises  from  monopolistic  control  of  an  industry. 

Said  an  independent  tobacco  manufacturer  a  few  years  ago,  speak- 
ing of  the  supposed  absorption  by  the  tobacco  combination  of  80 
per  cent  of  the  tobacco  trade  of  New  England : 

That  80  per  cent  was  made  by  four  or  five  different  factories  eontrolUng 
about  20  brands.  No  one  of  these  factories  could  say,  "  If  you  do  not  handle  our 
brands  to  the  exclusion  of  all  other  brands  in  competition,  you  shall  not  have 
our  brands  at  a  price  that  you  can  make  a  profit  on."  But  now  one  company, 
owning  the  20  brands,  all  popular  and  well  established,  have  that  power.i 

When  the  power  exists,  fear  may  produce  a  similar  effect  without 
any  definite  requirement.    Says  a  manufacturer  of  motor  cars: 

Let  me  now  ask  you  to  put  yourself  in  the  place  of  the  independent  manu- 
facturer who  has  to  purchase  his  raw  material  in  a  market,  the  control  of 
which  is  dominated  by  an  enormous  overpowering  factor  in  the  lines  of  mate- 
rial he  requires.  He  feels  he  has  to  buy  his  supplies  from  this  trust;  he  has 
to  pay  the  price  asked.  *  *  *  He  is  afraid  to  buy  of  an  independent  small 
producer,  even  at  possibly  an  equal  or  better  figure,  because  he  will  surely  have 
to  come  back  some  busy  year  and  deal  with  the  trust,  when  he  fears  he  might 
find  himself  not  in  the  preferred  list  of  the  trust's  patrons.' 

When  the  Eastman  Kodak  Co.  formed  its  subsidiary,  the  General 
Aristo  Co.,  to  combine  its  own  photographic-paper  business  with 
that  of  most  of  the  other  principal  manufacturers,  contracts  were 
alleged  to  have  been  obtained  with  the  European  manufacturers  of 
raw  paper,  binding  them  to  sell  to  no  one  in  America  but  the  Gen- 
eral Aristo  Co.  Independent  manufacturers  of  sensitized  paper  said 
that  paper  for  sensitizing  was  made  only  in  Europe,  and  they  com- 
jilained  that  their  business  had  been  greatly  interfered  with  by  these 
contracts.^ 

Section  14.  Full-line  forcing. 

This  consists  in  a  requirement  that  specified  goods  be  handled 
on  pain  of  refusal  to  furnish  certain  other  goods  or  to  give  certain 
discounts  or  other  favorable  terms.  It  is  often  called  full-line  forc- 
ing, because  a  manufacturer  of  a  particular  brand  of  goods  which  is 
specially  desired  may  insist  that  all  his  other  goods,  for  which 
there  is  no  special  preference,  shall  be  taken  in  lieu  of  those  of  rival 
makers  as  a  condition  of  obtaining  supplies  of  specially  desired 
goods,  thus  attempting  to  force  the  dealer  to  handle  the  "  full  line  " 
of  the  manufacturer.  Thus,  a  former  Commissioner  of  Corporations 
complained  that  salesmen  of  the  International  Harvester  Co.  used  to 

^  Reporti?  of  the  Industrial  Commission,  Vol.  XIII,  p.  339. 

2  Control  of  Corporations,  Persons,  and  Firms  Engaged  in  Interstate  Commerce  :  Report 
of  the  Committee  on  Interstate  Commerce,  United  States  Senate.  62d  Cong.,  Pursuant  to 
S.  Res.  98,  with  Hearings,  Digest,  and  Index,  p.  1296. 

«  Reports  of  the  Industrial  Commission,  Vol.  XIII,  pp.  liii,  liv,  173-185,  191. 

30035°— 16 21 


322  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

require  dealers  to  order  the  so-called  "new  lines"  (i.  e.,  tillage  imple- 
ments, wagons,  manure  spreaders,  etc.)  as  a  condition  of  retaining  the 
agency  of  some  brand  of  the  company's  harvesting  machines.^ 

Full-line  forcing  is  closely  analogous  to  the  requirement  of  exclu- 
sive dealing.  The  latter  forbids  buying  from  competitors;  the 
former  requires  that  goods  which  might  otherwise  be  bought  from 
competitors  be  bought  from  the  company  which  enforces  the  demand. 

The  exclusive-dealing  requirement  may  cover  only  a  single  article 
and  have  no  reference  to  any  other,  but  the  essence  of  the  full-line 
forcing  method  is  the  tying  of  two  or  more  articles  together.  This 
method  is  available,  therefore,  only  to  a  seller  who  can,  by  control  of 
a  product  necessary  or  desirable  to  dealers  in  a  certain  line,  induce 
them  to  buy  from  him  either  products  of  which  he  has  not  exclusive 
control  or  products  which  they  may  not  care  to  buy  at  all. 

Section  15.  Inducing  breach  of  contract. 

One  of  the  bills  for  amendment  of  the  Sherman  law,  submitted  in 

1914  to  the  Senate  Committee  on  Interstate  Commerce,  proposed  to 

forbid  "  unfair  competition  "  and  to  define  it  to  include,  among  other 

things,  the  following : 

Causing  or  nttcniptin.!?  to  cause  any  purchaser  of  the  goods  of  any  competitor 
to  breali  any  contract  for  purchase  of  such  goods.^ 

Complaints  have  been  made  by  manufacturers  of  harvesting  ma- 
chinery, both  against  the  salesmen  of  the  International  Harvester  Co. 
in  its  earlier  years  and  against  those  of  various  companies  before  that 
company  was  formed,  that  they  made  a  practice  of  following  up  their 
competitors  and  inducing  farmers  to  back  out  of  orders  they  had 
given.^ 

The  Eastman  Kodak  Co.,  or  its  subsidiary,  the  General  Aristo  Co., 
is  accused  of  attacking  a  competing  manufacturer  of  photographic 
paper  in  such  a  way  that  the  competitor's  customers  even  shipped 
back  goods  they  had  received,  with  the  result  that  he  was  bankrupted. 
The  alleged  method  was  a  sudden  refusal  to  sell,  not  merely  to  any 
dealer  who  bought  the  competitor's  goods  but  even  to  any  dealer 
who  sold  what  he  had  on  hand.  William  B.  Dailey,  another  inde- 
pendent manufacturer  of  photographic  j^aper,  in  presenting  his  com- 
plaint against  the  Eastman  Kodak  Co.  to  the  Industrial  Commission, 
related  the  case  as  follows: 

They  were  doing  quite  a  large  business,  and  the  trust  offered  to  buy  them  out, 
which  offer  they  refused,  not  thiuliing  it  large  enough.     They  had  a  very  nice 

1  Report  of  the  Commissioner  of  Corporations  on  the  International  Harvester  Co.,  p. 
306,   et  soq. 

2  Interstate  Trade :  Hearings  before  the  Committee  on  Interstate  Commerce,  United 
States  Senate,  63d  Cong.,  2d  sess.,  on  Bills  Relating  to  Trust  Legislation,  p.  1169. 

^  Report  of  the  Commissioner  of  Corporations  on  the  International  Harvester  Co., 
p.  324. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  323 

plant  in  Newark  and  were  doing  a  good  business  and  making  a  good  deal  of 
money.  Tliey  did  not  sell  out,  so  the  trust  boycotted  tbeir  goods.  The  trust 
did  not  boycott  their  goods  as  quickly  as  ours.  They  commenced  on  ours  the 
1st  of  January,  1899,  and  they  did  not  throw  this  imyer  out  until  about  the  1st 
of  September,  1S99;  but,  on  the  other  hand,  when  they  did  throw  them  out 
they  prohibited  the  dealers  from  selling  their  goods  when  the  dealers  had  a  con- 
siderable stock  on  hand.  The  trust  did  not  buy  that  paper  out,  and  the  dealers 
could  not  sell  it,  and  did  not  know  what  to  do  with  it.  Consequently  those 
dealers  who  had  not  paid  the  bills  shipped  it  back  to  the  American  Self- Toning 
Co.  The  goods  were  perishable,  and  great  quantities  came  back  on  the  com- 
pany's hands,  and  they  lost  a  great  deal  of  money.  The  accounts  being  small, 
if  they  had  undertaken  to  sue  all,  they  would  have  had  a  couple  of  thousands 
of  suits  on  hand,  aud  it  looked  as  if  it  would  not  pay  them.  They  were  losing 
all  their  business,  aud  it  was  not  very  many  mouths  until  they  were  in  a  re- 
ceiver's hands.^ 

Section  16.  Enticement  of  competitors'  employees. 

Accusations  are  not  infrequently  made  of  attempts  to  entice  away 
important  employees  for  the  purpose  of  embarrassing  a  competitor's 
business.  In  the  celebrated  case  of  People  v.  Everest,  a  prosecution 
of  certain  persons  alleged  to  have  acted  in  the  interests  of  the  Stand- 
ard Oil  Co.,  it  was  one  of  the  grounds  of  complaint  that  they  had 
conspired  to  entice  certain  skilled  employees  from  the  Buffalo  Lubri- 
cating Oil  Co.,  particularly  Albert  A.  Miller,  superintendent  of  the 
construction  of  its  work,  and  the  only  man  in  the  company  able  to 
superintend  the  manufacture  of  oil.- 

Section  17.  Espionage  by  corruption  and  bribery. 

A  part  of  the  "restraint  upon  unfair  competition"  which  the 
independent  tobacco  manufacturers  asked  the  court  to  impose  on  the 
new  corporations  into  which  the  tobacco  combination  was  dissolved 
was  that : 

Each  corporation  which  is  to  carry  forward  any  part  of  the  manufacturing 
business  of  the  trust  should  be  restrained  *  *  *  from  espioiuige  on  the 
business  of  any  competitor,  either  through  bribery  of  any  agent  or  employee  of 
such  competitor  or-  obtaining  information  from  any  United  States  revenue 
oflicial." 

Many  have  proposed  specific  legislative  action  to  the  same  effect. 
Thus  Senator  La  Follette's  bill  for  amending  the  Sherman  Act^  pro- 
posed to  declare  every  restraint  of  trade,  under  circumstances  de- 
scribed, unreasonable  and  in  violation  of  the  act  as  to  any  party 
who — 

As  the  vendor,  lessor,  licensor,  or  bailor  of  any  article  spies  upon  the  business 
of  any  comi>etitor  or  secures  infurmalion  concerning  his  business,  either  through 

*  Reports  of  the  Industrial  Commission,  Vol.  XIII,  p.  187. 

2  Standard  Oil  Trust  Hearings,  SOtli  Cong.,  1st  sess.,  House  Report  3112,  pp.  815,  816, 
945,  94«. 

3  Control  of  Corporations,  IVrsons,  and  Firms  Engaged  in  Interstate  Commerce:  Report 
of  the  Committee  on  Interstate  Commerce,  United  States  Senate,  62d  Cong.,  Pursuant  to 
S.  Res.  08,  witli  Hearings,  Digest,  and  Index,  p.  1221. 

*  Ibid.,  p.  1779. 


324  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

bribery  of  an  agent  or  employee  of  such  competitor  or  of  any  State  or  Federal 
offici;il,  or  by  any  illegal  means  whatsoever  secures  information  concerning  the 
competitive  business. 

One  of  the  "methods  of  unfair  competition"  alleged  against  the 
Standard  Oil  Co.  by  a  former  Commissioner  of  Corporations  was  the 
maintenance  of  a  most  elaborate  system  of  espionage  over  the  busi- 
ness of  independent  oil  concerns.  Sometimes  it  set  its  regular  men 
to  spy ;  sometimes  it  hired  special  spies ;  but  its  chief  source  of  infor- 
mation was  reports  from  railroad  employees,  whom  it  bribed  to  dis- 
close to  it  facts  which  it  was  their  duty  not  to  disclose.  This  system 
enabled  the  Standard  to  ascertain  in  just  what  markets  its  competi- 
tors were  selling  oil,  often  in  advance  of  the  arrival  of  shipments,  and 
so  to  cut  its  prices  at  those  points.^ 

Certain  lumber  dealers,  doing  a  mail-order  business,  have  com- 
plained that  the  retail  lumber  dealers'  associations  have  used  a  simi- 
lar plan  against  them.-  The  practice  was  admitted,  as  used  against 
lumber  manufacturers,  by  the  defendants,  representing  retail  lum- 
ber dealers'  associations,  in  the  Lumber  Trust  case,  United  States  v. 
Hollis  et  al.  The  defendants  alleged  in  their  answer  that  lumber 
manufacturers  generally  concealed  and  denied  their  sales  to  con- 
sumers, "  and  that  it  was  thus  found  necessary,  on  account  of  the 
secret  and  clandestine  manner  in  which  such  sales  were  almost  uni- 
formly made  by  such  wholesalers  and  manufacturers  to  the  con- 
sumer, to  employ  detectives  and  other  means  to  find  out  and  ascer- 
tain the  same."^ 

In  the  suit  against  the  American  Tobacco  Co.  the  Government 
alleged  that  the  superintendent  of  one  of  that  company's  subsidiaries 
had  been  convicted  of  attempting  to  bribe  an  employee  of  a  com- 
petitor to  give  information  about  the  competitor's  business.*  The 
Government  also  presented  evidence  of  the  company's  tampering 
Avith  internal-revenue  officers  to  learn  what  internal-revenue  stamps 
competitors  bought.^ 

Until  detected  and  complained  of  by  an  inspector  of  the  Inter- 
state Commerce  Commission  in  1912,  the  Reading  Raihvay,  accord- 
ing to  the  Government's  complaint,  regularly  furnished  the  Reading 

^  Report  of  the  Commissioner  of  Corporations  on  the  Petroleum  Industry,  Pt.  IT,  pp. 
58,  669. 

~  Statement  of  Edward  C.  Ro1)erts,  president  of  the  Gordon-Van  Tine  Co.,  Davenport, 
Iowa.  Trust  Legislation :  Hearings  before  the  Committee  on  the  Judiciary,  House  of 
Representatives,  63d  Cong.,  2d  sess.,  on  Trust  Legislation,  p.  1764. 

3  United  States  v.  Hollis  et  al.  In  the  Circuit  Court  of  the  United  States  for  the  Dis- 
trict of  Minnesota,  fourth  division.  In  equity.  No.  1079.  The  joint  and  several  answer 
of  the  defendants,  p.  101. 

*  United  States  v.  American  Tobacco  Co.  and  others ;  in  the  Supreme  Court,  October 
term,  1910;  brief  for  the  United  States,  p.  245. 

sibid.,  p.  240. 


TRUST  LAWS  AND  UNFAIR  COMPETITION,  325 

Coal  &  Iron  Co.  with  lists  of  antlii'acite  shipments  made  by  its  inde- 
pendent competitors,  showing  names  of  shippers  and  consignees.^ 

Section  18.  Secret  commissions. 

The  widespread  practice  of  giving  commissions  and  making  gifts 
to  persons  who  make  purchases  for  others,  including  domestic 
servants,  buyers  for  department  stores,  purchasing  agents  for  rail- 
roads, and  others,  has  been  complained  of  as  unfair  competition. 

In  a  comparatively  recent  case  brought  under  the  Sherman  Act,  the 
Government  alleged,  among  other  things,  that  the  Cleveland  Stone 
Co.  "  is  accustomed  by  a  money  consideration  or  by  conferring  favors 
in  diiferent  ways  to  intluence  architects  who  prepare  plans  and 
specifications  for  contemplated  buildings,  and  induce  said  architects 
to  specify  stone  quarried  by  the  Cleveland  Stone  Co.  and  which 
has  some  particular  trade  name,  thus  excluding  competitors  from 
bidding  thereon,  though  its  competitors  may  have  quarries  located  in 
the  same  stratum  of  stone  and  producing  stone  of  precisely  the  same 
quality  as  that  specified."  ^ 

The  practice  of  giving  "  premiums "  or  commissions  to  salesmen 
of  wholesale  dealers,  and  so  inducing  them  to  push  one  manufac- 
turer's goods  at  the  expense  of  others,  is  said  to  be  condemned  as  an 
"  unfair  practice  "  by  salesmen  who  have  profited  by  such  premiums, 
even  while  they  deny  any  element  of  underhandedness  on  their  own 
part.^ 

Section  19.  Misrepresenting  competitors. 

This  may  take  the  form  of  misrepresenting  the  competitor's  goods, 
or  his  character,  responsibility,  or  business  methods.  Complaint  of 
such  methods  has  in  past  times  been  made  by  persons  in  the  harvest- 
ing-machine business.*  Mail-order  lumber  houses  have  complained 
that  the  members  of  retail  lumber  dealers'  associations,  in  their 
efforts  to  drive  the  mail-order  houses  out  of  business,  have  made 
systematic  use  of  misrepresentation.'' 

The  American  Press  Association,  furnishing  small  newspapers 
with  far  the  greater  part  of  their  plate  matter,  carried  on  for  some 
time  a  vigorous  competitive  campaign  against  the  Western  News- 
paper Union.     The  following  complaint  of  its  methods  is  from  the 

1  TTnitod  States  r.  Ucndinc:  Co.  ot  al.  :  in  the  District  Court  of  tlip  United  States,  Eastern 
District  of  Pennsylvania;  Brief  for  tlie  United  States  (May,  1!)14),  pp.  61,  G2. 

"  United  States  v.  The  Cleveland  Stone  Co.  et  al.,  1913.  In  the  District  Court  of  the 
United  States  for  the  Northern  District  of  Ohio.     Petition  in  equity,  p.  17. 

^  Interstate  Trade :  Hearings  before  the  Committee  on  Interstate  Commerce,  United 
States  Senate,  63d  Cong.,  2d  sess.,  on  Bills  Relating  to  Trust  Legislation,  pp.  177,  178. 

*  Report  of  the  Commissioner  of  Corporations  on  the  International  Harvester  Co.,  pp. 
36,   323-325. 

">  Trust  Legislation:  Hearings  before  the  Committee  on  the  .ludiciary,  House  of  Repre- 
sentatives, 63d  Cong.,  2d  sess.,  on  Trust  Legislation,  p.  1705, 


326  EEPORT  OF   THE   COMMISSIONER  OP   CORPORATIONS. 

petition  in  a  Government  suit  under  the  Sherman  Act,  in  which  a 
decree  against  the  defendants  was  rendered  with  their  consent. 

It  has  for  many  years  publisbed  as  a  house  organ  a  weekly  paper  called,  the 
American  Press.  This  paper  It  circulates  among  all  the  country  newspapers 
in  the  States  and  Territories.  From  the  date  of  the  Newspaper  Union's  refusal 
to  sell  its  plate  business  to  the  association  it  has  prosecuted,  through  this 
organ  and  by  correspondence,  a  campaign  of  abuse  and  misrepresentation  as  to 
the  Union's  business  and  business  methods  for  the  purpose  of  taking  from  it 
its  customers.^ 

In  December,  1914,  the  Supreme  Court  of  North  Carolina  had  before 
it  an  indictment  of  six  persons,  claiming  to  be  employed  by  the 
Wrought-Iron  Range  Co.,  for  conspiracy  to  break  up  a  competitor's 
business.  It  was  alleged  that  the  conspiracy  w\as  to  be  carried  out 
by  the  following  means : 

To  break  up  the  sales  made  by  the  agents  of  the  rival  company ;  to  abuse  that 
company;  to  vilify  it;  to  follow  up  its  agents  from  town  to  town,  from  road  to 
road,  from  house  to  house,  and  vilify  and  abuse  them ;  to  slander,  vilify,  and 
run  down  that  company ;  to  chax'ge  falsely  that  such  rival  company  was  com- 
posed of  a  set  of  thieves  and  liars ;  and  to  say  falsely  that  the  agents  of  that 
company  were  a  set  of  thieves  and  liars,  who  were  trying  to  cheat  and  defraud 
the  people.* 

Attention  was  called  to  a  special  method  of  competition  in  a  letter 
on  pending  trust  legislation,  addressed  to  the  chairman  of  the  Senate 
Committee  on  Interstate  Commerce  by  S.  A.  Taylor,  of  Pittsburgh, 
in  February,  1914.  Mr.  Taylor  was  opposing  any  limitation  on  the 
right  of  a  concern,  in  selling  its  goods,  to  choose  its  customers.  In 
that  connection  he  said : 

The  greatest  reason  which  appears  to  me,  however,  is  that  a  competitor  might 
compel  another  to  sell  him  a  portion  of  his  production,  and  in  order  to  break 
down  a  fair  competition  would  sell  this  portion  of  his  production  at  a  greatly 
reduced  price,  assuming  to  begin  with  that  he  would  lose  money  on  this  portion 
of  his  purchase  by  doing  it,  so  as  to  crii)ple  and  give  the  production  of  his 
competitor  a  bad  name.  This  has  been  done  in  the  past,  and  I  can  see  where 
this  clause  might  render  it  legal  for  him  to  do  such  things." 

Section  20.  Abuses  in  advertising. 

Complaints  under  this  head  relate  to  two  different  practices — 
deceptive  advertising  and  excessive  advertising.  Deceptive  advertis- 
ing is  not  different  in  principle  from  other  kinds  of  misrepresentation 
or  cheating.  "  Overadvertising,"  however,  has  been  condemned  also 
as  one  of  "  the  acts  wdiich  wicked  ingenuity  has  devised  *  *  *  to 
drive  others  out  of  business  and  exclude  them  from  the  free  right  to 

1  United  States  v.  Western  Newspaper  Union  et  al. ;  petition,  quoted  in  Trust  Legisla- 
tion :  Hearings  before  tlie  Committee  on  tlie  Judiciary,  House  of  Representatives,  63d 
Cong.,  2d  sess.,   on  Trust  Legislation,  p.  16G6. 

2  State  V.  Dalton  et  al.,  83  S.  E.,  003,  005. 

^  Interstate  Trade :  Hearings  before  the  Committee  on  Interstate  Commerce,  United 
States  Senate,  63d  Cong.,  2d  sess.,  on  Bills  Relating  to  Trust  Legislation,  p.  1070. 


TRUST    LAWS   AND    UNFAIR   COMPETITION,  327 

trade."  ^  The  point  is  that  advertising  takes  money,  and  that  extraor- 
dinary financial  resources  give  an  advantage  which  has  no  rehition  to 
any  superiority  of  products  or  service,  and  which  is,  therefore,  felt 
to  be  injurious  to  the  public,  and  so  unfair.     As  Prof.  Taussig  says : 

It  is  not  easy  to  say  just  bow  far  advertising  serves  a  good  purpose,  how  far 
it  means  waste.  Ko  doubt  it  does  stimulate  wants,  introduces  new  devices, 
promotes  variety  in  production  and  consumption,  and  it  is  often  a  means  of  use- 
ful competition.  But  sometimes  it  is  a  weapon  of  destructive  competition. 
Among  articles  equally  good,  tbat  wbicb  is  systematically  paraded  is  likely 
to  be  most  readily  sold.  *  *  *  One  might  suppose  tbat  if  Smith's  wares 
were  equally  good  and  were  sold  at  a  lower  price  (made  possible  by  elimi- 
nating the  advertising  expense)  he  would  bold  his  own  in  si^ite  of  Jones's 
preposterous  puffing.  But,  in  fact,  Jones's  wares  are  preferred ;  some  vague 
impression  of  superiority  is  produced  by  the  incessant  boasting.  Plentiful  cash 
is  the  sine  qua  non  of  an  effective  advertising  campaign.  The  large  producer, 
or  would-be  monopolist,  has  here  again  a  tactical  advantage.^ 

Section  21.  Passing  off  goods  for  those  of  another. 

This  signifies  any  method  tending  to  confuse  one  person's  product 
with  another's,  so  that  a  custodier  buys,  or  may  buy,  under  a  mistake 
as  to  whose  goods  he  is  getting.  No  other  practice,  perhaps,  has  been 
so  often  called  unfair  competition  in  the  law  of  English-speaking 
peoples.    Edward  S.  Rogers,  of  Chicago,  says: 

At  an  early  day  judges  with  consciences  and  a  proper  sense  of  sportsmanship 
began  to  decide' cases  in  favor  of  the  complainant  which  were  in  no  sense  trade- 
mark cases,  but  where  the  defendant's  conduct  involved  precisely  the  same 
wrong — the  sale  of  one  trader's  goods  as  those  of  another — the  result  being 
accomplislied  by  some  ingenious  contrivance,  the  deceptive  use  of  personal, 
geographical,  or  descriptive  names,  imitated  labels  or  form  of  package,  or  in 
some  of  the  infinity  of  ways  which  enable  one  trader  to  represent  his  goods  as 
those  of  a  competitor,  whose  reputation  is  better  and  whose  trade  he  covets. 
The  digesters  and  text-writers  at  first  were  puzzled  to  known  where  to  classify 
such  cases.  The  author  of  a  textbook  on  trade-marks  would  devote  a  chapter 
to  "  Cases  analogous  to  trade-marks,"  and  put  them  there.  Finally,  the  term 
"unfair  competition"  was  adopted  (perhaps  from  the  French  concurrence 
deloyale)  and  has  since  been  used  to  describe  that  class  of  wrongs  where  by 
artifice  one  trader's  goods  are  sold  as  and  for  another's.  Probably  the  phrase 
"passing  off,"  commonly  used  in  England,  more  correctly  describes  the  wrong 
as  we  now  understand  it  in  this  country  than  "  unfair  competition,"  but  "  unfair 
competition  "  is  the  preferable  designation  if  it  can  be  given  the  meaning  that, 
as  a  part  of  the  English  language,  it  ought  to  have — that  it  includes  not  alone 
"passing  off"  but  any  conduct  on  the  part  of  one  trader  which  tends  unneces- 
sarily to  injure  another  in  his  business." 

i  Inlorstate   Trado :   Hearings   before   the    Committee  on    Interstate   Commeree,   United 
States  Senate.  (VM  Cong..  2d  soss.,  on  I'.ills  Relating  to  Trust  Legislation,  p.  11  OS. 

2  F.  W.  Taussig.  Principles  of  E<>onomics  (I'.H:'.),  p.  42S. 

3  Trust  Legislation:  Hearings  before  the  Committee  on  the  .Judiciary,  House  of  Repre- 
sentatives, 03d  Cong.,  2d  sess.,  on  Trust  Legislation,  pp.  1600,  1601. 


328  REPORT  OF    THE   COMMISSIONER   OF   CORPORATIONS. 

Section  22.  Shutting  off  competitors'  credit. 

This  may  take  many  forms.  Pressure  may  be  exerted  on  banks  and 
capitalists  to  refuse  loans.  A  representative  of  a  farmers'  coopera- 
tive organization  complained  that  a  cooperative  warehouse  at  Mem- 
phis, storing  cotton  and  making  advances  on  it,  had  been  subjected  to 
a  financial  boycott  of  this  kind.^  An  attempt  may  be  made  to  throw 
a  rival  company  into  a  receivership,  or  insinuations  injurious  to 
credit  may  be  made.  A  mail-order  lumber  company  complained  that 
it  had  been  attacked  with  such  insinuations  by  the  retail  lumber 
dealers'  associations.- 

Section  23.  Shutting  off  materials,  supplies,  or  machines  from  competitors. 

The  complaints  under  this  head  presuppose  something  in  the  nature 
of  a  monopoly;  without  this  the  alleged  injury  could  not  be  inflicted. 
It  may  be  a  legal  monopoly,  as  one  based  upon  patents  or  on  the 
ownership  of  practically  the  whole  supply  of  a  natural  resource,  or 
it  may  rest  on  a  practical  monopoly  of  an  industry  without  such  a 
definite  legal  guaranty.  In  the  suit  of  the  United  States  against  the 
American  Can  Co.,  brought  in  1913,  it  was  made  a  ground  of  com- 
plaint that  that  company  had  acquired  most  of  the  valuable  patents 
for  can-making  machinery  in  order  "  to  prevent  the  remaining  com- 
peting can  manufacturers  and  persons  who  might  wish  to  become 
competing  can  manufacturers  from  obtaining  the  necessary  ma- 
chinery."^ The  Government  based  its  suit  against  the  Aluminum 
Co.  of  America  partly  on  the  allegation  that  the  company  was  en- 
deavoring to  obtain  control  of  the  bauxite  properties  of  the  United 
States  (bauxite  being  the  earth  or  ore  from  which  alumininn  is  made) 
in  order  to  prevent  anyone  but  itself  from  producing  the  metal 
aluminum. 

An  example  of  monopoly  without  specific  legal  warrant  is  the 
control  which  the  American  Tobacco  Co.  obtained  over  the  produc- 
tion of  licorice,  and  the  embarrassment  into  which  it  was  thus  enabled 
to  bring  independent  manufacturers  of  tobacco  to  whom  licorice  Avas. 
a  necessary  material.  The  Government  made  it  one  of  its  grounds 
of  complaint  against  the  American  Tobacco  Co.  that  a  subsidiary, 
the  MacAndrews  &  Forbes  Co.,  "  obtained  a  practical  monopoly  of 
domestic  and  foreign  commerce  in  licorice  root  and  its  products, 
and  all  substantial  competition  has  been  destroyed.    One  former  com- 

1  Conti'ol  of  Corporations,  Persons,  and  Firms  Engagod  in  Interstate  Commerce  :  Re- 
port of  the  Committee  on  Interstate  Commerce,  United  States  Senate,  02d  Cong.,  pursuant 
to  S.  Res.  98,  p.  2.341  ;  statement  of  T.  .1.  BroolvS,  representing  tlie  Farmers'  Educational 
Cooperative  Union,  Atwood,  Tenn. 

2  Trust  Legislation  :  Hearings  before  the  Committee  on  the  .Tudiciary,  House  of  Repre- 
senatives,  6.3d  Cong.,  2d  sess.,  on  Trust  Ijegisltaion,  p.  1770. 

*  United  States  v.  American  Can  Co.  et  al.,  original  petition,  filed  Nov.  29,  191 H,  in  the 
District  Court  of  the  United  States,  District  of  Maryland,  p.  12. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  329 

petitor      *     *     *     remains,  but  he  depends  on  the  combination  for 
raw  materials  and  exists  by  sufferance."  ^ 

The  method  complained  of  in  the  last-named  case  "was  not  complete 
denial  of  supplies  to  independent  manufacturers,  but  exorbitant 
prices.^ 

Section  24.  Acquiring  stock  in  competing  companies  for  purpose  of  reduc- 
ing or  destroying  competition. 

A  large  company  sometimes  obtains  an  interest  in  a  competitor 
without  obtaining  control,  and  uses  its  interest  to  destroy  or  injure 
it.  Persons  interested  in  the  United  States  Pipe  Line  Co.,  which 
had  been  formed  by  the  independent  refiners  and  crude-oil  producers 
to  transport  both  crude  and  refined  oil,  complained  that  the  Stand- 
ard Oil  Co.  obtained  an  interest  in  it  with  such  ends  in  view. 

The  United  States  Pipe  Line  Co.  excluded  tlie  Standard  from  its  meetings  on 
ground  that  the  Standard  acquired  its  stock  to  compass  its  destruction  and  to 
get  information  that  would  lead  to  the  destruction  of  the  independent  movement.^ 

Section  25.  Wrongful  and  malicious  suits. 

It  is  often  not  easy  to  determine  how  far  suits  are  malicious  and 
how  far  they  are  merely  proper  efforts  to  maintain  supposed 
rights.  There  is  in  most  cases,  of  course,  ground  of  suit.  Often 
it  is  an  alleged  infringement  of  patent.  Among  the  "  unfair 
means"  by  which  the  National  Cash  Eegister  Co.  was  accused  of 
restraining  trade  in  the  indictment  brouglit  against  its  officers  in  1912 
was  this :  That  it  brought  suits  against  competitors  and  against  pur- 
chasers of  their  machines,  alleging  infringement  of  patent  rights, 
when  it  knew  that  no  patents  existed  by  which  such  suits  could  be 
sustained.* 

Baseless  and  vexatious  patent  suits  were  one  of  the  means  which 
the  Standard  Oil  Co.  was  accused  of  using  to  compass  the  destruc- 
tion of  the  Buffalo  Lubricating  Oil  Co.^ 

Section  26.  Intimidation. 

While  threats  are  often  a  separate  basis  of  complaint,  they  are  in 
general  only  subsidiary  to  actual  injuries.  Threats  are  apt  to  be 
effective  onh?^  as  the  power  and  the  disposition  to  injure  are  actually 
manifested. 

1  United  States  r.  American  Tohaceo  Co.  and  others ;  in  the  Supreme  Court,  October 
term.  1910;  brief  for  the  United  States,  p.  301. 

'  Report  of  the  Commissioner  of  Corporations  on  the  Tobacco  Industry,  Pt.  I,  p.  24. 

=»  Industrial  Commission,  Preliminary  Report  on  Trusts  and  Industrial  Combinations 
(vol.  1  of  the  Commission's  reports)  ;  testimony  of  Thomas  W.  Phillips,  p.  590. 

*  United  States  r.  Patterson  and  others  (201   F>d.,  70.S). 

^  House  Reports,  HOth  Cong.,  1st  sess.,  vol.  9,  Report  No.  3112,  Standard  Oil  Trust  hear- 
ings ;   pp.  432,   434. 


330  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

In  United  States  v.  Western  Newspaper  Union,  American  Press 
Association,  et  al.,  the  petition  accused  the  defendants  of  "  numerous 
acts  of  unfair  competition,"  which  included  "  summoning  *  *  * 
competitors  to  conferences  and  openly  telling  them  they  could  not 
continue  in  their  competing  business,  but  that  they  must  either  get 
out  or  sell  out,  and  coupling  such  demands  with  threats  of  still  fiercer 
imfair  competition,  including  the  installation  of  competitive  plants 
in  their  territory,  and  a  recitation  of  plants  already  bought  out  or 
put  out,  and  of  the  cooperation  between  all  the  defendants  in  the 
campaign  against  them."^ 

Threats  are  often  made  to  customers  of  competitors  as  well  as  to 
the  competitors  themselves.  The  petition  just  quoted  furnishes  an 
instance.  It  gives  the  following  accusation  against  some  of  the 
defendants : 

They  have  threatened  papers  located  at  points  that  can  not  support  two  small 
newspapers  to  start  competing  papers  unless  they  patronized  defendants.^ 

Section  27.  Fixing  channels  of  trade. 

Retailers  feel  themselves  aggrieved  if  wholesalers  sell  to  con- 
sumers, and  often  endeavor  to  stop  it.  In  many  towns,  it  is  said, 
wholesale  grocers  understand  that  they  will  be  boycotted  if  the 
retailers  catch  them  selling  to  consumers.  The  retailers  feel  that  they 
are  only  taking  proper  action  to  restrain  competition  which  they 
regard  as  unfair.  The  associations  of  retail  lumber  dealers  have 
been  very  active  in  enforcing  the  same  view.  "  We  do  not  consider 
it  fair,"  said  the  secretary  of  the  New  Jersey  Lumbermen's  Protec- 
tive Association,  in  a  letter  dated  February  8,  1904,  "  for  a  man  who 
is  engaged  in  manufacturing  or  wholesaling  lumlier,  competing  witli 
his  own  customers."  The  annual  report  of  the  board  of  directors  of 
this  association,  submitted  February  26, 1907,  contained  the  following 
passage :  "  It  is  wrong  in  principle  for  the  wholesaler  or  the  manufac- 
turer, as  we  have  always  contended,  to  become  active  competitors 
of  their  own  customers,  the  retailers.""  Manufacturing  consumers 
of  lumber  who  constantly  buy  in  lots  of  a  carload  or  more  are  usually 
able  to  buy  from;  manufacturers  and  wholesalers  without  open  objec- 
tion from  the  retailers ;  but  occasionally  the  retailers  have  been  strong 
enough  to  shut  out  even  very  large  consumers  of  this  class.  Against 
building  contractors  they  have  especially  contended;  even  against 
contractors  who  have  had  lumber  yards.  In  many  cases  the  retail- 
ers' associations  have  been  able  to  enforce  upon  wholesalers  and  man- 
ufacturers their  contention  that  a  man  who  makes  a  business  of  build- 

1  Quoted  in  Tmst  Le^slation  :  HcarinRS  before  the  Committee  on  the  Judiciary,  ITouse 
of  Representatives,  God  Cong.,  2d  sess.,  on  Trust  Legislation  ;  pp.  1664,  1665. 

2-Ibid.,  p.  1665. 

^  U.  S.  V.  Eastern  States  Retail  Lumber  Dealers'  Association  et  al..  Record,  Vol.  IV, 
petitioner's    exhibits,    p.    20". 


TBUST    LAWS    AND    UNFAIR   COMPETITION.  331 

ing,  even  though  he  also  makes  a  business  of  retailing  lumber,  is  not 
a  "  regular  "  or  "  legitimate  "  retailer.  For  selling  to  such  retailers 
many  manufacturers  and  wholesalers  have  been  boycotted. 

On  the  other  hand,  a  great  body  of  opinion  holds  that  all  such  dis- 
criminations are  unfair  and  should  be  prohibited.  Says  Samuel 
Untermeyer : 

I  think  that,  broadly  speaking,  a  man  who  is  in  interstate  commerce  ought  to 
be  obliged  to  sell  to  anybody  who  is  responsible.  *  *  *  a  man  should  not 
arbitrarily  refuse,  without  cause,  to  sell  a  given  customer.  *  *  *  You  need 
never  extend  credit  to  a  man,  but  the  man  who  comes  with  the  money  should 
be  allowed  to  purchase.* 

The  same  idea  is  implied  in  the  proposition  that  goods  should  be 
sold  at  a  fixed  and  published  price,  uniform  to  all  comers.- 

1  Tnist  Lofrislation  :  Ilearinffs  before  the  Committee  on  the  Judiciary,  House  of  Repre- 
sentatives, OHd  Cong.,  2d  sess.,  on  Trust  Legislation,  p.  849. 
-P.  31G,  above. 


CHAPTER  VII. 
UNFAIR  COMPETITION  AT  THE  COMMON  LAW. 

Section  1.  Introductory. 

The  purpose  of  this  chapter  is  to  present  certain  phases  of  the 
common  law  relating  particularly  to  the  right  of  pereons  engaged 
in  business  to  be  protected  from  unfair  or  oppressive  methods  of 
competition,  without  assmning  to  determine  whether  or  not  such 
methods  are  unfair  within  the  meaning  of  section  5  of  the  Federal 
Trade  Commission  act. 

Every  person  has  a  right  to  engage  in  business  and  to  strive  by 
all  lawful  means  to  advance  his  own  interests,  and  if,  as  the  result 
of  a  mere  exercise  of  this  right,  others  conducting  similar  enter- 
prises lose  custom,  they  have  no  cause  of  action  for  such  injury. 
The  right  to  lawfully  compete  in  business  affords  a  justification  and 
negatives  any  claim  that  the  injury  was  inflicted  wantonly  or  with- 
out cause.  The  right  to  compete  is  not  absolute,  however,  but  is 
qualified  by  the  existence  of  a  similar  right  in  others. 

Generally  speaking,  persons  engaged  in  business  occupy  much  the 
same  relation  to  each  other  as  other  members  of  society.  Business 
rivalry  ordinarily  confers  no  privilege  to  commit  acts  or  to  engage 
in  practices  which  would  be  unlawful  if  indulged  in  by  persons  in 
other  walks  of  life.  The  fact,  for  instance,  that  two  men  are  business 
competitors  will  not  justify  one  in  making  libelous  statements  con- 
cerning the  other,  in  physically  obstructing  the  passage  of  his  agents 
along  the  public  highways,  or  in  bribing  them  to  act  contrary  to  his 
interests.  Whether  or  not  the  object  of  such  an  attack  is  a  competi- 
tor, conduct  of  this  character  is  equally  unlawful.  But  acts  which 
would  ordinarily  not  result  in  actual  damage  may  sometimes  seri- 
ously injure  a  business  rival.  To  illustrate,  a  false  statement  that  a 
farmer  uses  a  low-grade  fertilizer  could  not  conceivably  cause  him 
injury,  whereas  a  similar  statement  made  by  one  engaged  in.  the 
manufacture  of  fertilizer  respecting  the  product  of  a  competing 
manufacturer,  if  generally  believed,  would  probably  result  in  a  loss 
of  sales  by  the  competitor  and  consequent  financial  injury  for  which 
damages  could  be  recovered. 

On  the  other  hand,  the  fact  that  the  parties  are  competitors  has 
been  held,  in  some  cases,  to  constitute  a  justification  for  acts  which 
have  resulted  in  damage,  although,  under  other  circumstances,  they 
332 


TEUST   LAWS  AND  UNFAIR  COMPETITION.  333 

might  possibly  have  been  considered  actionable  as  a  wanton  and 
malicious  interference  with  another's  business.  Thus,  though  the 
decisions  are  not  in  accord,  it  has  been  held  that  a  business  man 
knowing  that  a  competitor  has  a  contract  to  sell  goods  to  another 
may  procure  the  latter  to  violate  the  contract  and  purchase  his 
goods  instead  and  that  such  conduct  should  be  permitted  in  the 
interest  of  free  competition,  although  in  the  absence  of  competition 
it  might  be  actionable.  This  chapter  has,  therefore,  been  largely 
confined  to  a  consideration  of  cases  arising  between  business  rivals; 
in  other  words,  to  cases  in  which  the  justification  of  competition 
might  have  been  considered  by  the  courts.  Only  where  there  was  not 
a  sufficient  number  of  decisions  of  this  description  to  show  the  true 
state  of  the  law  has  resort  been  had  to  cases  in  which  the  element 
of  competition  was  not  present. 

There  are  also  certain  forms  of  property,  such  as  secret  formulas, 
lists  of  customers,  and  other  trade  secrets,  as  well  as  the  good  will 
of  a  business,  or  the  property  in  particular  brands  or  trade  names, 
which  are  peculiarly  the  product  of  business  activity.  Attempts  by 
competitors  to  discover  such  secrets  by  the  corruption  of  employees 
or  by  other  methods,  or  unfairly  to  appropriate  the  benefits  resulting 
from  the  established  reputation  of  a  rival's  products  by  palming  off, 
as  his  goods,  articles  manufactured  by  others,  have  given  rise  to 
many  legal  controversies.  The  decisions  in  these  cases  constitute  a 
distinct  body  of  the  law,  dealing  wholly  with  trade  competition. 

While  the  primary  question  to  be  determined  in  the  cases  presented 
here  ii\  the  legality  of  the  acts  or  conduct  complained  of,  there  is 
involved  in  many  cases  an  element  of  unfairness,  of  breach  of  trust, 
of  Avillful  misrepresentation,  of  flagrant  dishonesty,  or  of  coercion 
or  oppression.  This  fact  appears  to  have  led  the  courts  to 
characterize  certain  acts  as  unfair  competition.  The  use  of  marks 
or  wrappings  to  deceive  purchasers  and  pass  off  one  man's 
goods  as  those  of  another  has  for  yeare  in  this  country  been 
termed  unfair  competition.  Other  practices,  such  as  procuring 
the  breach  of  a  competitor's  contracts,  betraying,  or  inducing  others 
to  betray,  a  competitor's  trade  secrets,  or  intimidating  a  com- 
petitor's customers  by  threats  of  infringement  suits,  have  also  been 
characterized  by  the  courts  as  imfair  competition.  These  and  many 
other  acts  or  practices  have  been  frequently  described  or  alluded  to 
by  the  courts  in  other  terms  of  much  the  same  significance,  such  as 
"  inequitable  competition,"  "  unfair  conduct,"  "  unfair  dealing," 
"  unfair  means,"  "  unfair  business  methods,"  "  unfair  advantage," 
"  unfair  mode  of  trading,"  or  as  "  unfair  and  unjust  practices  and 
methods."  Such  expressions  also  as  not  "  fair  com^^etition,"  not 
"  proper  competition,"  not  "  honest  competition,"  not  "  legitimate 


334  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

competition,"  not  "  lawful  competition,"  not  "  legitimate  and  lawful 
competitive  methods  "  are  frequently  employed  by  the  courts  to  de- 
scribe competitive  acts  or  practices  which  are  regarded  as  milawful. 
The  inherently  unfair  or  fraudulent  character  of  some  of  the  practices 
considered  in  this  chapter  is  unquestionably  an  element  in  determin- 
ing their  illegality. 

Except  where  made  criminal  by  statute,  probably  few  single  acts  of 
unfair  competition  could  bo  made  the  subject  of  a  proceeding  in  the 
name  of  the  State.  The  cases  considered  in  this  chapter  are,  there- 
fore, almost  wholly  such  as  have  arisen  between  private  parties,  and 
consequently  little  attention  has  been  paid  by  the  courts  to  the  pub- 
lic consequences  of  the  use  of  the  practices  or  methods  involved. 
Only  where  the  cases  mvolved  a  restraint  of  trade,  or  some  form 
of  fraud  on  the  public,  has  the  policy  of  preventing  unfair  com- 
petitive methods  because  of  their  ell'ect  on  the  public  been  con- 
sidered. That  the  use  of  competitive  acts  or  practices  consid- 
ered in  this  chapter,  and  held  to  be  unlawful  at  the  common  law 
as  between  private  parties,  may,  however,  tend  to  restrain  trade  or 
create  a  monopoly  appears  from  the  fact  that  many  of  them  have  been 
employed  by  corporations  occupying  monopolistic  i)ositions  in  par- 
ticular lines  of  business,  or  by  associations  of  traders,  and  their  use 
has  been  enjoined  in  suits  instituted  by  the  Government  under  the 
Sherman  Antitrust  Act.^ 

Common-law  decisions  respecting  the  legality  of  certain  com- 
petitive methods  are  considered  in  the  following  order :  (a)  Inducing 
breach  of  competitors'  contracts;  (h)  enticing  employees  from  the 
service  of  competitors;  (c)  betrayal  of  trade  secrets;  (d)  betrayal  of 
confidential  information;  (e)  appropriation  of  values  created  by 
competitors'  expenditures;  (/)  defamation  of  competitors  and  dis- 
paragement of  competitors'  goods;  (g)  misrepresentation  by  means 
other  than  words;  {h)  false  claims  to  testimonials;  (^)  intimidation 
of  competitors'  customers  by  threats  of  infringement  suits;  {j)  com- 
binations to  cut  off  competitors'  supplies  or  to  destroy  their  market; 
(k)  intimidation,  obstruction,  and  molestation  of  competitors  or  their 
customers;  (Z)  preventing  the  sale  of  competing  goods  by  demand- 
ing contracts  for  exclusive  dealing;  (711)  bribery  of  employees;  (n) 
competing  wdth  purchaser  after  the  sale  of  business  and  good  will ; 
(o)  passing  off'  the  goods  of  one  manufacturer  or  dealer  as  those  of 
another. 

There  are  some  ingenious  competitive  devices  or  practices  that  have 
been  apparently  little  used  and  have  been  before  the  courts  only  in 
isolated  cases.  Cases  of  this  character  are  collected  at  the  end  of 
the  chapter  under  the  title  "  Miscellaneous." 

1  See  Ch.  VIII. 


TRUST    LAWS    AND    UNFAIR   COMPETITION.  335 

Decisions  not  only  by  the  courts  in  the  United  States  but  in  Eng- 
hind  and  in  other  countries  which  have  the  English  common  hiw  liave 
been  included  in  this  cliapter.  It  has  appeared  desirable,  however, 
to  present  the  American  and  foreign  decisions  separately. 

Section  2.  Inducing  breach  of  competitors'  contracts. 

It  has  been  a  common  practice  for  manufacturers  or  dealers,  public- 
service  corporations  and  others,  to  induce  persons  under  contract  to 
purchase  supplies,  goods,  or  service  from  their  competitors,  to  break 
such  contracts  and  purchase  from  them  instead.  As  a  result  of  this 
practice  a  number  of  cases  have  arisen  both  in  the  Federal  and  State 
courts  where  the  injured  party  has  sought  to  recover  damages  from 
the  competitor  procuring  the  violation  of  its  contractual  rights,  or  to 
prevent  such  competitor  from  continuing  this  method  of  competition. 
In  the  course  of  opinions  in  this  class  of  cases  the  courts  have  re- 
ferred to  the  practice  of  procuring  the  breach  of  competitors'  con- 
tracts as  "unfair  competition,"  have  stated  that  it  was  not  within 
the  domain  of  "  fair  competition,"  or  have  characterized  it  in  similar 
terms.  Thus,  a  Federal  district  court  has  stated  that  the  "  right  to 
compete  in  business  does  not  justify  '  unfair'  competition  in  business 
or  trade,  or  misrepresentations  which  tend  to  induce  one  party  to  a 
legal  contract  to  refuse  to  perform  it  to  the  damage  of  the  other 
party  "  ;^  and  in  another  case  where  damages  were  sought  for  fraudu- 
lently preventing  a  competitor  from  securing  a  contract  the  Federal 
circuit  court  of  appeals  said  that  "  it  will  hardly  be  contended  that 
the  means  charged  to  accomplish  the  wrong,  prompted  by  the  mo- 
tive charged,  brings  the  conduct  of  the  defendants  within  the  domain 
of  fair  competition  for  trade.""  In  an  earlier  case  the  Federal 
circuit  court,  referring  to  an  offer  to  indenuiify  a  competitor's 
customers  who  violated  their  contracts,  stated  that  such  conduct 
"  transcends  the  rights  of  the  law  of  competition."  ^  The  Supreme 
Court  of  New  York  referred  to  inducing  a  breach  of  competitors' 
contracts  as  a  step  "in  the  same  scheme  of  unfair  competition,"* 
and  the  Supreme  Court  of  Oklahoma,  in  the  course  of  an  opinion 
which  involved  inducing  a  violation  of  another's  contracts,  said  that 
"  unfair  competition  is,  and  always  has  been,  frowned  upon  by  the 
law,  and  the  trend  of  decisions  from  Lumley  v.  Gye  ^  to  the  present 
time  seems  to  sustain  the  proposition  that  it  is  a  violation  of  legal 
right  to  interfere  with  contractual  relations  recognized  by  law  if 

iSperry  &  Hutchinson  Co.  v.  Pommer,  199  Fed.,  309,  314  (D.  C.  1912). 
2  Lewis  V.  Bloede  ct  al.,  202  Fed.,  7,  24  (C.  C.  A.,  1912). 

=>  Citizens'  Light,  Heat  &.  Power  Co.  v.  Montgomery  Light  &  Water  Power  Co.,  171  Fed., 
553  (C.  C,  1909). 

*  American  Law  Book  Co.  v.  Edward  Thompson  Co.,  84  N.  Y.  Supp.,  225   (1903). 
6  2  El.  &  Bl.,  21G   (1S53J. 


336  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

there  be  no  sufficient  justification  for  the  interference."  ^  The  Su- 
preme Judicial  Court  of  Massachusetts,  in  a  recent  case,  said :  "  It  is 
manifest  that  to  knowingly  and  maliciously  induce  another  to  break 
a  contract  *  *  *  is  not  justified  by  fair  trade  competition;"^ 
and  the  Supreme  Court  of  Michigan  in  1914  expressed  the  opinion 
that  "  there  are  many  ways,  other  than  by  interference  with  contract, 
of  harassing,  interfering  with,  and  obstructing  a  competitor  in  such 
a  manner  as  to  amount  to  unfair  competition,  in  the  broadest  sense 
of  the  term."  ^ 

AMEBICAN  DECISIONS. 

The  cases  in  this  country  involving  the  lawfulness  of  inducing  or 
procuring  a  breach  of  contract  may  be  divided  into  two  broad  classes, 
namely : 

1.  Those  in  which  the  breach  is  procured  by  the  use  of  fraud,  by 
false  statements  respecting  the  other  party  to  the  contract  or  his 
goods,  by  coercing  or  intimidating  one  of  the  parties  to  abandon  the 
contract,  or  by  the  employment  of  other  unlawful  means. 

2.  Those  in  which  no  unlawful  means  are  employed  but  where  the 
violation  of  contractual  rights  is  induced  by  mere  persuasion  or 
argument,  or  hy  the  offer  of  lower  prices,  superior  goods,  or  other 
similar  means. 

Inducing  breach  by  fraud,  coercion,  intimidation,  or  other  un- 
lawful MEANS. — It  is  very  generally  held  by  Federal  and  State 
courts  that  it  is  unlawful  and  gives  rise  to  a  cause  of  action  for 
damages,  to  induce  one  of  the  parties  to  a  contract  not  to  perfonn  it, 
if  fraud,  coercion,  intimidation,  molestation,  or  other  unlawful  means 
be  employed  to  procure  this  action  on  the  part  of  the  contracting 
party.  Thus  it  was  held  bj^  the  Supreme  Court  of  the  United  States 
that  one  who  had  a  contract  to  constinict  a  railroad  could  recover 
damages  from  a  competing  line  which,  by  bribing  officials  of  the  road 
under  construction  and  by  false  representations,  induced  the  State 
legislature  to  revoke  a  grant  of  land  to  the  road,  thus  making 
it  impossible  to  continue  the  construction  of  the  line  and  depriving 
the  contractor  of  the  benefit  of  his  contract.*  And  wdiere  merchants 
purchased  trading  stamps  from  a  company  and  agreed  not  to  use  the 
stamps  of  any  other  company,  the  Federal  district  court  held  it  un- 
lawful for  a  competing  company  to  procure  the  merchants  by  false 
representations  to  break  their  contracts;  and  enjoined  the  rival  com- 
pany from  further  soliciting  or  inducing  merchants,  "  by  any  illegal 

iSchonwald  et  al.  v.  Ragains,  122  Pac,  203  (Okla.  Sup.  Ct-.,  1912). 
2  Wheeler-Stenzel  Co.  v.  American  Window  Glass  Co.  et  al..  202  Mass.,  471   (1909). 
=  Attorney  General  r.  National  Cash  Register  Co.,  148  N.  W.,  420,  428   (Mich.  Sup.  Ct., 
1914). 

*  Angle  V.  Chicago,  St.  Paul,  etc.,  Ry.,  151  U.  S.,  1   (1894). 


TRUST    LAWS    AND    UNFAIR   COMPETITION.  337 

means  or  methods,"  to  violate  their  agreements.^  The  same  principle 
was  applied  in  another  case  where  a  Federal  court  held  it  to  be  un- 
lawful for  the  unsuccessful  bidder  for  a  contract  to  prevent  by  fraud 
and  collusion  the  consummation  of  a  contract  with  another  whose  bid 
had  been  accepted.- 

Similarly,  the  Supreme  Court  of  New  York  held  that  it  was  un- 
lawful and  ground  for  an  injunction  for  a  publishing  house  inten- 
tionally to  make  false  statements  regarding  the  relative  merits  of  its 
own  and  a  rival  publisher's  works  for  the  purpose  of  inducing  the 
latter's  subscribers  to  break  their  contracts  and  purchase  the  books 
of  the  former;  and  to  agree  to  indemnify  the  subscribers  so  violating 
their  contracts  in  the  event  of  suit.^  In  an  earlier  case  it  was  held 
that  a  part}^  who  had  contracted  to  sell  hogs  to  another  at  a  future 
date  could  recover  damages  from  a  third  party,  who,  learning  of 
the  contract,  falsely  represented  to  the  intending  purchaser  that  the 
hogs  would  not  be  delivered  as  agreed  and  thus  induced  him  to  buy 
his  own  hogs  instead.*  Similarly,  where  the  plaintiff  had  con- 
tracted to  purchase  cheese  from  another,  and  the  defendant,  a 
competitor,  with  knowledge  of  the  contract,  induced  the  owner  to  sell 
the  cheese  to  him,  it  was  held  that  the  plaintiff  could  recover 
damages.^ 

A  similar  ruling  was  recently  made  by  the  Maryland  Court  of 
Appeals.  It  appears  that  an  ice-making  company  threatened  to  dis- 
continue selling  a  wholesale  company  whom  it  was  under  contract  to 
supply,  unless  the  latter  would  break  its  contract  to  deliver  large 
(juantities  of  ice  to  a  local  dairy  company,  the  manufacturer  being  de- 
sirous of  securing  the  patronage  of  the  dairy  company.  Fearing  that 
it  would  be  unable  to  purchase  ice  elsewhere,  the  wholesaler  yielded, 
but  later  sued  the  manufacturer  for  compelling  it  to  give  up  its  con- 
tract with  the  dairy  company,  and  it  was  held  that  damages  could  be 
recovered."  In  Schonwald  et  al.  v.  Eagains'^  the  Oklahoma  Supreme 
Court  held  it  unlawful  for  the  members  of  an  association  of  ice 

1  Sperry  &  Hutchinson  Co.  v.  Pommer,  109  Fed.,  .309  (D.  C,  1912). 

=  Lewis  r.  Bloede,  202  Fed.,  7  (C.  0.  A.,  1912). 

3  American  Law  Book  Co.  v.  Edward  Thompson  Co.,  84  N.  Y.  Supp.,  225   (1903). 

*  Benton  v.  Pratt,  2  Wend.,  385  (N.  Y.,  1829). 

sRice  V.  Manley,  66  N.  Y.,  82  (1876). 

"Siimwalt  Ice  Co.  r.  Knickerbocker  Ice  Co..  80  Atl.,  48  (Md.  Ct.  of  App.,  1911).  Per 
Burke,  J. :  "  The  plaintiff  had  the  right  to  carry  on  its  business  under  the  contract  with 
the  Gardiner  Dairy  Company  and  it  was  the  legal  duty  of  the  defendant  to  refrain  from 
the  use  of  intimidation,  force,  coercion,  threats,  or  any  other  illegal  means  with  a  view 
of  preventing  it  from  doing  so,  and,  if  with  the  purpose  and  by  the  means  stated  in  the 
declaration  defendant  prevented  the  plaintiff  from  fulfilling  its  contract  with  the  Dairy 
Company  and  thereby  the  plaintiff  was  damaged  as  alleged,  the  defendant's  liability  for 
such  damage  or  loss  can  not  be  seriously  doubted.  The  gist  of  the  action  is  the  wrongful 
and  unlawful  interference  with  the  business  relations  of  the  plaintiff  by  the  means  and 
for  the  object  alleged." 

'122  Pac,  20."?,  210  (Okla.  Sup.  Ct.,  1912).  See  also  Standard  Oil  Co.  r.  State,  post 
p.  160 ;  Standard  Oil  Co.  v.  Doyle,  622,  p.  459. 

30035°— 1(3 22 


338  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

dealers  to  procure  the  patrons  of  a  competing  outside  dealer  to  break 
their  contracts  for  ice,  by  refusing  to  sell  them  unless  they  disregarded 
these  contracts,  and  by  threatening  that  when  the  competing  dealer's 
supply  of  ice  was  exhausted  the  members  of  the  association  would 
not  sell  to  anyone  who  had  purchased  from  him.^  And  where  an 
association  of  laundrymen,  for  the  purpose  of  compelling  a  compet- 
ing laundry  agent  to  maintain  their  scale  of  prices,  procured  other 
laundries,  by  offers  of  money  or  by  threats  to  ruin  their  business,  to 
refuse  to  perform  their  contracts  to  do  work  for  the  said  laundry 
agent,  it  was  held  that  the  latter  was  entitled  to  damages  and  that  the 
right  of  competition  in  trade  was  not  a  justification  for  such  acts.- 

In  a  number  of  other  cases,  both  Federal  and  State,  it  has  been  held 
unlawful  to  induce  a  breach  of  contractual  obligations  by  fraudulent 
or  other  unlawful  means.  In  a  majorit}^  of  these  cases,  however,  the 
parties  to  the  controversy  were  not  competitors  and  the  question 
whether  competition  was  a  justification  for  the  acts  was  not  therefore 
passed  upon.^ 

Inducing  breach  of  contract  by  lawful  means. — As  stated  above, 
it  is  generally  regarded  as  unlawful  to  induce  or  procure  one  of  the 
parties  to  a  contract  to  refuse  to  perform  it  if  any  unlawful  means 
be  employed  to  effect  this  end.     A  more  difficult  question,  and  one 

1  In  this  case  the  court,  per  RobertROn,  Commissioner,  said  in  part :  "  *  *  *  In  the 
instant  case  had  the  conduct  of  Schonwald  and  the  ice  company  been  directed  and  gov- 
erned solely  by  the  desire  to  legitimately  eliminate  Ragains'  retail  ice  business  by  fair 
competition  no  action  could  have  been  maintained  against  them,  but  it  is  plainly  evident 
that  they  were  not  so  limited,  directed,  or  actuated.  The  threats,  coercions,  and  intimi- 
dating statements  made  by  them  to  the  customers  of  Ragains  liad  for  their  sole  and 
primary  object,  not  the  building  up  of  their  own  legitimate  business,  but  the  destruction 
of  Ragains'  business,  and  that,  too,  by  the  most  unreasonable,  unfair,  coercive,  and  un- 
justiflable  methods.  The  only  legitimate  result  of  their  conduct,  as  is  plainly  shown  by 
the  testimony,  from  the  commencement  of  the  troubles  between  them  was  to  injure  un- 
fairly, and  without  sufficient  excuse  or  justification,  the  business  of  Ragains.  They  did 
not  sell  their  ice  cheaper.  They  did  not  claim  to  have  a  better  grade  or  quality  of  ice. 
They  did  not  offer  better  delivery  facilities.  They  did  not  offer  any  inducement  by  way 
of  credits  or  time  in  payment  of  accounts.  They  did  not  show  by  any  legitimate  or  rea- 
sonable or  justifiable  method  that  the  customers  by  patronizing  them  would  obtain  better 
results  or  better  service  than  Ragains  could  furnish,  and  their  sole  and  only  excuse  was 
that  they  enjoyed  a  monopoly  of  the  ice  business  in  Blackwell  and  vicinity,  and  thereljy 
controlled  the  ice  market,  and  that  unless  the  customers  who  had  contracts  with  Ragains 
would  forthwith  break  and  violate  those  contracts  they  could  not  have  or  purchase  any 
ice  from  said  defendants  in  case  Ragains'  ice  supply  for  any  reason  should  become  ex- 
hausted ;  and  they  further  informed  said  customers  that  Ragains  could  not,  in  the  event 
of  his  supply  becoming  exhausted,  purchase  ice  from  any  other  person  wlio  supplied  said 
city  with  ice  on  account  of  combinations  and  understandings  had  by  said  defendants  with 
other  ice  companies,  the  benefits  of  which  said  combinations  were  denied  Ragains,  and 
that,  therefore,  the  said  customers  would  be  unable  to  procure  any  ice  at  all.  There  was 
no  possible  excuse  or  justification  for  such  conduct.  The  actions  of  defendants  without 
doubt  were  malicious  and  unwarranted." 

2  Doremus  r.  Hennessy,  176  111.,  608  (1898). 

''Bitterman  v.  Louisville  &  Nashville  R.  R.  Co.,  207  U.  S.,  205  (1907);  Delaware, 
Lackawanna  &  Western  Ry.  Co.  v.  Frank  et  al.,  110  Fed.,  689  (C.  C,  1901)  :  Kinner 
et  al.  V.  Lake  Shore  &  Mich.  So.  Ry.,  1.3-23  Ohio  C.  C.  Dec,  294  (1902)  ;  American  Malt- 
ing Co.  V.  Keitel,  209  Fed.,  351  (C.  C.  A.,  1913)  ;  Krigbaum  v.  Sbarbaro  et  al.,  138  Pac, 
304  (Cal.  Dist.  Ct.  of  App.,  1913)  ;  Perkins  v.  Pendleton  et  al.,  90  Me.,  166  (1897)  ; 
Morgan  v.  Andrews,  64  N.  W.,  869  (Mich.  Sup.  Ct.,  1895)  ;  London  Guarantee  Co.  v. 
Horn,  206  111.,  493  (1904). 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  339 

on  which  the  American  courts  are  divided,  is  whether  it  is  unhiwful 
for  a  manufacturer  or  dealer  to  procure  his  competitors'  customers 
to  violate  contracts  ah-eady  entered  into  where  this  is  accomplished 
not  by  the  use  of  unlawful  means,  such  as  misrepresentation,  fraud, 
or  coercion,  but  merely  by  persuasion,  by  the  offer  of  lower  prices,  or 
by  similar  inducements.  Some  of  the  courts,  both  Federal  and  State, 
hold  that  it  is  unlawful  actively  and  knowingly  to  procure  a  breach 
of  contract,  although  only  lawful  means  be  employed.  These  courts 
announce  the  doctrine  that  the  parties  to  a  valid  contract  have  a  legal 
right  to  have  it  performed,  and  that  whoever  deliberately  interferes 
and  by  persuasion,  solicitation,  or  the  offer  of  lower  prices,  or  by  any 
other  means,  procures  one  of  the  parties  to  abandon  the  contract,  is 
liable  in  damages  to  the  injured  party.  On  the  other  hand,  some  of 
the  courts  hold  that  inducing  a  breach  of  contract  by  mere  persuasion, 
or  by  the  offer  of  better  prices,  is  not  actionable.  Some  of  these  de- 
cisions rest  upon  the  ground  that  solicitation  or  offering  inducements 
of  a  lawful  nature  must  be  protected  in  the  interest  of  freedom  of 
competition  and  that  the  injured  party  to  the  contract  should  be 
left  to  his  remedy  against  the  other  contracting  party. 

Procuring  hreach  hy  lawful  rneans  actionable. — In  a  compara- 
tively recent  case  in  the  Federal  circuit  court  it  was  held  that 
schoolbook  publishers  were  liable  in  damages  to  a  rival  publisher  for 
inducing  county  schoolbook  boards  to  adopt  their  books  in  lieu  of 
those  of  their  competitor  Avhere  the  latter  had  contracts  to  supply  the 
books  for  a  term  of  five  years.^  And  where  a  trading-stamp  company 
induced  merchants  who  had  contracted  to  use  only  the  stamps  of  a 
competing  company,  to  violate  their  contracts  and  to  adopt  its  stamps 
instead,  the  Federal  district  court  issued  a  preliminary  injunction 
restraining  the  company  from  interfering  with  its  competitor's  sub- 
scribers and  from  soliciting  and  inducing  them  to  break  their  con- 
tra(;ts.-  Recent  opinions  of  the  highest  courts  of  several  States  are  in 
accord  with  these  Federal  decisions.  For  example,  the  Maryland 
court  of  appeals  held  in  a  recent  case  that  a  dealer  who  had  a  con- 
tract to  supply  a  distilling  company  with  2,000  gross  of  bottles  could 
recover  damages  from  a  competitor  who,  with  knowledge  of  the  con- 
tract, induced  the  distilling  company  to  cancel  the  contract  by  the 


1  Heath  et  al.  r.  American  Book  Co.,  07  Fed.,  533,  536  (C.  C,  1899).  Per  Jackson,  J.  : 
"  In  this  case  we  think  it  cannot  bo  denied  that  tlie  damage  complained  of  was  tlie  result 
of  the  defendant's  act  in  submitting  its  book  to  the  schoolbook  boards,  and  urging  them 
to  adopt  it  in  lieu  of  the  plaintiffs'  books,  which  resulted  in  supplanting  the  plaintiffs' 
books  by  the  schoolbook  boards  and  their  use  dispensed  with  in  the  schools,  and  that, 
when  the  contract  was  entorod  into  between  the  schoolbook  boards  and  the  defendant, 
such  was  contemplated  bj-  both  parties  to  it." 

=  Sperry  &  Hutchinson  Co.  r.  Associated  Merchants'  Stamp  Co.,  208  Fed.,  205  (D.  C, 
1913). 


340  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

offer  of  lower  prices/  Similai'ly  wlieie  a  hotel  corporation  appointed 
an  exclusive  booking  agent  for  certain  territory  and  subsequently 
was  induced  to  give  the  same  privilege  to  another,  it  was  held  that  the 
latter  could  be  enjoined  from  acting  as  the  agent  of  the  corporation 
within  the  specified  territory  and  from  seeking  to  prevent  the  agent 
first  appointed  from  acting  as  the  exclusive  agent  for  that  territory,- 
The  same  court  in  a  subsequent  case  held  it  unlawful  for  a  manufac- 
turer to  induce  an  association  of  jobbers,  organized  for  the  collective 
buying  of  window  glass,  to  refuse  to  perform  its  contract  with  a 
member  to  supply  it  with  a  specified  amount  of  glass  per  year.^ 

The  same  principle  was  applied  in  Knickerbocker  Ice  Co,  o.  The 
Gardiner  Dairy  Co.*  There  the  dairy  company  had  a  contract  with 
a  retail  ice  company  by  which  the  latter  was  to  supply  it  with  ice 
not  to  exceed  a  specified  quantity  at  a  given  price.  The  Knicker- 
bocker Co.,  manufacturers  of  ice,  desired  the  business  of  the  dairy 
company  for  itself  and  threatened  not  to  sell  the  retail  company 
any  more  ice  unless  it  abandoned  its  contract  to  supply  the  dairy 
company.  Being  compelled  by  existing  market  conditions  to  pur- 
chase ice  from  the  Knickerbocker  Co.,  the  retail  company  yielded  to 
the  former's  demands  and  declined  to  perform  its  contract  with  the 
dairy  company.  The  latter  sued  the  Knickerbocker  Co.  for  inducing 
a  breach  of  the  contract,  and  the  Maryland  Court  of  Appeals  held 
that  it  could  recover. 

1  Cumberliind.  Glass  Mfg.  Co.  v.  De  Witt,  87  Atl.,  927  (Md.  Ct.  of  App.,  1913).  In  this 
case  the  defendant  particularly  urged  that  trade  competition  was  a  sufficient  justification 
for  procuring  a  manufacturer  to  cancel  a  contract  with  his  competitor  and  to  transfer 
the  order  to  the  defendant,  but  the  court  held  the  contrary,  saying  in  part,  by  Burke,  J.  : 
"  Now,  what  is  the  justification  upon  which  the  defendant  relies  to  exonerate  itself  from 
responsibility?  It  is  the  right  of  competition  in  trade.  It  asserts  this  proposition:  That 
the  right  of  competition  justifies  a  defendant  in  knowingly  and  deliberately,  for  its  own 
benefit  or  advantage,  inducing  the  breach  of  a  contract  by  offering  lower  prices.  No 
case  has  been  cited  to  support  this  contention.  Counsel  for  appellant  have  cited  a 
number  of  cases  bearing  upon  the  right  of  competition  in  trade  or  business.  But  this  is 
altogether  different  from  the  right  which  one  has  to  be  protected  from  interference  with 
his  rights  under  existing  contracts  *  *  *.  We,  therefore,  hold  that  the  right  to  com- 
pete furnishes  no  justification  to  the  defendant  in  this  case." 

^Beekman  v.  Marsters,  80  N.  E.,  817  (Mass.  Sup.  Ct.,  1907).  Per  Loring,  J.:  "The 
result  of  the  findings  of  the  master  must  be  taken  to  be  that  the  defendant  induced  the 
hotel  corporation  to  break  its  contract  with  the  plaintiff,  but  that  he  did  not  do  this  to 
spite  the  plaintiff  or  for  the  purpose  of  injuring  him,  but  for  the  purpose  of  getting  for 
himself  (the  defendant)  business  which  the  plaintiff  alone  was  entitled  to  under  the 
contract  with  the  hotel  coii^oration,  that  is  to  say,  to  get  business  which  the  defendant 
could  not  get  if  the  hotel  corporation  kept  its  agreement  with  the  plaintiff  *  *  *.  No 
case  has  been  cited  which  holds  that  the  right  to  compete  justifies  a  defendant  in  inten- 
tionally inducing  a  third  person  to  take  away  from  the  plaintiff  his  contractual  rights." 

3  Wheeler-Stenzel  Co.  v.  American  Window  Glass  Co.,  202  Mass.,  471  (1909).  Per  Mor- 
ton, J. :  "  It  is  manifest  that  to  knowingly  and  maliciously  induce  another  to  break  a 
contract  with  the  plaintiff  is  not  justified  by  fair  trade  competition."  See  also  Dr.  Miles 
Medical  Co.  v.  Piatt,  142  Fed.,  006  (C.  C,  1906)  ;  Wells  &  Richardson  Co.  v.  Abraham 
et  al„  146  Fed.,  190  (C.  C,  1906)  ;  Tubular  Rivet  &  Stud  Co.  v.  Exeter  Boot  &  Shoe  Co., 
159  Fed.,  824  (C.  C.  A.,  1908)  ;  Filler  v.  Joseph  Schlitz  Brewing  Co.,  223  Fed.,  313 
(C.  C.  A.,  191.5)  ;  Illinois  Steel  Co.  v.  Brenshall,  141  111.  App.,  36   (1908). 

*69  Atl.,  405   (Md.  Ct.  of  App.,  1908). 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  341 

There  are  other  decisions  of  State  courts  holding  it  to  be  unlawful 
to  procure  a  breach  of  a  valid  contract  regardless  of  whether  the 
means  employed  be  in  themselves  unlawful,  but  in  most  instances 
the  parties  to  the  controvei-sy  were  not  competitors  and  trade  com- 
petition was  not,  therefore,  urged  as  a  justification  for  the  defend- 
ant's action  in  procuring  a  violation  of  contractual  obligations ;  ^ 
though  in  cases  involving  the  discharge  of  nonunion  men  at  the  in- 
stance of  labor  unions  it  has  been  unsuccessfully  urged  in  justifica- 
tion of  such  action.- 

Procuring  'breofJi  hy  lawful  means  not  actionaMe. — In  contrast 
with  the  decisions  above  set  out  are  opinions  in  both  Federal  and 
State  courts  holding  that  it  is  not  actionable  to  procure  a  breach 
of  a  competitor's  contracts  with  his  customers  if  it  be  accomplished 
by  mere  solicitation,  persuasion,  or  similar  means.  Thus  in  a  well- 
considered  Federal  case,  where  a  light  and  power  company  sought 
to  induce  the  patrons  of  a  rival  company  to  cancel  their  contracts  and 
offered  to  indemnify  them  in  the  event  of  suits  being  instituted  by 
the  competing  company  for  breach  of  such  contracts,  it  was  held  by 
the  circuit  court  that  if  the  object  could  be  accomplished  by  solicita- 
tion or  persuasion  it  was  not  unlawful,  but  that  the  company  could 
not  go  so  far  as  to  offer  to  indemnify  its  competitor's  customers 
against  damages  resulting  from  repudiating  their  contracts.^  Simi- 
larly where  the  proprietor  of  a  theater  had  engaged  a  dramatic  star 

1  Raymond  v.  Tarrincrton  et  al.,  1^  R.  W.,  SOO  (Tex.  Sup.  Ct.,  1903)  ;  Bowen  v.  Speer, 
166  S.  W.,  1183  (Tex.  Ct.  of  Civ.  Apps.,  1914)  ;  Faunce  v.  Searles,  142  N.  W.,  816  (Minn. 
Sup.  Ct,  1913)  ;  Iron  Holders'  Union  v.  Allis-Chalmers  Co.,  160  Fed.,  45  (C.  C.  A.,  1908). 

2  Berry  r.  Donovan.  188  Mass.,  353   (1905). 

*  Citizens'  Liglit,  Heat  &  Power  Co.  v.  Montgomery  Light  &  Water  Power  Co.,  171  Fed., 
553,  560  (C.  C,  1909).  Per  Jones,  J.:  "The  trader  who  has  made  a  contract  with  an- 
other person  has  a  right,  which  the  law  will  protect,  to  have  that  other  keep  it.  Other 
traders  have  a  correlative  right  to  solicit  the  custom  to  which  the  contract  relates. 
Whatever  damage  results  to  the  first  trader  by  the  mere  solicitation  is  privileged,  so  far 
as  the  solicitor  is  concerned,  in  the  interest  of  proper  freedom  of  competition.  Were  the 
law  otherwise,  the  first  person  occupying  the  field  of  public  service  in  many  localities,  by 
procuring  long  contracts  to  take  water,  light,  and  the  like  from  him,  might  intrench 
himself  in  a  monopoly  there  for  years,  because  another  thereafter  could  not  solicit  cus- 
tomers, thus  bound,  to  change  their  patronage  to  him,  and  thereby  enable  a  rival  enter- 
prise to  enter  the  field.  The  faithful  observance  of  contracts,  however,  is  as  essential  to 
the  public  welfare  as  the  right  of  competition.  Property  rights,  public  and  private 
morality,  and  liberty  itself  are  insecure  when  the  law  encourages  the  nonobservance  of 
contract  obligations.  Hence,  while  the  law  allows  the  trader  by  mere  solicitation  to  per- 
suade customers  to  change  their  business  relations,  it  does  not  permit  such  a  solicitor, 
even  in  the  interest  of  competition,  to  go  further,  intervening  actively  between  the  con- 
tracting parties,  as  a  dominant  agency  in  producing  a  breach  by  promise  of  indemnity  to 
one  of  them  to  induce  the  breach.  When  the  solicitor  knowingly  and  intentionally  goes 
beyond  mere  solicitation  to  induce  another  man's  customer  to  do  business  with  him,  and 
promises  to  hold  that  other  man's  customer  harmless  for  breach  of  contract  with  him, 
he  transcends  the  rights  of  the  law  of  competition,  has  no  '  suflicient  justification.'  and 
thereby  becomes  liable  to  him  whose  customer  is  taken  over.  Such  conduct  is  an  un- 
lawful interference  with  another  man's  rights,  for  which  he  may  maintain  an  action  and 
recover  nominal  damages,  allhough  the  contract  be  not  actually  breached  in  consequence 
of  the  solicitation." 


342  REPORT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

to  perform  at  his  house  the  Supreme  Court  of  Kentucky  held  that 
he  could  not  recover  damages  from  the  owner  of  a  rival  house  who 
induced  her  to  cancel  the  contract  and  to  perform  at  his  theater 
instead,  there  being  no  evidence  that  any  fraud,  misrepresentation  or 
other  unlawful  means  had  been  employed  to  procure  the  breach  of 
contract;^  and  the  same  court  has  held  that  a  party  who  had  con- 
tracted with  a  farmer  for  the  purchase  of  the  latter's  crop  of  tobacco 
could  not  recover  damages  from  another  who  persuaded  the  farmer 
to  repudiate  the  contract  and  to  sell  the  tobacco  to  him,  it  not  ap- 
pearing that  any  fraud  or  force  had  been  employed.^ 

In  addition  to  the  cases  already  referred  to,  there  are  a  number  of 
others  which  affirm  the  doctrine  that  inducing  a  breach  of  contract 
is  not  actionable  unless  unlawful  means  be  used  to  procure  it.^  And 
in  a  recent  case  the  Federal  circuit  court  held  that  where  a  person 
purchased  property  with  knowledge  that  the  owners  had  contracted 
to  sell  it  to  another  he  would  not  be  liable  in  damages  to  the  latter, 
unless  he  had  taken  some  active  step  to  bring  about  the  breach  of  con- 
tract of  sale  or  had  at  least  induced  or  persuaded  the  owner  to  aban- 
don the  earlier  agreement  to  sell  the  property.* 

ENGLISH  DECISIONS. 

It  is  apparently  an  established  principle  of  English  law  that  it 
is  unlawful  knowingly  to  induce  the  violation  of  a  contract  if  it  be 
valid  and  for  a  determinate  period,  the  law  on  this  subject  having 
been  reviewed  and  stated  at  length  in  several  recent  decisions  of  the 
House  of  Lords.  Expressions  are  to  be  found  in  some  of  the  deci- 
sions to  the  effect  that  procuring  the  breach  of  or  abandonment  of  a 
contract  might  be  justified  on  the  ground  that  the  person  procuring 
it  was  under  a  duty  to  advise  or  persuade  one  of  the  contracting 
parties  not  to  perform  the  contract,  as  if  a  parent  or  guardian  should 
persuade  a  child  or  ward  to  abandon  a  contract  to  marry.  But 
there  appears  to  be  little  doubt  that  business  competition  or  competi- 

iBourUer  Bros.  v.  Macauley,  91  Ky.,  135    (1891). 

2  Chambers  et  al.  v.  Baldwin,  91  Ky.,  121  (1891).  Per  Lewis,  J.:  "But  as  Wise  was 
not  induced  by  either  force  or  fraud  to  breal?  the  contract  in  question,  it  must  be  regarded 
as  having  been  done  of  his  own  will  and  for  his  own  boneflt ;  and  his  voluntary  and 
distinct  act,  not  that  of  appellee,  being  the  proximate  cause  of  damage  to  appellants,  they, 
according  to  a  familiar  and  reasonable  principle  of  Taw,  cannot  seek  redress  elsewhere 

than  from  him."     See  also  Roseneau  v.  Empire  Circuit  Co.,  131  N.  Y.  App.  Div.,  429 

(1909),  post,  p.  416. 

3  Boyson  v.  Thorn,  33  Pac,  492  (Cal.  Sup.  Ct.,  1893)  ;  Swain  v.  Johnson  et  al.,  65  S.  E., 
619  (N.  C.  Sup.  Ct.,  1909)  ;  .Tackson  v.  Morgan  et  al.,  94  N.  E.,  102  (Ind.  Appellate  Ct., 
1911)  ;  Ashley  v.  Dixon,  48  N.  Y.,  430  (1872)  ;  Glencoe  Sand  &  Gravel  Co.  v.  Hudson 
Bros.,  etc.,  40  S.  W.,  93  (Mo.  Sup.  Ct.,  1897)  ;  Tenn.  Coal  Co.  v.  Kelly,  163  Ala.,  348 
(1909)  ;    Sleeper  v.  Bakei-  et  al.,   22  N.   Dak.,   386    (1911). 

*  Sweeney  v.  Smith  et  al.,  167  Fed.,  385  (C.  C,  1909). 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  343 

tion  between  union  and  nonimion  labor  is  not  a  justification  for 
procuring  a  breach  of  contract.^ 

In  the  first  important  English  case  on  this  subject  other  than  cases 
involving  the  legality  of  enticing  another's  servant  to  leave  his  em- 
ploy, it  was  held  by  the  Court  of  Queen's  Bench  that  the  proprietor 
of  a  theater  who  had  engaged  an  operatic  star  to  sing  at  his  house 
during  a  specified  period  and  not  to  sing  elsewhere  during  that  time, 
could  recover  damages  from  the  owner  of  a  rival  theater  who  had 
induced  the  singer  to  violate  the  contract  and  to  sing  at  his  theater 
within  the  period  named  in  her  original  contract.^  The  same  prin- 
ciple was  applied  by  the  court  of  appeal  in  1881,  when  it  held  that 
one  who  had  contracted  with  an  artisan  to  manufacture  bricks  and 
tile  exclusively  for  him  by  a  secret  process  known  only  to  the  artisan, 
could  recover  damages  from  a  third  party  who  induced  the  work- 
man to  make  bricks  and  tile  for  him  in  violation  of  his  agreement.^ 
Similarly,  where  the  members  of  a  labor  union,  in  order  to  compel 
certain  builders  to  comply  with  their  demands,  attempted  to  induce 
merchants  not  to  sell  them  lumber  or  other  supplies,  and  by  refusing 
to  Avork  on  supplies  purchased  from  merchants  who  sold  to  the 
objectionable  builders,  compelled  builders  to  break  existing  contracts 
for  supplies  with  such  merchants,  it  was  held  that  the  latter  could 
recover  damages  from  the  members  of  the  union  who  had  thus  de- 
prived them  of  the  benefits  of  their  contracts.*  So,  also,  where  the 
members  of  a  labor  union,  in  an  effort  to  compel  an  employer  to  dis- 
charge nonunion  men,  forced  others  under  contract  to  purchase  from 
him  to  repudiate  the  contracts  by  threats  of  ordering  a  strike  in 
their  places  of  business,  and  induced  his  employees  to  leave  him  in 
violation  of  their  contracts  of  employment,  it  was  held  by  the  House 
of  Lords  that  the  emploj'^er  could  recover  damages  from  the  members 
of  the  union.''*  In  this  case  it  appeared  that  the  employer  had  offered 
to  pay  all  fines,  debts,  and  demands  of  the  union  against  his  men, 
and  asked  to  have  them  admitted  to  the  union,  but  the  union  refusing 
to  comply  with  the  request,  and  persisting  in  its  efforts  to  embarrass 
him,  and  to  force  his  men  out  of  emploA'ment,  he  brought  the  action, 
with  the  results  above  set  forth.  In  a  subsequent  case  it  was  held  by 
the  same  tribunal  that  mine  owners  whose  employees  had  been  ordered 
by  the  miners'  federation  to  stop  work  on  certain  days,  in  violation 
of  their  contracts,  could  recover  damages  from  those  thus  procuring 

1  As  the  number  of  cases  involving  the  legality  of  inducing  a  breach  of  contract  other 
than  a  contract  of  employment  is  very  limited,  and  as  the  English  law  on  this  subject 
is  principally  found  in  decisions  of  the  House  of  Lords  in  labor  cases,  it  has  been  neces- 
sary to  use  cases  of  this  character  in  order  to  show  the  state  of  the  English  law. 

2Lumley  v.  Gye,  2  El.  &  Bl.,  216  (Q.  B.,  1853). 

3  Bowen  v.  Hall,  L.  R.  (1881),  G  Q.  B.  Div.,  333  (Ct.  of  Appeal). 

♦Temperton  r.  Russell  et  al.,  L.  R.  (1893),  1  Q.  B.,  715  (Ct.  of  Appeal). 

sQuiuu  r.  Loathem,  L.  R.   (1901),  A.  C,  495. 


344  EEPORT   OF   THE   COMMISSIONER  OF   COEPORATIONS. 

a  l)reach  of  the  contracts  existing  between  them  and  their  employees, 
notwithstanding  the  fact  that  the  action  of  the  federation  was  not 
taken  with  any  malice  or  ill  will  toward  the  mine  owners,  but  with 
the  object  of  keeping  up  the  price  of  coal,  by  which  the  wages  of  the 
miners  were  regulated.^  The  doctrine  of  these  cases  appears  to  be 
followed  in  a  subsequent  decision  of  the  court  of  appeal,  which  held 
that  a  mason's  apprentice  could  recover  damages  from  a  society  of 
laborers  which  had  procured  his  employer,  by  threats  of  calling  a 
strike,  to  refuse  to  continue  him  in  his  employ  as  an  apprentice 
according  to  the  terms  of  his  apprenticeship  contract.^  In  another 
case  an  injunction  was  granted  restraining  the  defendants  from  in- 
ducing subscribers  to  quotations  from  the  London  Stock  Exchange  to 
violate  their  contracts  not  to  sell  or  disclose  the  information  to 
others.^  And  in  a  more  recent  case  the  same  court  decided  that  a 
company  engaged  in  the  sale  of  phonographs  and  records,  which 
bound  wholesale  and  retail  dealers  not  to  sell  to  anyone  who  was  on 
its  suspended  list,  could  recover  damages  from  a  competing  com- 
pany which  was  on  this  list  and  which  had  procured  machines  from 
a  dealer  by  having  two  of  its  employees  falsely  represent  themselves 
as  dealers  and  sign  fictitious  names  to  contracts  presented  to  them. 
It  was  held,  however,  that  where  no  misrepresentation  was  used,  the 
competing  company  having  secured  machines  from  a  dealer  who 
merely  assumed  that  it  was  not  on  the  suspended  list,  damages  could 
not  be  recovered.^ 

Inducing  breach  actionable  though  procured  by  lawful 
MEANS, — The  earl}'^  English  cases  appear  to  hold  that  inducing  a 
breach  of  contract  was  not  actionable  unless  some  unlawful  means 
were  employed  to  procure  the  breach  or  unless  it  was  done  for  the 
purpose  of  injuring  one  of  the  parties  or  of  benefiting  the  person 
procuring  the  violation  at  the  expense  of  the  injured  contracting 
party.^  When  these  opinions  were  reviewed  by  the  House  of  Lords 
in  a  later  case,  some  of  the  members  of  the  tribunal  declined  to 
follow  this  reasoning  and  expressed  the  opinion  that  the  basis  of  the 
action  was  the  procuring  of  an  unlawful  act,  namely,  the  violation  of 

^  South  Wales  Miners'  Federation  et  al.  i'.  Glamorgan  Coal  Co.  et  al.,  L.  R.  (1905), 
A.   C,   239. 

2  Read  v.  The  Friendly  Society  of  Operative  Stone  Masons  of  England  et  al.,  L.  R. 
(1902),  2  K.  B.,  732  (Ct.  of  Appeal). 

=5  Exchange  Telegraph  Co.  v.  Gregory,  L.  R.  (189.5),  1  Q.  B.,  147. 

*  National  Phonograph  Co.  v.  Edison-Bell  Consolidated  Phonograph  Co.,  L.  R.  (1908), 
1  Ch.,  3.35  (Ct.  of  Appeal).  See  also  Smithies  r.  National  Association  of  Plasterers,  L.  R. 
(1909),  1  K.  B.,  310;  Denaby  «&  Cadcby  Collieries  v.  Yorkshire  Aliners'  Association,  L.  R. 
(1906),  A.  C,  384,  389;  New  Kleinfonteln  Co.  v.  Superintendent  of  Laborers,  (1906) 
Transvaal  Law  Reps.,  S.  C,  241;  Long  v.  Larkin  et  al.  (1914),  2  Irish  Reports,  285, 
329    (Ct.    of   Appeal). 

ELumley  v.  Gye,  2  El.  &  Bl.,  216  (Q.  B.,  1853)  ;  Bowen  v.  Hall,  L.  R.  (1881),  6  Q.  B. 
Div.,  333  (Ct  of  Appeal)  ;  Temperton  v.  Russell,  L.  R.  (1893),  1  Q.  B.,  715  (Ct.  of 
Appeal). 


TEUST    LAWS    AND    UNFAIR   COMPETITION.  345 

the  contract,  and  that  the  ill  will  of  the  party  inducing  the  breach, 
or  the  fact  that  it  was  done  for  the  purpose  of  benefiting  him  at  the 
expense  of  the  injured  party,  was  not  material.^  This  doctrine  was 
expressly  affirmed  in  a  subsequent  decision  by  the  House  of  Lords,^ 
and  in  a  still  later  case,  where  no  fraud,  misrepresentation,  or  other 
unlawful  means  were  employed  and  where  there  was  no  ill  will  be- 
tween the  parties,  it  was  nevertheless  held  by  that  court  that  the 
defendants,  who  had  procured  a  breach  of  contract,  must  answer  in 
damages  to  the  injured  party. ^  Subsequently  the  court  of  appeal 
declined  to  hold  a  company  liable  for  inducing  a  breach  of  contract 
where  no  unlaw^ful  means  were  employed  and  where  the  dealer 
violating  the  contract  did  so  innocently  and  under  mistake  of  fact ; 
but  awarded  damages  where  fraud  was  employed  in  the  inducement 
though  the  breach,  so  far  as  the  party  to  the  contract  was  concerned, 
was  innocently  made.^  The  effect  of  these  decisions  appears  to  be 
that  in  England  no  fraud,  misrepresentation,  coercion,  or  other 
,  unlawful  means  need  be  present  to  render  the  procurement  of  a 
breach  of  contract  unlawful  if  the  breach  is  such  as  would  give  rise 
to  an  action  on  the  contract  against  the  party  violating  it. 

Nature  of  contract. — In  the  earlier  English  cases  the  courts 
appear  to  have  been  of  the  opinion  that  liability  for  procuring  a 
breach  of  contract  extended  only  to  cases  of  enticing  away  or  har- 
boring another's  servant,  but  in  Lumley  v.  Gye^  the  court  held 
that  a  contract  for  the  service  of  an  opera  singer  was  sufficiently 
within  the  rule  of  master  and  serv^ant  to  sustain  the  action.  In  later 
cases  it  has  been  held  unlawful  to  procure  a  breach  of  a  contract 
to  make  bricks  and  tile  exclusively  for  another,"  to  purchase  build- 
ing materials,'^  and  to  purchase  meat.^  In  a  recent  case,  procur- 
ing a  breach  of  a  contract  governing  the  sale  of  phonographs  was 
also  held  unlawful."  And  in  a  case  in  the  House  of  Lords  in  1897  Lord 
Herschell  stated  that  "  the  law  laid  down  in  Bowen  v.  Hall  in  terms 
applies  to  all  contracts,  and  I  quite  agree  that  the  nature  of  the 
contract  can  make  no  difference."  ^°  The  distinction,  therefore,  in 
this  class  of  actions  between  contracts  of  hiring  or  for  personal 
services  and  ordinaiy  conunercial  contracts  seems  to  have  disap- 
peared from  the  English  laAv. 

1  Opinions  of  Lords  Watson  and  nprschell  in  Allen  v.  Flood,  L.  R.  (1898),  A.  C,  1, 
108,119. 

2Qiiinn  r.  Leathern,  L.  R.   (1901),  A.  C,  495. 

''South  Wales  Miners'  Federation  et  al.  v.  Glamorgan  Coal  Co.  ct  al..  L.  R.  (1905), 
A.  C,  239. 

<  National  Phonograph  Co.  v.  Edlson-Bfell  Phonograph  Co.,  L.  R.   (1908),  1  Ch.,  335. 

C2  El.  &  Bl.,  216  (Q.  B.,  1853). 

"Bowen  r.  Hall,  L.  R.  (1881)   6  Q.  B.,  333   (Ct.  of  Appeal). 

'Temperton  r.  Russell,  L.  R.   (1893)   1  Q.  B.,  715. 

*'Quinn  v.  Leathern,  L.  R.   (1901),  A.  C,  495. 

"National  Phonograph  Co.  v.  Edison-Bell  Phonograph  Co.,  L.  R.  (1908)  1  Ch.,  335. 

"Allen  I'.  Flood,  L.  R    (1898),  A.  C,  1,  12G. 


346  EEPOET   OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

Section  3.  Enticing  employees  from  the  service  of  competitors. 

So  far  as  appears  from  the  reported  cases,  enticing  a  competitor's 
employees  to  leave  his  service  in  violation  of  their  contracts  and  to 
enter  the  employment  of  rivals  has  been  little  resorted  to  as  a  com- 
j)etitive  method.^  A  few  cases  have  arisen,  however,  both  in  this 
country  and  in  England,  where  in  an  effort  to  cripple  a  rival,  his 
employees  have  been  induced  to  leave  him  for  service  with  a  com- 
petitor, or  the  agents  of  a  competitor  have  been  induced  to  secretly 
represent  its  rivals  in  violation  of  a  contract  for  exclusive  services. 
The  legal  ground  of  liability  in  such  cases  is  ordinarily  that  the 
employees  have  been  induced  or  procured  to  violate  their  contracts 
of  employment;  but  in  some  cases  it  is  apparently  made  to  depend 
in  part  on  a  conspiracy  to  jnjure  a  competitor's  business  or  on  a 
willful  and  malicious  interference  with  it. 

AMERICAN  DECISIONS. 

In  a  leading  case  in  Massachusetts  the  supreme  judicial  court  held 
that  to  obstruct  and  hinder  the  business  of  a  shoe  manufacturer  by 
persuading  and  inducing  a  large  numljer  of  persons  in  his  employ  to 
leave,  and  by  inducing  one  of  his  employees  to  violate  his  contract  of 
service,  was  unlawful  and  a  cause  of  action  for  damages  for  the  injury 
inflicted.^     And  where  the  salesman  and  local  manager  of  a  map 

1  The  record  in  United  States  v.  American  Tobacco  Co.  at  al.  discloses  considerable  evi- 
dence showing  that  the  defendant,  in  its  efforts  to  drive  an  independent  manufacturer  out 
of  business,  had  enticed  its  employees  to  leave  it  and  enter  the  service  of  the  defendant 
and  had  attempted  also  to  cause  strikes  in  its  factories.  United  States  v.  American  To- 
bacco Co.  (Circuit  Court,  Southern  District  of  New  York),  vol.  II,  i-ecord,  p.  631 ;  same 
case.  Government's  brief  in  the  Supreme  Court  (1910),  p.  254.  See  also  People's  Tobacco 
Co.  V.  American  Tobacco  Co.,  170  Fed.,  .SOO,  400   (C.  C.  A.,  1909). 

In  Hamilton  Manufacturing  Co.  v.  Tubbs  Manufacturing  Co.  et  al.,  216  Fed.,  401,  412 
(1908),  the  inciting  of  strikes  was  charged  among  other  things,  but  the  evidence  was 
conflicting  and  not  sufficiently  clear  to  justify  granting  the  relief  prayed  for. 

In  Rice  v.  Standard  Oil  Co.,  134  Fed.,  404,  470  (C.  C,  190.5),  it  was  alleged  among  other 
things  that  the  defendant  and  its  associates  "  bribed  and  bought  out  the  plaintiff's  sales 
agents,  and  caused  the  plaintiff's  agents  and  employes  to  betray  the  trust  confided  to 
them  by  the  plaintiff  in  his  said  business,  and  to  wrongfully  abandon  the  plaintiff's  service 
and  disregard  their  duty  to  the  plaintiff  in  the  course  of  his  business."  The  court  sus- 
tained a  motion  to  dismiss  the  declaration  on  the  ground  that  the  averments  were  too 
vague,  and  observed  that  "  none  of  the  plaintiff's  agents  thus  alleged  to  have  been  bribed 
or  to  have  betrayed  their  trust  is  named." 

-Walker  v.  Cronin,  107  Mass.,  5.51  (1871).  But  see  Boston  Glass  Manufactory  v. 
Binney,  4  Pick.,  428  (1827),  where  it  was  held  lawful  to  induce  a  servant  to  leave  his 
master  when  his  term  of  employment  should  expire,  although  he  might  not  previously 
have   had   any    intention   of   quitting. 

See  also  Tunstall  et  al.  v.  Stearns  Coal  Co.,  192  Fed.,  808.  810  (C.  C.  A.,  1911),  where 
it  was  alleged,  among  other  things,  that  the  defendants,  former  employees  of  the  plain- 
tiff and  representatives  of  a  labor  organization  known  as  the  United  Mine  Workers,  were, 
by  the  use  of  money,  "  hiring  to  discontinue  work  'the  company's  employes  who  were 
remaining  at  work,  and  hiring  to  remain  away  or  go  elsewhei'e  others  who  were  intending 
to  go  to  work  in  the  company's  mines."  It  was  not  alleged  that  any  time  contract  rela- 
tion existed  between  the  company  and  the  men  so  hired.  The  defendants  were  enjoined 
from  "  hiring  or  employing  any  of  the  employes  of  the  plaintiff  to  quit  the  service  of 
the  plaintiff,  and  enjoined  and  restrained  from  hli-ing  and  paying  any  persons  who  are 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  347 

company,  on  entering  the  service  of  a  competitor,  induced  another 
emploA^ee  also  to  leave  and  to  enter  the  service  of  the  new  employer  in 
violation  of  his  contract,  and  was  also  attempting  to  entice  others 
away,  it  was  held  that  his  former  employer  was  entitled  to  an  injunc- 
tion restraining  him  from  procuring  its  employees  to  leave  in  viola- 
tion of  their  contracts.^  Similarly  where  a  companj?^  emploj^ed  a 
traveling  salesman  under  contract  to  sell  for  it  exclusively,  it  was 
held  that  the  company  could  recover  damages  from  a  rival  which 
secretly  induced  the  salesman  to  sell  its  goods  as  well.-  In  a  recent 
New  York  case,  however,  it  w^as  held  that  damages  could  not  be  re- 
covered for  enticing  aw^ay  a  competitor's  employees  in  violation  of 
their  contracts  of  employment,  unless  fraudulent  or  otherwise  unlaw- 
ful means  were  employed.^  In  an  earlier  case  the  New  York  Supreme 
Court  apparently  held  it  actionable  for  a  corporation  engaged  in 
refining  oil,  maliciously  and  with  the  intention  of  injuring  a  rival's 
business,  to  entice  from  the  latter's  service  its  superintendent,  who 
had  planned,  located,  and  constructed  its  works,  at  the  time  when  the 
company's  refinery  had  been  so  far  completed  that  it  could  commence 
distilling  oil.* 

Where  an  association  of  job  printers  procured  a  typographical 
union,  by  threats  of  declaring  an  open  shop,  to  call  out  the  union 
men  in  a  competing  establishment,  with  the  object  of  compelling  the 
latter  to  observe  the  rule  of  the  association  respecting  the  mainte- 
nance of  prices  for  printing,  it  was  held  by  the  Supreme  Court  of 
Georgia  that  an  injunction  should  issue  restraining  the  association 
from  "  interfering  with  the  plaintiff"s  business  as  a  printer  engaged 
in  competitive  trade,  and  from  unlawfully  influencing  the  labor  or- 
ganization from  obstructing  its  business."  ^  "While  conspiracy  was 
alleged  in  this  case,  the  court  expressly  stated  that  liability  for 
maliciously  interfering  with  the  plaintiff's  conti-acts  with  its  em- 
ployees Avas  independent  of  the  conspiracy.  Similarly,  the  Supreme 
Coui-t  of  Mississippi  held  that  an  insurance  company  could  recover 
damages  from  other  companies  which,  it  was  alleged,  had  conspired 
to  injure  it  by  maliciously  and  unlawfully  persuading  and  intimidat- 
ing its  agent  to  leave  its  service  by  threats  to  drive  him  out  of  busi- 
ness  as   an   insurance   agent  if   he   remained    with   the   company.** 

seeking  employment  of  the  plaintifif  from  engaging  in  the  employment  of  the  plaintiff. 
In  other  words,  *  *  *  from  l)ril)ing  the  employes  of  the  plaiulifT  to  cease  worl£  for 
the  plaintiff,  or  from  bribing  persons  who  are  willing  and  desirous  and  about  to  enter 
its  employ  from  so  doing."'     An  order  for  this  preliminary  injunction  was  affirmed. 

1  Kinney  v.  Scarbrough  Map  Co.,  74  S.  R.,  772  (da.  Sup.  Ct.,  1912). 

2.1.  S.  Brown  Hardware  Co.  v.  Indiana  Stove  Works,  90  Tex.,  4.5:'>  (1903). 
•     »  1)0  Jong  V.  B.  G.  Behrraan  Co.  et  al.,  I'M  N.  Y.  Supp.,  10S3  (Sup.  Ct.,  App.  Div.,  1911). 

'Buffalo  Lubricating  Oil  Co.  v.  Everest,  3  IIow.  Prac.  Ucp.   (N.  S. ),  179   (N.  Y.  Sup. 
Ct.,  1886). 

>>  Employing  Printers'  Club  v.  Dr.  Blosser  Co.,  122  Oa..  !i09  (190.^i). 

"  Olobe  &  Rutgers  Fire  Insurance  Co.  v.  Firemen's  Fund  Insurance  Co.  et  al.,  97  Miss., 
148    (1910). 


348  REPORT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

And  in  a  recent  case  in  the  Federal  courts  relief  was  denied  a  com- 
plainant who  sought  to  restrain  a  ball  player  from  phn'ing  with  a 
rival  organization  in  violation  of  his  contract  with  the  complainant, 
where  the  latter  had  induced  the  player,  previous  to  signing  the  con- 
tract, to  break  his  then  existing  agreement  to  play  with  the  rival  or- 
ganization, the  ground  of  the  decision  being  that  the  conduct  of  both 
complainant  and  defendant  had  been  unconscionable,  and  the  former 
not  coming  into  court  with  clean  hands  would  not  be  afforded  relief.^ 

ENGLISH  DECISIONS. 

The  legality  of  enticing  away  a  rival's  employees  was  before  the 
English  courts  at  least  as  early  as  1774,  when  it  was  held  that  an 
employer  could  recover  damages  from  a  rival  who  induced  his  jour- 
ne,ymen  shoemakers  to  leave  his  service,  though  they  were  not  hired 
for  a  determinate  period."  Similarly,  where  a  piano  manufacturer 
invited  a  rival's  workmen  to  dinner  and  after  causing  them  to  become 
intoxicated  induced  them  to  sign  contracts  of  emploj^ment  with  him, 
it  was  held  that  the  original  employer  could  recover  damages,  and  a 
verdict  of  £1,600  was  held  not  excessive.^  In  another  case,  however, 
the  court  expressed  the  opinion  that  it  was  not  imlawful  to  induce  a 
servant  to  leave  his  master  where  there  was  no  contract  by  which  the 
master  could  require  his  services.* 

In  a  leading  case  in  the  English  court  of  appeal  it  has  been  held 
that  it  is  unlawful  to  induce  an  artisan  under  contract  to  work  ex- 
clusively for  another  to  break  his  contract,^  and  the  same  principle 
was  applied  in  a  comparatively  recent  case  where  it  was  held  that  it 
is  actionable  to  continue  to  employ  ballet  girls  after  notice  that  they 
were  under  contract  to  perform  for  a  competitor.'' 

Section  4.  Betrayal  of  trade  secrets. 

The  right  of  business  men  to  protection  from  the  betrayal  or  unau- 
thorized use  of  secret  processes,  machinery,  formulas,  or  other  secrets 
of  their  business  has  been  frequently  before  the  courts,  especiall}'- 
in  recent  years.     The  profits  resulting  from  the  use  of  such  secrets 

iWeeghan  v.  Killifer  et  al.,  215  Fed.,  168  (D.  C,  1914).  For  cases  involving  the 
legality  of  inducing  violations  of  contracts  of  employment  by  others  than  competitors 
see  Bixby  v.  Dunlap,  56  N.  H.,  456  (1876)  ;  Haskins  v.  Royster,  70  N.  C,  601  (1874)  ; 
Daniel  v.  Swearengen,  6  S.  C,  297  (1875)  ;  Huff  v.  Watkins,  15  S.  C,  82  (1880)  ;  Per- 
kins V.  Pendleton,  90  Me.,  166  (1897)  ;  Thacker  Coal  &  Coke  Co.  v.  Burke,  59  W.  Va., 
253  (1906)  ;  Jackson  v.  Morgan,  94  N.  W.,  1021   (Ind.  App.  Ct.,  1911). 

2  Plart  V.  Aldridge,  1  Cowpei's  Reps.,  54  (1774).  But  that  to  induce  a  l)reach  of  a  con- 
tract for  an  indeterminate  period  is  not  unlawful  unless  illegal  means  be  employed,  see 
Allen  V.  Flood,  L.  R.  (1898),  A.  C,  1. 

^Gunter  v.  Astor  et  al.,  4  Moore  C.   P.,  12    (1819). 

*Nichol  V.  Martyn,  1-2  Espinasse,  732   (1799). 

^Bowen  v.   Hall,   L.  R.    (1881),  6  Q.   B.   Div.,   333. 

8De  Francesco  v.  Barnum,  63  Law  Times,  514  (Q.  B.,  1891).  See  also  Fred.  Wilkins 
&  Bros.    (Ltd.)    V.  Weaver,  L.  R.    (1915),  2  Ch.,  322. 


TBUST   LAWS   AND   UNFAIR  COMPETITION.  349 

have  aroused  the  cupidity  of  trusted  employees,  inciting  them  to  set 
up  rival  enterprises  in  an  attempt  to  employ  the  knowledge  acquired 
through  their  former  employment.  Competitors  have  also  induced 
employees  of  rivals  who  were  familiar  with  their  trade  secrets 
to  take  service  or  to  embark  in  business  with  them,  and  in  this  way 
attempted  to  obtain  the  use  of  valuable  methods. 

A  New  York  court,  in  the  course  of  an  opinion  involving  the  legal- 
ity of  the  use  of  secret  processes  of  a  business  house  by  its  former  em- 
ployees, observed  that  "  This  is  not  legitimate  competition,  which  it 
is  always  the  policy  of  the  law  to  foster  and  encourage,  but  it  is 
contra  bonos  mores  and  constitutes  a  breach  of  trust  which  a  court 
of  law — and  much  more  a  court  of  equity — should  not  tolerate."^ 
A  similar  expression  is  found  in  another  decision  of  the  New  York 
courts,^  and  in  a  still  later  case  it  was  said,  in  a  like  connection,  that 
"  fair  competition  is  always  encouraged,  but  a  man  can  not,  through 
deceit  *  *  *  enter  the  household  of  his  benefactor  and  steal  his 
belongings."  ^ 

It  is  apparently  established  that  a  court  of  equity  will  restrain  the 
disclosure  or  use  of  a  trade  secret*  by  one  who  has  become  familiar 
with  it  through  confidential  employment,  or  will  enjoin  its  use  by  one 
who  has  acquired  it  with  knowledge  that  the  person  from  whom  it 
was  obtained  had,  because  of  the  manner  in  which  it  came  into  his 
possession,  no  right  to  divulge  it. 

AMERICAN   DECISIONS. 

In  accordance  with  this  principle  it  Avas  held  by  a  New  York  court 
that  a  manufacturer  of  photographic  supplies  was  entitled  to  an  in- 
junction restraining  former  employees  from  using  his  secret  processes 
and  appliances,  with  which  they  had  become  familiar  while  in  his 
employ.^     And  where  the  former  employees  of  a  manufacturer  of 

1  Eastman  Kodak  Co.  i'.  Reichenbach  et  al.,  79  Ilun,  183,  194  (N.  Y.  Sup.  Ct,  App. 
Div.,  1894). 

a  Little  v.  Gallus  et  al.,  4  N.  Y.  App.  Div.,  569  (1896). 

'Eastern  Extracting  Co.  v.  Greater  New  York  Extracting  Co.  et  al.,  126  N.  Y.  App. 
Div.,    928,   081    (1908). 

*A  trade  secret  has  been  defined  by  the  Ohio  Circuit  Court  as  follows:  ".\  trade  secret 
is  a  plan,  or  process,  tool,  mechanism,  or  compound,  known  only  to  its  owner  and  those 
of  his  employees  to  whom  it  is  necessary  to  confide  it  in  order  to  apply  it  to  the  uses 
for  which  it  is  intended.  It  is  not  protected  by  patent,  for  the  secret  then  is  made  public, 
and  the  inventor  is  protected  by  letters  patent  from  infringement  thereof ;  while,  as  soon 
as  anyone  fairly  and  honestly  discovers  a  trade  secret,  either  by  examination  of  the 
manufactured  products  sold  or  offered  for  sale  to  the  public,  or  in  any  other  honest  way, 
that  person  discovering  it  has  full  right  to  use  it."  National  Tube  Co.  v.  Eastern  Tube 
Co.  et  al.,  3  Ohio  C.  C.  Rep.  (N.  S.),  4.')9.  462  (1902).  The  Pennsylvania  Supreme  Court 
says  :  "  The  character  of  the  secrets,  if  they  be  peculiar  and  important  to  the  business, 
is  not  material.  They  may  be  secrets  of  trade  or  secrets  of  title,  or  seci'et  processes  of 
manufacture,  or  any  other  secrets  important  to  the  business  of  the  employer."  Macbeth- 
Evans  Glass  Co.  V.  Schnelbach  et  al.,  239  Pa.,  76  (1913). 

B  Eastman  Kodak  Co.  v.  Reichenbach  et  al.,  79  Hun,  183  (N.  Y.  Sup.  Ct..  App.  Div.. 
1894). 


350  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

typewriter  ribbons  engaged  in  a  like  business,  they  were  restrained 
from  using  or  disclosing  the  secret  processes  of  their  former  em- 
ployer/ Likewise,  where  a  man  entered  the  employ  of  a  corporation, 
and,  after  remaining  only  long  enough  to  become  familiar  with  his 
employer's  secret  process  of  extracting  alcohol  from  empty  whisky 
barrels,  left  and  organized  a  corporation  to  engage  in  the  same  busi- 
ness, it  was  held  that  neither  the  former  employee  nor  his  company 
could  use  the  process.^ 

The  same  principle  is  invoked  by  the  courts  to  protect  the  owners 
of  secret  but  unpatented  machinery  and,  under  some  circumstances, 
patterns  for  constructing  machinery  or  other  articles  sold  to  the  trade. 
Thus,  wdiere  a  corporation  employed  a  mechanic  to  perfect  a  machine 
for  manufacturing  paper  bags,  under  an  agreement  that  it  should 
belong  to  the  employer,  the  employee  was  subsequently  enjoined 
from  manufacturing  the  machines  for  other  parties.^  Similarly,  it 
has  been  held  by  the  Supreme  Court  of  Massachusetts  that  an  en- 
gineer who  had  become  familiar  with  his  employer's  secret  machinery 
and  process  for  manufacturing  gunny  cloth  from  jute  butts,  under 
an  agreement  that  he  would  not  use  oV  disclose  the  information, 
should  be  restrained  from  constructing  machinery  for  others,  built  on 
his  former  employer's  models,  and  from  imparting  to  them  other 
secrets  of  the  process  of  manufacture.^  And  where  an  employee 
learned  his  employer's  secret  process  of  manufacturing  fly  paper 
under  circumstances  which  left  no  doubt  that  the  process  was  re- 
garded as  a  secret  and  that  the  employment  was  of  a  confidential 
character,  the  Supreme  Court  of  Michigan  restrained  the  employee 
from  communicating  the  process.^  So  also  the  New  York  Court  of 
Appeals  held  (1)  that  a  manufacturer  was  entitled  to  an  injunction 
restraining  a  rival,  who  had  surreptitiously  obtained  copies  of  his  pat- 
terns for  making  certain  unpatented  pumps,  from  using  or  disposing 
of  them,  and  (2)  that,  as  the  dimensions  of  the  patterns  could  not 
be  determined  from  the  parts  of  the  completed  pump,  the  sale  of  the 
pumps  did  not  constitute  such  a  publication  of  the  secret  of  the  speci- 
fications as  to  entitle  the  defendant  to  use  the  patterns  so  obtained." 
In  like  manner  it  has  been  held  that  a  former  employee  could  be 
enjoined  from  using  a  secret  process  of  manufacturing  oils  and 
greases  where  he  had  executed  an  affidavit  not  to  use  or  disclose  such 
process.^     And  where  an  employee  of  a  steel  company,  under  con- 

1  Little  V.  GaJlus  et  al.,  4  N.  Y.,  App.  Div.,  560  (1896). 

-  Eastern  Extracting  Co.  v.  Greater  New  York  Extracting  Co.  et  al.,  126  N.  Y.,  App. 
Div.,  928  (1908). 

3  Westervelt  et  al.  v.  National  Paper  &  Supply  Co.,  57  N.  E.,  552  (Ind.  Sup.  Ct,  1900). 

^I'eabody  v.  Norfolls,  98  Mass.,  452    (1868). 

^O.  &  W.  Thum  Co.  v.  Tloczynslii,  114  Mich.,  149  (1897). 

e  Tabor  v.  Hoffman,  118  K  Y.,  30   (N.  Y.  Ct.  of  App.,  1889). 

'Fralich  v.  Despar,  165  Pa.,  24   (1894). 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  351 

tract  not  to  disclose  a  secret  process  and  formula  for  making  cer- 
tain products,  was  enticed  from  its  service  by  a  competitor  for  the 
purpose  of  securing  his  knowledge  of  the  process,  the  court  not 
only  restrained  the  employee  and  the  rival  company  from  using 
or  divulging  such  secrets  but  also  enjoined  the  company  from  con- 
tinuing him  in  its  employ.^  So  where,  as  a  condition  of  the  sale 
of  a  business,  its  former  manager  contracted  with  the  purchaser 
to  enter  his  employ,  disclose  to  him  all  the  secret  processes  of  the 
business  known  only  to  the  manager,  and  not  thereafter  to  disclose 
them  to  anyone  else  nor  to  use  them  in  the  business  of  any  other  per- 
son, it  was  held  that  the  purchaser  was  entitled  to  an  injunction  re- 
straining the  manager  from  using  in  a  rival  business  the  secret 
processes  known  to  him  at  the  time  his  employer  purchased  the  busi- 
ness, as  well  as  other  secrets  subsequentl}'  disclosed  to  him  during  the 
course  of  his  emplojanent.- 

As  in  the  case  of  secret  machinery  or  appliances  or  secret  processes 
of  manufacture,  the  owners  of  secret  formulas  for  the  manufacture 
of  articles  of  commerce  may  enjoin  their  use  or  disclosure  by  former 
emplo3'ees  or  by  others  who  have  obtained  them  in  an  inequitable 
manner.  Thus  where  the  president  of  a  glass  company  had  dis- 
covered a  formula  for  making  scmitranslucent  glass  and  had  turned 
it  over  to  his  superintendent  to  make  the  necessary  experiments  in 
the  factory  furnaces,  the  Supreme  Court  of  Pennsylvania  decided 
that  the  superintendent  could  not  subsequently  use  the  formula  for 
his  own  benefit,  notwithstanding  the  fact  that  in  the  course  of  the 
experiments  conducted  for  his  employer  he  had  himself  discovered 
that  satisfactorv  results  could  onlv  be  had  from  the  formula  bv 
melting  the  glass  a  specified  time,  and  that  if  this  time  were  varied 
from,  the  product  would  not  be  of  the  desired  quality.  The  com- 
panv'^  to  which  the  superintendent  disclosed  the  formula  was  also 
enjoined  from  making  or  selling  glass  manufactured  by  using  the 
essential  ingredients  of  the  secret  formula.^  In  like  manner,  where 
the  owner  of  a  secret  formula  for  compounding  a  medicine  sold  it, 
and  his  son,  who  was  familiar  with  the  formula,  entered  the  employ 
of  the  purchaser  under  an  agreement  not  to  divulge  the  recipe  nor 
to  sell  any  similar  medicine  in  a  specified  territory,  the  Federal 
circuit  court  held  that  the  employee  could  not  manufacture  and  sell 

1  Taylor  Iron  &  Steel  Co.  v.  Nichols  et  al.,  61  Atl.,  946   (N.  .T.  Eq.,  1905). 

2  National  (lum  &  Mica  Co.  r.  Brapi.dly,  51  N.  Y,  Supp.,  93   (Sup.  Ct.,  App.  Div.,  1898). 

3  Machfth-Kvans  (ilass  Co.  r.  Schiiclbach  et  al.,  289  Pa.,  76,  87  (1913).  I'er  Elkin.  J.: 
"  To  be  entitled  to  equitable  relief  the  burden  was  on  the  appellee  [plaintiff]  to  show 
(1)  that  there  was  a  trade  secret,  or,  as  in  the  case  at  bar,  a  secret  process  of  manu- 
facture; (2)  that  it  was  of  value  to  the  employer  and  important  in  the  conduct  of  his 
business;  (3)  that  by  reason  of  discovery  or  ownership  the  employer  had  the  right  to  the 
use  and  enjoyment  of  the  secret;  and  (4)  that  the  secret  was  communicated  to  Schnel- 
bach  while  he  was  employed  in  a  position  of  trust  and  confidence  under  such  circum- 
stances as  to  make  it  inequitable  and  unjust  for  him  to  disclose  it  to  others,  or  to  make 
use  of  it  himself,  to  the  prejudice  of  his  employer." 


352  KEPOKT   OF    THE    COMMTSSTONER   OF    CORPORATIONS. 

a  substantially  identical  preparation.  In  this  case  the  court  ap- 
parently lays  down  the  rule  that  where  a  secret  formula  is  sold  a 
court  of  equity  will  not  permit  either  the  vendor,  or  the  members  of 
his  family  familiar  with  it  and  Imowing  of  the  sale,  to  use  it.^  So 
also  a  New  Jersey  court  refused  to  permit  the  president  of  a  cor- 
poration who  discovered  secret  formulas  or  processes  for  the  manu- 
facture of  ink,  to  sell  or  use  them,  Avhere  he  had,  while  managing  the 
business  during  a  receivership,  represented  the  recipes  to  be  a  part 
of  the  assets  of  the  corporation,  the  court  being  of  opinion  that  his 
whole  course  of  conduct  raised  an  implied  contract  that  the  formulas 
passed  to  the  purchaser  at  the  receiver's  sale.-  And  it  has  been  held 
that  a  company  engaged  in  the  manufacture  of  pharmaceutical  f)rep- 
arations  could  restrain  a  former  employee  from  using  its  secret 
formulas  in  the  manufacture  of  preparations  for  a  rival  company.^ 
Apparently,  also,  an  injunction  may  issue  to  prevent  the  dis- 
closure of  a  secret  method  of  compounding  certain  chemicals, 
although  all  of  the  ingredients  of  the  compound  are  known  to 
others.  For  example,  where  a  manufacturer  had,  by  much  expei-i- 
menting  in  mixing  chemicals,  produced  a  satisfactory  preparation 
to  be  used  in  tanning  hides,  the  court  enjoined  both  a  former  em- 
ployee and  a  rival  corporation  to  wdiom  he  had  disclosed  it,  from 
using  or  divulging  the  process,  though  the  latter  was  familiar  with 
all  the  ingredients  and  had  used  them,  though  less  successfully,  in 
the  manufacture  of  a  preparation  used  for  the  same  purpose.*  And 
a  corporation  which  used  a  peculiar  mixture  of  metals  to  com- 
pound a  bell  metal,  and  had  by  experimenting  determined  the  forms, 
sizes,  and  weights  of  the  bells  wdiich  could  be  satisfactorily  pro- 
duced from  the  metal,  was  granted  an  injunction  restraining  a  former 
foreman  in  its  factory  from  communicating  this  information  to 
others.''     On  the  other  hand,  manufacturing  processes,  machinery, 

1  Simmons  Medicine  Co.  et  al.  v.  Simmons,  81  Fed.,  163  (C.  C,  1897). 

sPomeroy  Ink  Co.  v.  Pomeroy,  77  N.  J.  Eq.,  293  (1910). 

=  G.  P.  Harvey  Co.  v.  National  Drug  Co.  et  al.,  77  N.  Y.  Supp.,  674  (Sup.  Ct,  App. 
Div.,    1902). 

*  Stone  V.  Goss  et  al.,  65  N.  J.  Eq.,  756  (Court  of  Errors  and  Appeals,  1903).  Per 
Swayze,  J.  :  "  Tiie  injunction  should  not  be  refused,  because  the  process  was  such  that  it 
would  probably  have  been  discovered  by  independent  experiments  in  the  manipulation  of 
the  ingredients  of  which  the  products  of  both  parties  were  alike  composed.  The  Gras- 
selli  Chemical  Co.,  by  its  own  conduct,  has  put  itself  in  such  a  position  that  it  may  even 
lose  the  advantage  of  future  independent  experiments.  It  would  be  quite  impossible  here- 
after to  decide  how  much  of  the  improvement  in  the  product  of  the  Grasselli  Chemical 
Co.  would  be  attributable  to  its  own  independent  efforts  and  how  much  to  the  knowledge 
of  Stone's  process  fraudulently  acquired  by  it.  Every  doubt  must  be  resolved  against  the 
parties  to  a  fraudulent  act.  If  the  defendant  thereby  suffers,  it  suffers  only  by  reason 
of  having  been  a  party  to  Goss'  fraudulent  disclosure  of  the  secret." 

^Cincinnati  Bell  Foundry  Co.  r.  Dodds  et  al.,  10  Ohio  Decisions,  Repruit  154  (Superior 
Court  of  Cincinnati,  1887).  For  other  cases,  see  White  Dental  Mfg.  Co.  v.  Mitchell,  188 
Fed.,  1017  (C.  C,  1911);  Phila.  Extracting  Co.  v.  Keystone  Extracting  Co.,  176  Fed., 
830  (C.  C,  1910)  ;  Union  Switch  &  Signal  Co.  v.  Sperry,  169  Fed.,  926  (C.  C,  1909)  ; 
Adams  Co.  v.  Knapp,  121  Fed.,  34  (C.  C.  A.,  1903)  ;  Jones  v.  Baker,  7  Cow.,  445  (N.  Y. 
Sup.    Ct.,    1827). 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  353 

or  formulas  must  apparently  have  some  characteristic  distinguish- 
insr  them  from  others  in  general  use  in  the  trade  in  order  that  thev 
may  be  protected  as  trade  secrets.  On  this  ground  a  New  York 
court  has  held  that  a  manufacturer  could  not  prevent  others  from 
using  a  formula  or  process  for  making  soap  where  the  "method 
consisted  in  the  exercise  of  great  care  in  the  selection  of  well-known 
materials  previously  in  use  in  the  trade,  and  in  their  combination 
and  mixture  in  certain  proportions,  also  approximately  observed 
by  other  manufacturers,  by  means  of  appliances  also  more  or  less 
known  to  others.'*'^  Likewise,  where  the  combined  efforts  of  the 
employees  of  a  tube  mill  had  resulted  in  a  certain  individuality  in 
the  patterns  and  castings,  but  it  appeared  that  approximately  the 
same  mills  could  be  constructed  by  any  competent  engineer,  it  was 
held  that  the  patterns  were  not  a  trade  secret  and  that  a  rival  manu- 
facturer coidd  retain  castings  made  from  such  patterns  surrepti- 
tiously taken  from  the  mill  by  an  employee,  although  the  court 
directed  the  return  of  the  patterns  themselves.^  And  it  has  been 
held  that  an  injunction  should  not  issue  where  the  general  prin- 
ciples of  the  machinery  which  a  manufacturer  sought  to  prevent 
a  competitor  from  using  were  well  known  to  machinists  and  had 
been  merely  adapted  to  the  complainant's  use,  and  where  it  also 
appeared  that  no  precautions  had  been  taken  to  keep  the  machinery 
a  secret  from  any  of  the  company's  employees.^  It  has  also  been 
held  that  an  employee  who  assisted  in  perfecting  machinery,  but 
was  not  employed  for  the  purpose  of  making  inventions,  could  not 
be  enjoined  from  engaging  in  the  same  business,  it  not  appearing 
that  he  had  constructed  or  used  any  machines,  processes,  or  formulas 
in  which  the  employer  had  any  exclusive  right.* 

Parties  who  may  be  enjoined  from  using  trade  secrets. — While 
the  courts  will  enjoin  the  use  or  disclosure  of  trade  secrets  not  only 
by  an  employee,  but  also  apparently  by  anyone  coming  into  posses- 
sion of  the  information  with  knowledge  of  its  confidential  nature  or 
of  the  confidential  character  of  the  emploj^ment  of  the  person  from 


ir.cll  &  Bogart  Soap  Co.  v.  Petrolia  Mfg.  Co.,  54  X.  Y.  Supp.,  6G3,  664,  665   (Sup.  Ct., 

1898). 

2  National  Tube  Co.  v.  Eastern  Tube  Co.  et  al.,  3  Obio  Cir.  Ct.  Rep.  (N.  S.),  459  (1902  i  ; 
aflBrmed  by  Sup.  Ct.,  69  Obio  State,  560  (1903)  ;  Cf.  Vulcan  Detinning  Co.  v.  American 
Can  Co.,  p.  30.3. 

3  Hamilton  Mfg.  Co.  v.  Tubbs  Mfg.  Co.,  210  Fed..  401  (C.  C,  1908)  ;  not  reported  until 
1914. 

*  American  Stay  Co.  v.  Delaney,  211  Mass.,  229  (1912).  Per  Braley,  .1.  :  "No  obliga- 
tion rested  upon  him  to  forego  the  exercise  of  his  inventive  powers,  even  if  they  were  in- 
cited because  of  knowledge  necessarily  derived  from  the  performance  of  his  contractual 
duties.  It  was  legitimate  for  him,  under  these  conditions,  to  invent  and  perfect  improve- 
ments which  were  embodied  in  new  machines  of  greater  capacity  and  efficiency."  See 
also   Mahler    r.    Sanche,   223    111.,    136    (1900). 

30035°— IG 23 


354  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

whom  it  was  obtained,^  it  has  been  held  that  if  such  secrets  have 
been  acquired  in  good  faith,  without  any  knowledge  of  another's 
prior  right  thereto,  or  of  any  facts  which  would  put  the  person  so 
acquiring  them  on  notice  thereof,  their  use  will  not  be  enjoined. 
Thus  the  court  refused  to  restrain  the  use  of  a  secret  formula  by  one 
who  had  purchased  it  without  knowledge  of  a  prior  sale  to  another 
party,  the  court  stating  that  the  remedy  of  the  first  purchaser  was 
to  sue  the  seller  for  breach  of  contract  not  to  disclose  the  formula  to 
others.-  In  like  manner,  where  the  administrator  of  an  estate  had 
given  a  secret  formula  to  one  person,  but  had  subsequently  conveyed 
it  to  another,  it  was  held  that  neither  party  could  restrain  the  other 
from  using  it.^ 

Agree3ient  not  to  disclose  SECRETS  IMPLIED. — While  the  earlier 
suits  to  prevent  the  disclosure  or  use  of  trade  secrets  were  usually 
based  upon  an  express  contract  not  to  divulge  them,*  later  decisions 
hold  that  an  express  contract  is  not  required,  but  that  it  is  sufficient 
if  the  person  divulging  or  seeking  to  use  the  secrets  occupied  a  posi- 
tion of  trust  and  confidence  and  the  information  came  to  him  in  the 
course  of  his  employment.  In  accordance  with  this  principle,  the 
Supreme  Court  of  Indiana  declares  that  if  the  servant  knew  at  the 
time  of  his  employment  that  his  employer  had  a  process  or  machinery 
the  nature  and  particulars  of  which  he  desired  to  keep  secret,  the 
law  will  imply  a  promise  not  to  divulge  or  use  the  secret.^  A  New 
York  court  states  the  correct  rule  to  be  that  the  law  raises  an  im- 
plied contract  that  an  employee  who  occupies  a  confidential  relation 
toward  his  employer  will  not  be  permitted  to  divulge  any  trade 
secrets  imparted  to  him  or  discovered  by  him  in  the  course  of  his 
employment.*^  Similarly,  the  Supreme  Court  of  JNIichigan  states  that 
if  it  is  clearly  established  by  all  that  was  said  and  done  that  the 
secrets  were  not  to  be  used  by  the  employee  except  while  in  the 
employ  of  those  who  imparted  them  to  him,  nor  divulged  by  him  to 
others,  and  that  this  was  one  of  the  conditions  of  his  employment, 
an  injunction  will  issue  to  prevent  the  servant  from  divulging  or 

1  Tabor  v.  Hoffman,  118  N.  Y.,  30  (N.  Y.  Ct.  App.,  1889)  ;  Eastern  Kodak  Co.  v.  Reich- 
enbach  et  al.,  79  Hun,  183  (N.  Y.  Sup.  Ct.,  App.  Div.,  1894j  ;  Westervelt  ct  al.  v.  National 
Paper  &  Supply  Co.,  57  N.  E.,  552  (Ind.  Sup.  Ct.,  1900)  ;  Eastern  Extracting  Co.  v. 
Greater  New  York  Extracting  Co.  et  al.,  126  N.  Y.  App.  Div.,  928  (1908)  ;  Peabody  v. 
Norfolk,  98  Mass.,  452  (1868)  ;  Stone  v.  Goss  et  al.,  65  N.  J.  Eq.,  756  (Court  of  Errors 
and  Appeals,  1903)  ;  Macbeth-Evans  Glass  Co.  r.  Schnelbach  et  al.,  239  Pa.  76  (1913). 

2  Stewart  v.  Hook,  118  Ga.,  44,')   (1903). 

sChadwick  v.  Covell,  151  Mass.,  190  (1890);  Covell  v.  Chadwick,  153  Mass.,  263 
(1891).  See  also  Watkins  v.  Landon,  54  N.  W.,  193  (Minn.  Sup.  Ct.,  1893)  ;  Marshall  v. 
Pinkham,  52  Wis.,  573   (1881). 

*  For  cases  involving  the  validity  of  express  contracts  not  to  disclose  trade  secrets, 
see  Fowle  v.  Park,  131  U.  S.,  88  (1889)  ;  I'ark  v.  Hartman,  153  Fed..  24   (C.  C.  A.,  1907). 

6  Westervelt  et  al.  v.  National  Paper  &  Supply  Co.,  57  N.  E.,  552   (la±  Sup.  Ct.,  1900). 

e Little  V.  Gallus  et  al.,  4  N.  Y.,  App.  Div.,  569,  574  (1896). 


TRUST    LAWS   AND   UNFAIR  COMPETITION.  355 

using  the  secrets.^  In  a  leading  case  in  New  York,  the  court  de- 
clares that  where  a  confidential  relation  exists  the  law  raises  an 
implied  contract  that  the  employee  will  not  divulge  any  trade  secrets 
imparted  to  him  or  discovered  by  him  in  the  course  of  his  emplo}^- 
ment,  and  that  a  disclosure  of  such  secrets  thus  acquired  is  a  breach 
of  trust  and  a  violation  of  good  morals,  which  a  court  of  equity 
should  intervene  to  prevent.^ 

ENGLISH  DECISIONS. 

The  distinction  between  technical  trade  secrets  and  confidential 
information  of  a  general  character  is  not  sharply  drawn  in  the  Eng- 
lish decisions.  Trade  secrets  and  information  regarding  an  em- 
ployer's business,  imparted  to  employees  or  associates  in.  confidence, 
or  necessarily  acquired  by  them  in  the  course  of  their  employment, 
are  both  protected  by  the  English  courts.  Decisions  of  this  charac- 
ter have  been  considered  together  in  the  following  section. 

Section  5.  Betrayal  of  confidential  information. 

In  order  that  the  aidof  the  courts  may  be  invoked  to  prevent  the  use 
or  disclosure  of  business  secrets,  it  is  apparently  not  necessary  that 
they  shall  be  such  as  may  be  technically  defined  as  trade  secrets — that 
is,  secret  processes,  tools,  machinery,  formulas,  etc.  It  is  apparently 
sufficient  if  the  information  which  it  is  sought  to  prevent  others 
from  using  pertains  to  the  business  of  the  parties  seeking  relief,  that 
it  is  in  fact  of  a  confidential  character,  and  that  it  was  imparted  to 
the  employee  for  the  purpose  of  being  used  in  his  employer's  busi- 
ness and  only  for  his  benefit. 

As  in  the  case  of  trade  secrets,  the  courts  have  said  that  for  an 
employee  to  use  the  confidential  information  of  his  former  em- 
ployer in  a  rival  business,  or  for  a  company  to  hire  the  employees  of 
a  competing  concern  for  the  purpose  of  securing  confidential  infor 
mat  ion  respecting  its  business,  amounts  to  "  unfair  "  or  "  inequitable 
competition.  Thus  in  New  York,  where  an  employee  resigned, 
entered  the  service  of  a  competitor,  and  proceeded  to  solicit  the 
business  of  those  persons  whom  he  had  canvassed  for  his  former 
employer,  the  court  said : 

In  recent  years  there  has  been  developed,  by  the  adjudication  of  our  courts 
and  by  legislation,  a  considerable  body  of  law  looking  toward  the  protection  of 
the  business  world  against  unfair  competition,  and,  if  wo  corroctly  interpret 
these  decisions,  a  court  of  equity  stands  ready  to  restrain  such  acts.'' 


75 


10.  &  W.  Thum  Co.  v.  Tloczynski,  114  Mich.,  149  (1897). 

2  Eastman  Kodak  Co.  v.  Reichenbach  el  al.,  79  Iliin,  18?.,  193  (N.  Y.  Sup.  Ct.  App. 
Div.,  1894).  See  also  Stone  v.  Goss  et  al.,  65  N.  J.  Eq.,  756  (Ct.  of  Errors  and  Appeals, 
1903)  ;  Wiggins  Sons  Co.  v.  Cott-A-Lapp  Co.,  169  Fed.,  150  (C.  C,  1909)  ;  Macbeth-Evans 
Glass  Co.  v.  Schnolbach  et  al.,  239  Pa.,  76  (1913). 

switkop  i«:  Holmes  Co.  v.  Boyce.  112  X.  Y.  Supp.,  874,  878  (Sup.  Ct.,  190S)  ;  a£fd.  115 
N.  Y.  Supp.,  1150  (Sup.  Ct.,  App.  Div.,  1909;. 


356  EEPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

In  a  later  case,  involving  practically  identical  facts,  the  same  couii 
said : 

It  is  unfair  for  tlie  defendant  to  tal^e  advantai;e  of  knowledge  imparted  to 
liim  in  confidence  and  use  tlie  Ivuowledge  to  destroy  plaintiff's  business.  *  *  * 
The  defendant's  use  of  confidential  communications,  communicated  to  him  by 
plaintiff  for  its  benefit,  for  the  purpose  and  with  the  intent  to  secure  plaintiff's 
customers  as  the  customers  of  the  plaintiif's  rival  and  competitor,  is  so  grossly 
imfair  and  unjust,  and  the  injury  and  damage  inflicted  upon  plaintiff's  property 
rights  are  so  incapable  of  being  ascertained,  the  conclusion  is  necessarily  reached 
that  plaintiff  is  entitled  to  the  judgment  and  decree  of  this  court    *     *     *.^ 

And,  again,  by  the  same  court  on  similar  facts : 

This  is  a  case  not  of  malicious  interference  with  contracts  where  equity 
refuses  to  interfere  unless  the  services  are  of  a  unique  and  special  character, 
but  of  unfair  competition.^ 

AMERICAN  DECISIONS. 

A  question  Avhich  has  frequently  been  raised  in  suits  involving 
the  use  or  betrayal  of  confidential  information  is  whether  a  former 
employee  may  make  use  of  lists  of  customers  which  he  may  have 
taken  with  him  on  leaving  his  employment  or  which  he  may  retain 
in  his  memory.  This  question  has  recently  been  considered  in  the 
Supreme  Court  of  New  York  in  several  cases  arising  out  of  the  same 
set  of  facts.  An  employee  of  the  Witkop  &  Holmes  Co.  who  solicited 
trade  and  delivered  goods  from  house  to  house,  on  entering  the 
service  of  the  company  had  been  supplied  with  a  card  list  of  patrons 
to  be  served.  On  leaving  this  employment  he  returned  this  list  and 
entered  the  service  of  a  rival  company,  for  which  he  immediately  be- 
gan to  solicit  the  patrons  of  his  fonner  employer.  On  suit  being 
instituted  hy  the  latter,  the  court  issued  an  injunction  restraining  the 
defendant  from  calling  upon  those  persons  whose  names  appeared  in 
the  card  list  furnished  him  by  the  Witkop  Co.  and  used  by  the 
defendant  while  engaged  with  it.^ 

In  a  previous  case  brought  by  the  same  company  to  restrain  similar 
conduct  by  another  employee,  the  court  held  that  the  plaintiff  was 

1  Witkop  &  Holmes  Co.  -;;.  Boyce,  118  N.  Y.  Supp.,  461,  465  (Sup.  Ct.,  1009). 

2  Witkop  &  Holmes  Co.  v.  Great  Atlantic  &  Pacific  Tea  Co.,  124  N.  Y.  Supp.,  956,  958 
(Sup.  Ct.,  1910). 

3  Witkop  &  Holmes  Co.  v.  Boyce,  118  N.  Y.  Supp.,  461,  464  (Sup.  Ct.,  1909).  Per 
Brown,  J.  :  "  The  obligation  of  an  employee  not  to  divulge  or  use  confidential  knowledge 
gained  in  the  course  of  his  employment  to  the  prejudice  of  his  employer  is  the  foundation 
of  every  contract  of  hiring.  It  is  unfair  for  the  defendant  to  take  advantage  of  knowledge 
imparted  to  him  in  confidence  and  use  that  knowledge  to  destroy  plaintiff's  business.  The 
defendant  furnished  an  employee  of  plaintiff's  competitor  with  information  of  plaintiff's 
customers  for  the  purpose  and  which  was  used  by  such  employee  in  making  deliveries  for 
such  competitor,  and  he  claims  the  right  to  personally  go  over  the  route,  call  upon  each 
customer  of  the  plaintiff  whose  name  and  address  had  been  furnislied  him  for  the  purpose 
of  plaintiff's  business,  solicit  orders  for  plaintiff's  competitors,  take  up  plaintiff's  trading- 
stamp  books  from  such  customers,  and  issue  a  trading  book  of  like  stamp  value  to  the 
customer  furnished  by  plaintiff's  competitor.  If  such  conduct  must  be  approved  and  ad- 
judged to  be  right,  proper,  and  lawful,  there  would  seem  to  be  no  limitation  upon  the 
gross  betrayal  of  confidence  by  an  unscrupulous  employee." 


TRUST   LAWS   AND   UNTATR   COMPETITION.  357 

entitled  to  an  injunction  restraining  the  defendant  from  interfering 
with  the  trade,  custom,  or  good  will  of  his  former  employer,  and 
from  making  use  of  the  knowledge  or  information  gained  from  his 
list  of  customers,  and  from  canvassing  and  soliciting  orders  from  his 
former  customers.^ 

Subsequently  the  Witkop  Co,  instituted  suit  to  restrain  its  com- 
petitor, the  Great  Atlantic  &  Pacific  Tea  Co.,  from  hiring  away  its 
drivers  or  solicitors  for  the  purpose  of  soliciting  the  patronage  of 
customers  formerlv  served  by  them,  and  the  court  held  that  an 
injunction  should  be  granted  both  on  the  equitable  principles  on 
which  the  previous  cases  had  been  decided  and  under  the  New  York 
statute  making  it  a  penal  offense  to  secure  lists  of  customers  from 
another.- 

Similarly,  it  has  been  held  that  a  laundry  company  was  entitled  to 
an  injunction  restraining  a  former  driver  of  its  wagons,  who  left 
its  service  for  that  of  a  competitor,  from  soliciting  or  receiving 
laundry  from  any  persons  who  were  customers  of  the  company  at 
the  time  he  left  its  employ  and  who  were  on  the  routes  worked  by 
the  driver.^  And  where  an  optical  company  engaged  an  employee 
to  examine  the  eyes  of  customers,  to  prescribe  glasses,  and,  as  a  part 
of  his  duties,  to  record  the  names  and  addresses  of  patrons  and  the 
sort  of  lenses  required  by  them,  it  was  held  that  the  employee  should 
be  restrained,  on  leaving  the  company's  employment,  from  using  the 
names  and  addresses  of  its  customers  surreptitiously  copied  from  its 
records,  from  soliciting  the  patronage  of  such  customers  whose  names 
he  thus  obtained  and  from  divulging  the  names  and  addresses  of 
these  customers  to  anyone  else.*  Likewise,  in  an  early  case  in  the 
Cincinnati  Superior  Court  the  employees  of  a  bakery,  including  the 
drivers  emplo3^ed  on  the  wagons,  who  left  in  a  body  and  started  a 

1  Witkop  &  Holmes  Co.  v.  Boyce,  112  N.  Y.  Supp.,  874  (Sup.  Ct.,  lOOSr,  affd.  115  N.  Y. 
Supp.,  lino   (Sup.  Ct.,  App.  Div.,  1909). 

«Wltkop  &  Holmes  Co.  r.  Great  Atlantic  &  Pacific  Tea  Co..  124  N.  Y.  Supp.,  956  (Sup. 
Ct.,  1910).  Per  Pound,  J.  :  "  It  follows  that  defendant  tea  company  and  ifs  officers  and 
agents  will  be  restrained  from  obtaining  the  benefit  of  plaintiff's  list  of  customers  by 
hiring  drivers  away  from  the  plaintiff  for  the  purpose  of  having  them  canvass  and  solicit 
trade  from  the  plaintiff's  customers  formerly  served  by  them.  That  this  was  done  in  the 
case  of  Wahl  and  other  drivers  admits  of  no  doubt. 

"  Tlie  defendant  tea  company  undoubtedly  has  the  right  to  solicit  the  trade  of  plain- 
tiff's customers,  and  to  obtain  a  list  thereof  by  using  opportunities  for  observation  open 
to  all.  Plaintiff  had  no  vested  property  rights  in  the  trade  of  such  customers.  The  vice 
of  defendant's  position  is  that  it  obtained  the  lists  or  copies  thereof  by  hiring  the  drivers 
and  made  the  lists  of  value  to  itself  by  sending  the  drivers  to  transfer,  if  possible,  the 
trade  from  their  former  employer  to  their  new  employer.  In  other  words,  although  the 
end  might  be  lawful,  the  means  adopted  were  unlawful.  This  is  a  case  not  of  malicious 
interference  with  contracts  where  equity  refuses  to  interfere  unless  the  services  are  of  a 
unique  and  special  character,  but  of  unfair  competition.  *  *  *  The  conduct  of  defend- 
ants amounts  to  an  unlawful  obtaining  and  use  of  a  trade  list."  (See  N.  Y.  Consoli- 
dated Laws    (Penal   Law,  chap.   40),  sec.  55:'.,  snl)ds.   0,   7.  i 

3  Empire  Steam  Laundry  Co.   r.  Lozier,  i:'.0  Pac,  1180   (Cal.  Sup.  Ct.,  1913). 

*  Stevens  &  Co.,  v.  Stiles,  20  K.  I.,  309  (1000). 


358  EEPOET  OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

rival  business,  were  enjoined  from  interfering  with  their  former 
employer's  customers.^ 

In  an  unreported  case  in  the  same  court  a  dri^^er  of  a  milk  wagon, 
who  left  his  employer  to  serve  a  rival,  was  enjoined  from  soliciting 
the  patronage  of  his  former  employer's  customers  on  the  route  he 
had  served  for  him;  and  in  another  case  an  injunction  was  granted 
restraining  an  employee  of  a  newspaper  from  selling  its  subscription 
list  to  a  rival  paper.^ 

And  an  Illinois  court  has  issued  an  injunction  restraining  a  book- 
keeper and  clerk,  when  he  started  a  rival  business,  from  in  any  man- 
ner corresponding  with  his  former  employer's  agents  or  customers 
or  soliciting  them  to  buy  his  goods.  It  was  held  in  a  subsequent 
action  for  a  violation  of  the  injunction  that  the  clerk  was  prohibited 
not  only  from  opening  a  correspondence  with  such  customers  but 
from  selling  to  customers  who  had  themselves  initiated  the  corre- 
spondence.^ 

But  the  Michigan  Supreme  Court  held,  apparently  contrary  to 
the  rule  announced  in  the  above  cases,  that  while  an  employee 
of  a  tea  company  on  engaging  with  a  rival  company  should  be 
enjoined  from  using  any  list  of  his  former  employer's  customers,  or 
a  copy  thereof  which  he  might  have  made  or  retained,  a  State 
statute  precluded  the  court  from  enjoining  the  employee  from  solicit- 
ing the  trade  of  such  of  these  customers  as  he  could  remember.^ 

Apparently  an  important  question  in  the  class  of  cases  summarized 
above  is  whether  an  employee  may  solicit  on  his  own  behalf  or  for  a 
new  employer,  those  customers  whom  he  has  secured  by  his  own  efforts 
and  industry  for  a  former  employer.  In  other  words,  whether  his 
obligation  is  to  refrain  from  soliciting  only  those  customers  whose 
names  were  communicated  to  him  by  his  former  employer.  It  has 
been  held  on  several  occasions  that  he  is  under  the  same  obligation 
as  to  both  classes  of  customers.  Thus  the  Supreme  Court  of  Cali- 
fornia was  of  the  opinion  that  where  a  part  of  the  duties  imposed 
on  the  driver  of  a  laundry  wagon  was  to  solicit  new  business  and  to 
keep  a  complete  and  confidential  list  of  all  customers,  he  should  not 
be  permitted  on  leaving  his  employer  to  canvass  or  receive  business 
of  these  patrons  for  a  rival.^ 

J  Smith  V.  Kernan,  8  Ohio  Dec.  Reprint  ?.2   (Sup.  Ct.,  Cincinnati,  IRSO). 

2  See  statement  of  the  court  in  Smith  v.  Kernan,  8  Ohio  Dec,  Reprint  32. 

sLoven  V.  The  People  ex  rel.  Fahrney  &  Sons  Co.,  158  HI.,  159   (1895). 

*  Grand  Union  Tea  Co.  v.  Dodds,  l(i4  Mich.,  50  (1910).  The  statute  referred  to  by  the 
court  provides  as  follows :  "All  agreements  and  contracts  by  which  any  person,  copartner- 
ship or  corporation  promises  or  agrees  not  to  engage  in  any  avocation,  employment,  pur- 
suit, trade,  profession  or  business,  whether  reasonable  or  unreasonable,  partial  or  general, 
limited  or  unlimited,  are  hereby  declared  to  be  against  public  policy  and  illegal  and  void." 
(Public   Acts.    1905.    net.    329,   see.    1.) 

'^Empire  Steam  Laundi-y  Co.  v.  Lozier,  l.JO  Pac,  IISO  (Cal.  Sup.  Ct.,  1913). 


TETJST  LAWS   AND   UNFAIR   COMPETITION.  359 

And  in  Witkop  &  Holmes  Co.  v.  Boyce/  although  it  does  not  ap- 
pear in  the  statement  of  facts  that  some  of  the  customers  in  question 
were  obtained  by  the  personal  efforts  of  the  employee,  such  appears 
to  have  been  the  case,  for  the  court  says: 

It  is  contended  that  the  customers  named  in  the  complaint  are  the  defendant's 
customers  and  not  the  customers  of  the  plaintii¥.  In  this  view  we  can  not 
concur.  The  contract  with  the  defendant  was  one  of  hiring.  He  was  employed 
and  agreed  to  enter  the  plaintiff's  sex-vice  as  a  salesman,  canvasser,  collector, 
and  delivery  man,  such  employment  to  be  at  all  times  under  the  direction  and 
supervision  of  the  plaintiff.  It  does  not  need  argument  to  show  that,  under 
such  circumstances,  every  customer  procured  was  a  customer  of  the  plaintiff 
and  not  of  the  defendant. 

And  in  a  case  in  the  Ehode  Island  Supreme  Court  it  was  held  that 
an  emi:)loyee  of  an  optical  company,  who,  on  leavina*,  took  with  him 
only  the  names  of  the  customers  whose  eyes  he  had  examined  and  for 
whom  he  had  prescribed,  should,  nevertlieless,  be  restrained  from 
soliciting  the  patronage  of  these  customers.^ 

On  the  other  hand  a  different  rule  apparently  prevails  as  to  the 
right  of  a  general  insurance  agent,  as  distinguished  from  other  em- 
ployees or  agents,  to  solicit  policyholders  whom  he  secured  for  a 
company,  on  leaving  its  service  and  entering  that  of  a  competing 
company.  Thus  where  the  general  agent  of  an  insurance  company 
had  acquired  his  knowledge  of  those  insured  by  his  employer,  not 
from  the  latter,  but  by  reason  of  the  fact  that  he  had  himself  pro- 
cured their  contracts  of  insui-ance,  the  court  held  that  the  agent 
should  not  be  restrained  from  soliciting  the  policyholders  to  transfer 
their  policies  to  a  competing  company  whose  agent  he  had  become;  ^ 
and  the  appellate  court  of  Illinois  has  reached  a  similar  conclusion 
upon  substantially  identical  facts.* 

In  like  manner  where  a  general  agent  representing  several  insur- 
ance companies  sold  his  business  and  turned  over  the  records  of  his 

161   N.   Y.  Misc.,   126. 

2  Stovens  &  Co.  r.  Stilps,  29  R.  I.,  .''.OO  (1000).  Per  .Tolinson,  .T.  ;  "Particular  stress  is 
laid  upon  the  claim  that  the  only  names  copied  from  the  complainant's  lists  were  those 
of  customers  whom  the  respondent  personally  examined,  and  it  Is  argued  that  to  copy  and 
use  such  a  list  of  names  is  not  a  breach  of  trust  or  a  breach  of  confidence.  The  argu- 
ment does  not  commend  itself  to  us.  It  is  elementary  that  what  is  done  by  the  agent  in 
the  course  of  his  employment  is  in  a  legal  sense  done  by  the  master  himself.  The  re- 
spondent could  have  no  more  right  to  copy  records  made  by  himself  while  acting  for  the 
complainant  than  he  would  have  to  copy  any  other  records  of  the  complainant  to  which 
he  had  access." 

astoin  r.  National  Life  Association,  ]0.">  Oa.,  S21  (1890).  Per  Fish,  J.:  "The  relation 
of  Stein  to  the  association  was  not  a  confidential  one  in  the  sense  that  he,  by  reason  of 
it,  acquired  a  Ivnowledgo  of  any  business  secrets.  *  *  *  That  knowledge  of  the  policy- 
holders which  would  bo  useful  to  him,  in  the  event  of  his  representing  as  agent  another 
company,  was  not  confided  to  him  by  the  association,  if  derived  from  it  at  all.  Persons 
may  have  taken  out  policies  in  the  association  on  account  of  personal  friendship  for  Stein 
or  confidence  in  his  integrity,  and  there  is  no  reason  why  he  should  not  be  allowed  to 
solicit  their  business  for  another  company  which  he  represents,  his  agency  for  the  asso- 
ciation having  been  terminated." 

<.\merican   Insurance  Co.  r.   France,   111    HI.  .\pp.,  :>S2    (1003). 


860  REPORT  OF    THE   COMMISSIONER  OF   CORPORATIONS. 

office  to  the  purchaser,  it  was  held  by  a  New  York  court  that  one  of 
the  companies,  who  refused  to  appoint  the  hitter  as  its  agent,  was 
entitled  to  the  possession  of  such  records  as  it  had  directed  its  former 
agent  to  keep,  and  to  an  injunction  restraining  the  agent  from  using 
any  information  obtained  exclusively  from  these  documents  in  solic- 
iting business  of  policy  holdere  in  the  company.  It  was  further 
held,  however,  that  the  purchaser  of  the  business  could  retain  a  record 
which  the  former  agent  had  kept  for  his  own  information,  containing, 
among  other  things,  the  names  and  addresses  of  policy  holders  in 
the  plaintiff  company  and  dates  of  expiration  of  the  policies.^ 

The  same  general  principles  have  been  held  to  apply  to  the  general 
manager  of  a  national  advertising  agency.  For  example,  where  the 
Chicago  manager  of  such  an  agency  brought  with  him  on  entering  its 
service  a  large  clientele  of  his  own,  and  after  two  years  in  its  employ 
reentered  the  same  line  of  business  for  himself,  it  was  held  b}^  a 
Federal  court  that  he  should  not  be  restrained  from  receiving  and 
soliciting  business  from  advertisers  with  whom  he  had  contracted  on 
behalf  of  his  former  employer  and  who  were  still  under  contract  with 
the  company.^ 

A  further  question  in  these  cases  is  whether  an  employee  may  be 
enjoined  from  making  use  of  knowledge  of  his  employer's  customers 
which  he  retains  in  his  memory,  or  whether  his  obligation  is  merely 
not  to  use  lists  or  copies  thereof  which  he  has  in  his  possession  in 
tangible  form.  The  New  York  Supreme  Court  has  held  that  an  em- 
ployee may  not  solicit  from  the  customers  of  his  former  employer 

1  National  Fire  Insurance  Co.  r.  Sullard,  97  N.  Y.  App.  Div.,  233  (1904),  Per  Hooker, 
J. :  "  The  uncontradicted  evidence  tends  to  show,  and  the  custom  Is  so  universal  that  the 
court  may  take  judicial  notice,  *  *  *  that  the  business  of  a  fire  insurance  agent,  at 
least  in  the  smaller  cities  and  towns,  is  to  represent  contemporaneously  several  insurance 
companies,  and  consists  in  soliciting  persons  to  permit  the  agent  to  place  insurance  for 
them,  or  in  being  solicited  by  those  desirous  of  being  insured,  for  the  same  purpose.  Only 
in  rare  cases  do  those  who  seek  insurance  express  preference  for  any  one  fire  insurance 
company  over  another,  or  request  that  their  insurance  be  placed  in  any  particular  com- 
pany. The  proof  in  this  case  tends  to  show  that,  for  the  three  and  one-half  years  Ship- 
man  was  the  agent  of  the  plaintiff  and  other  companies,  he  was  rarely,  if  ever,  requested 
to  place  insurance  with  any  particular  company,  and  exercised  his  own  judgment  in  de- 
termining with  which  of  the  insurance  companies  he  represented  he  would  place  the 
insurance. 

"  The  policyholder  was  free  to  renew  with  any  company  he  might  see  fit  or  not  to 
renew  his  policy  at  all.  Shipman  procured  the  insurance  for  the  plaintiff  in  the  first 
place  from  customers  or  patrons  of  his  own.  It  is  entirely  lawful  for  the  defendant,  so 
long  as  he  does  not  use  for  that  purpose  the  information  gathered  exclusively  from  the 
plaintiff's  property,  to  solicit  these  customers  and  patrons  in  behalf  of  any  insurance 
company  he  may  see  fit,  the  plaintiff  or  any  otlier,  so  long  as  he  does  not  abridge  the 
enjoyment  by  the  plaintiff  of  his  beneficial  interest  in  existing  contracts  of  insurance  by 
inducing  improper  cancellations." 

But  see  Scottish  Union  and  National  Insurance  Co.  r.  Dangaix,  103  Ala.,  388  (1893), 
where  the  Supreme  Court  of  Alabama  in  a  case  in  whicli  it  was  not  called  upon  to  decide 
the  point,  expressed  the  opinion  that  the  agent  of  an  insurance  company  has  no  legal 
right  on  leaving  the  company  to  solicit  the  policyholders  to  cancel  the  policies  procured 
for  the  company  by  the  agent  during  the  term  of  his  employment. 

-Proctor  &  Collier  Co.  v.  Mahin  et  al.,  93  Fed.,  875   (C.  C.,  1S99). 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  361 

where  the  list  of  customers  is  in  fact  confidential.^  Similarly  the 
supreme  courts  of  Rhode  Island  and  California  and  the  Cincinnati 
superior  court  haA^e  approved  decrees  sufficiently  broad  not  only  to 
prevent  employees  from  using  copies  of  lists  of  customers  which  they 
had  taken  away  witli  them,  but  also  to  prevent  them  using  knowl- 
edge of  these  customers  regardless  of  the  form  in  which  it  had  been 
retained.-  But  the  Supreme  Court  of  Michigan  refused  to  enjoin  a 
former  employee  from  soliciting  those  of  his  late  employer's  customers 
whose  names  he  could  remember.^ 

Confidential  character  or  sources  of  supplt,  costs,  etc. — In 
some  instances  it  has  been  held  that  an  employer  may  restrain  the 
disclosure  of  the  sources  from  which  he  purchases  supplies,  the  mer- 
chants to  whom  he  sells,  or  his  costs.  Thus  where  an  employee  of 
a  catalogue  house,  on  leaving  to  start  a  rival  business,  took  with 
him  a  list  of  retail  merchants  under  contract  to  buy  from  his  em- 
ployer he  was  enjoined  from  approaching  any  merchant  on  the  list 
.or  from  approaching  or  interfering  with  his  late  employer's  sales- 
men for  a  period  of  10  months ;  and  from  using  or  copying  his  cata- 
logue.* Similarly  a  temporary  injunction  has  been  issued  by  a  New 
York  court  restraining  a  former  employee  of  a  loan  company  from 
divulging  to  a  rival  anything  "  concerning  the  system,  forms,  or 
methods"  of  the  business  and  from  sending  letters  to  her  former 
employer's  customers  "  relating  to  such  matters,"  until  the  final 
determination  of  the  case.^  And  a  dealer  who  secured  the  secret- 
code  system  of  a  company,  showing  the  cost  and  selling  price  of  its 
goods,  from  one  of  its  traveling  salesmen  was  compelled  by  the 
Dakota  courts  to  deliver  the  catalogue  into  which  he  had  copied  the 
code  to  a  receiver  appointed  by  the  court.®  So  also  where  a  corpora- 
tion engaged  in  the  manufacture  of  steel  cars  supplied  railroads  with 
blue  prints  to  enable  them  to  order  repair  jxarts,  it  was  held  that  the 
manufacturer  could  compel  a  rival  corporation  to  return  copies  of 

1  Witkop  &  Holmes  Co.  r.  Boyce,  IIS  N.  Y.  Snpp.,  461   (1900). 

2  Stevens  &  Co.  v.  Stiles,  29  R.  I.,  399  (1909)  ;  Empire  Steam  Laundry  Co.  r.  Lozior. 
ir>0  Pae.,  1180  (Cal.  Sup.  Ct,  lOlP.)  ;  Smith  v.  Kernan,  8  Ohio  Dec,  Reprint  ."2  (Cin- 
cinnati Sup.  Ct.,  1880). 

» Grand  Union  Tea  Co.  v.  Dodds,  164  Mich.,  oO  (1910).  Per  Hooker,  .7.:  "We  are  of 
the  opinion,  however,  that  he  (the  defendant)  can  not  he  restrained  from  sellinjr  his  com- 
modities, for  himself  or  for  any  employer,  in  any  part  of  the  city,  or  to  any  person,  so 
long  as  he  does  not  use  any  property  helonging  to  the  complainant,  or  copies  thereof  that 
were  surreptitiously  made.  So  far  we  think  ourselves  well  within  equity  jurisdiction,  on 
general  principles.  The  statute  precludes  an  injunction  restraining  the  defendant  frdm 
soliciting  anyone  to  purchase  his  wares,  notwithstanding  he  may  remember  that  they 
were  his  patrons  while  he  was  employed  by  the  complainant."      (See  i)p.  157,  ".-)8n.) 

^  ^lerchants  Syndicate  Catalogue  Co.  v.  Retailers  Factory  Catalogue  Co.  et  al.,  206  Fed., 
545   (D.  C,  1013). 

BToIman  v.  Mulcahy,  103  N.  Y.  Supp.,  936  (Sup.  Ct.,  App.  Dlv.,  1907).  See  also  Oxy- 
pathor  Co.  v.  I)e  I'ordoro  et  al.,  149  N.  Y.  Supp.,  513   (Sup.  Ct.,  App.  Div.,  1914). 

0  Simmons  Hardware  Co.  r.  Waibel  et  al.,  11  L.  R.  A.,  207   (S.  Dak.  Sup.  Ct.,  1891). 


362  REPORT  OF    THE   COMMISSIONER  OF   CORPORATIONS. 

the  prints  obtained  from  the  raih^oads  which  it  was  using  in  the 
manufacture  of  similar  cars.^ 

Information  generally  known  to  the  trade  may  be  used. — But 
no  obligation  rests  upon  employees  not  to  disclose  information  re- 
specting their  employers'  customers  or  other  details  of  his  business 
unless  it  is  in  fact  of  a  confidential  character;  nor  may  an  em- 
ployee be  prevented  from  using  for  himself  or  a  competitor  of  his 
former  employer  ordinary  business  skill  or  general  knowledge  of  an 
industry  acquired  in  the  course  of  his  employment.  Thus,  in  a 
recent  case  the  New  York  Supreme  Court  held  that  a  wholesale 
dealer  could  not  restrain  a  salesman  from  soliciting  the  trade  of 
customers  whose  names  and  addresses  and  whose  individual  prefer- 
ences he  had  learned  while  in  the  dealer's  employ,  where  it  appeared 
that  these  customers  were  dealers  in  dairy  products  and  were  listed 
in  a  city  directory,  and  also  that  thev  did  not  buy  exclusively  from 
the  plaintiff,  but  dealt  more  or  less  constantly  with  others.^ 

Shortly  before  this  the  appellate  division  of  the  New  York  Supreme 
Court  had  refused  to  grant  a  temporary  injunction  on  the  ground 
that  it  Avas  not  clearly  shown  that  the  information  in  question  had 
been  given  in  confidence.'  And  where  a  saleswoman  employed  by  a 
corset  manufacturer  had  apparently  been  supplied  with  information 
respecting  the  advantages  to  the  wearer  of  a  peculiar  make  of  corset, 
foi-  the  purpose  of  delivering  lectures,  and  had  been  taught  his  meth- 
ods of  demonstrating  the  garment,  the  Iowa  Supreme  Court  was  of 
the  opinion  that  she  might  make  use  of  this  knowledge  and  expe- 
rience in  the  employ  of  a  competitor.* 

In  like  manner  a  New  Jersey  court  refused  to  restrain  a  former  em- 
ployee from  divulging  any  information  "  of  any  nature  now  known 
to  him,  or  hereafter  acquired  by  him  *  *  *  relating  to  or  regard- 
ing any  process  of  steel  making  or  molding  or  treating  steel  that  may 
have  been,  is  now,  or  may  be  hereafter  during  the  term  of  this  agi'ee- 
ment  used  in  the  works"  in  which  he  was  employed,  although  these 
were  the  terms  of  his  contract  of  employment.^ 

1  Pressed  Steel  Car  Co.  v.  Standard  Steel  Car  Co.,  210  Pa.  St.,  404   (1904). 

=  Boosing  I'.  Dorman,  148  N.  Y.  App.  Div.,  824    (lt)12). 

3  Peerless  Pattern  Co.  v.  Pictorial  Review  Co.,  132  N.  Y.  Supp.,  .37  (Sup.  Ct.,  App.  Div., 
1911). 

^Gossard  Co.  v.  Crosby,  1.32  Iowa,  155   (1906). 

^Taylor  Iron  &  Steel  Co.  v.  Nichols  et  al.,  69  Atl.,  186  (N.  .7.  Ct.  of  Errors  and  App., 
1908).  Per  Swayze,  .T.  :  "  The  conti-act  not  only  forbids  Nichols  to  disclose  any  secret  of 
the  complainant,  but  also  any  knowledge  he  might  have  relating  to  the  process  of  making 
steel  that  may  have  been  used  in  the  complainant's  works,  whether  matter  of  common 
knowledge  or  not,  whether  known  to  him  before  he  entered  their  employment  or  not ;  and 
it  also  requires  him  to  hold  inviolate  not  only  the  secrets  of  the  complainant,  but  his 
own  secrets,  if  he  bad  any,  and  treatments  or  processes,  whether  secret  or  not.  The 
necessary  result  of  the  enforcement  of  the  contract  would  be  that  Nichols  must  either 
work  for  the  complainant  or  remain  idle  ;  and,  since  the  restraint  is  unlimited  in  point 
of  time  or  place,  he  might,  at  the  option  of  the  complainant,  after  the  expiration  of  five 
years  be  without  employment  for  the  rest  of  his  life  at  the  only  trade  he  knows." 


TRUST    LAWS   AND   UNFAIR   COMPETITION.  363 

In  an  earlier  case  the  New  Jersey  court  had  refused  an  injunction 
restraining  tlie  defendants  from  violating  a  contract  not  to  divulge  to 
anyone  where  or  from  whom  their  former  employer  purchased  his 
materials  or  to  whom  he  sold  his  goods  or  the  price  at  which  he 
bought  or  sold,  the  court  saying  that  an  agreement  of  this  nature 
might  well  be  regarded  in  the  absence  of  anything  to  the  contrary  in 
its  terms,  as  limited  in  its  obligation  to  the  time  of  the  employment.^ 

Directors  of  corporations  may  not  disclose  confidential  in- 
formation.— The  obligation  not  to  disclose  or  make  use  of  confi- 
dential information  obtained  in  the  course  of  employment  has  been 
held  applicable  to  the  director  of  a  corporation.  Thus,  where  a  cor- 
poration conducted  a  business  which  was  dependent  for  its  success 
largely  upon  a  secret  formula  which  it  had  purchased  in  a  foreign 
country,  it  was  held  that  a  director,  who  had  acquired  a  knowledge  of 
the  formula  by  reason  of  his  position,  as  well  as  other  employees  of 
the  company  to  whom  it  was  necessary  to  disclose  it,  could  not  use  it 
in  a  rival  business,  notwithstanding  the  fact  that  the  formula  was 
known  to  others  and  the  further  fact  that  subsequent  to  the  filing  of 
the  suit  the  rival  corporation  had  purchased  the  formula  from  a  party 
in  Europe  who  claimed  to  be  the  true  owner.-  Likewise  the  secretary 
of  a  corporation  was  held  to  he  justified  in  forcibly  taking  its  letter 
files  from  one  of  the  directors  who  was  securing  data  therefrom  for 
the  benefit  of  a  rival  corporation,  in  the  organization  and  manage- 
ment of  which  he  was  active.^  A  similar  doctrine  was  applied  by 
the  Iowa  courts,  where  it  was  held  that  a  corporation  might  lawfully 

1  Salomon  v.  Hertz  ct  al.,  40  N.  J.  Eq.,  400  (1885).  Cf.  Gorhain  Mfs.  Co.  r.  Eraory- 
Bird-Thayer  Dry  Goods  Co.  ct  al.,  02  Fed.,  774  (C.  C,  1800)  ;  affd.  104  Fed., 
24Z  (C.  C.  A.,  1000).  This  was  an  action  in  form  to  restrain  the  defendants 
from  passing  off  inferior  silverwai'e  as  that  of  the  complainants'  manufacture.  At  the 
trial,  however,  it  appeared  that  the  real  purpose  of  the  action  was  to  prevent  the  de- 
fendants from  selling  the  complainants'  silverware  at  lower  prices  than  those  maintained 
by  retail  jewelers,  and  with  this  end  in  view  several  of  the  defendants'  employees  were 
asked,  on  cross-examination,  from  whom  they  purchased  goods  of  the  complainants'  manu- 
facture. The  witnesses  refused  to  answer,  and  their  action  in  so  doing  was  upheld  on 
the  ground  that  the  information  requested  was  a  trade  secret  and  tliat  its  disclosure  was 
not  essential  to  the  proper  maintenance  of  the  complainants'  suit. 

2  Vulcan  Detinning  Co.  v.  American  Can  Co.,  07  Atl.,  ?>'iQ  (N.  .1.  Court  of  Errors  and 
Appeals,  1007).  Per  Garrison,  J. :  "  What  I  wish  to  point  out  is  that  the  real  gravamen 
of  the  complainant's  bill,  as  amplified  in  the  proofs,  is  not  that  the  defendants  are  threat- 
ening to  destroy  the  value  of  an  absolute  secret  by  imparting  it  to  the  public,  but  that 
the  defendants,  while  keeping  the  secret  of  the  process  to  themselves,  are  making  a  use 
of  it  that  is  inequitable  as  to  the  complainant.  In  fine,  the  main  and  immediate  need  of 
the  complainant,  as  shown  by  the  testimony,  is  to  be  protected  from  the  inequitable  com- 
petition to  which  it  had  been  exposed  by  a  breach  of  confidence.  *  *  *  i  am  not  sug- 
gesting that  the  complainant  is  not  entitled  to  an  injunction  enjoining  publication,  for  I 
Ihink  that  it  is;  but  I  am  now  saying  that  the  main  ground  for  relief  disclosed  by  (he 
complainant's  case  is  the  existence  of  inequitable  competition  arising  from  a  breach  of 
trust,  and  hence  referal)lo  to  general  principles  of  equity,  and  not  to  those  special  doc- 
trines by  which  unpatented  secrets  are  protected.  In  the  application  of  these  general 
principles  the  secrecy  with  which  a  court  of  equity  deals  is  not  neccssarUy  that  absolute 
secrecy  that  inheres  in  discovery,  but  that  qualified  secrecy  that  arises  from  mutual 
understanding  and  fbnt  is  required  alike  by  good  faith  and  by  good  morals." 

•' llemiuway   i;.   llcmimvay,  r>.S  Coun.,  44:'.    (1800». 


364  EEPOET  OF   THE  COMMISSIONER  OF   COEPOEATIONS. 

refuse  to  transfer  shares  of  its  stock  to  a  purchaser  who  was  a 
party  to  a  conspiracy  to  boycott  the  business  of  the  corporation  and 
Avho  desired  to  become  a  stockholder  for  the  express  purpose  of  dis- 
covering its  source  of  supply.^ 

ENGLISH  DECISIONS. 

The  English  courts  have  for-  many  years  restrained  the  use  or  com- 
munication of  trade  secrets  or  confidential  information,  imparted  to 
employees  or  associates  in  confidence  or  necessarily  acquired  by  them 
in  the  course  of  employment,  where  to  permit  such  use  or  disclosure 
would  be  a  violation  of  an  express  or  implied  contract  or  would 
amount  to  a  breach  of  trust.^  Persons  acquiring  a  knowledge  of  such 
secrets,  with  notice  of  their  confidential  nature,  have,  also,  been  en- 
joined from  using  or  disclosing  them. 

It  was  early  held  b}^  the  English  courts  that  the  use  or  betrayal  of 
secret  formulas  or  processes  by  faithless  employees  could  be  restrained 
by  a  court  of  equity.  In  1820  Lord  Chancellor  Eldon  granted  an  in- 
junction restraining  a  former  employee  of  a  manufacturer  of  pro- 
prietary remedies  from  using  in  a  rival  business,  or  from  disclosing 
to  others,  recipes  surreptitiously  copied  from  the  books  of  his  em- 
ployer.^ In  a  leading  English  case  on  this  subject,  decided  in  1851, 
one  of  the  partners  in  a  company,  engaged  in  the  manufacture  of  a 
medicinal  preparation  according  to  a  secret  formula,  disclosed  the 
formula  to  his  son  in  violation  of  the  terms  of  his  partnership  con- 

1  Fnnck  v.  Farmers'  TOlevator  Co.  et  al..  142  Iowa,  621  (1909).  The  following  from  the 
Report  of  the  Commissioner  of  Corporations  on  the  Petroleum  Industry,  Pt.  I  (p.  153), 
indicates  that  this  method  of  acquirins  a   competitor's   secrets  is   not   unusual  : 

"  In  the  case  of  the  United  States  Pipe  Line  Co.  the  Standard  obtained  a  minority  of 
the  stock  and  has  been  able  to  secure  representation  upon  the  directorate,  so  as  to  be 
familiar  with  the  business  secrets  of  its  competitor." 

See  also  Carter  v.  Producers'  Oil  Co.  (Ltd.),  182  Pa.  St.,  551  (1897),  and  U.  S.  v. 
Standard  Oil  Co.  of  N.  .T.  (C.  C,  E.  D.,  Mo.)  ;  Brief  of  facts  and  argument  for  petitioner. 
Vol.   I,  pp.  2.31-2.35. 

And  SCO  brief  for  the  United  States  in  United  States  v.  American  Tobacco  Co.  et  al.. 
where  it  was  urged  that  "  one  use  of  '  supply  '  companies  was  to  obtain  through  them 
information  about  the  business  of  competitors.  The  Mengel  Box  Co.,  for  example,  was 
required  to  report  monthly  the  number  of  boxes  which  it  sold  to  independents.  (R.  II, 
G63.)'"  (On  appeal  from  the  Circuit  Court  of  the  United  States  for  the  Southern  District 
of  New  York,  p.  217.)  See  also  Monarch  Tobacco  Works  v.  American  Tobacco  Co.  et  al., 
165  Fed.,  774  (C.  C,  1908). 

2  Lord  .Justice  Turner  in  Morison  r.  Moat,  9  Hare,  241,  255  (1851),  said:  "That  the 
court  has  exercised  jurisdiction  in  cases  of  this  nature  does  not,  I  think,  admit  of  any 
question.  Different  grounds  have  indeed  been  assigned  for  the  exercise  of  that  jurisdic- 
tion. In  some  cases  it  has  been  referred  to  property,  in  others  to  contract,  and  in  others, 
again,  it  has  been  treated  as  founded  upon  trust  or  confldence,  meaning,  as  I  conceive, 
that  the  court  fastens  the  obligation  on  the  conscience  of  the  party  and  enforces  it 
against  him  in  the  same  manner  as  it  enforces  against  a  party  to  wliom  a  benefit  is  given 
the  obligation  of  performing  a  promise  on  the  faith  of  which  the  benefit  has  been  con- 
ferred ;  but  upon  whatever  grounds  the  jurisdiction  is  founded,  the  authorities  leave  no 
doubt  as  to  the  exercise  of  it." 

"Yovatt  V.  Winyard.   1  Jacob  &  Walker,  .394    (1820). 


THUST   LAWS  AND   UNFAIR   COMPETITION.  365 

tract,  with  "whicli  the  latter  was  familiar.  The  court  held  that  the 
formula  had  been  revealed  in  breach  of  trust  and  of  contract,  and 
granted  an  injunction  restraining  the  party  to  whom  it  had  been  dis- 
closed from  selling  or  compounding  any  medicine  according  to  the 
secret  recipe,  and  from  in  any  manner  using  the  secret  or  any  part 
thereof.^  Similarly  where  a  manufacturer  of  disinfectants  sold  his 
business  and  covenanted  not  to  disclose  the  secret  process,  nor  engage 
in  the  same  business  for  ll  years,  the  contract  was  held  enforcible.- 
So,  also,  a  contract  wdiereby  an  employee  agreed  not  to  use  or  disclose 
any  of  his  employer's  secret  formulas,  processes,  or  machinery  for 
making  tjq^ewriter  ribbons  and  carbon  paper,  w^as  held  valid  and  the 
emploj'ee  enjoined  from  violating  it."  In  like  manner,  wdiere  an  em- 
ployee of  a  company  was  informed  that  its  process  of  manufacture 
was  secret,  but  on  acquiring  an  imperfect  knowledge  of  it  entered  the 
service  of  a  competitor  and  w-as  attempting  to  use  the  process  and  to 
secure  the  parts  of  it  w^ith  which  he  was  not  familiar  from  the 
original  inventor,  it  was  held  that  an  injunction  should  issue  to 
prevent  him  from  using  the  process.* 

The  same  legal  principles  under  which  secret  formulas  or  processes 
are  protected  have  been  invoked  by  the  English  courts  to  prevent  the 
unfair  use  by  competitors  of  other  trade  secrets  or  confidential  in- 
formation. Thus  a  company  engaged  in  the  manufacture  of  fire 
engines  has  been  granted  an  injunction  restraining  a  former  em- 
ployee and  his  new  master  from  using  a  table  of  dimensions  of  its 
engines  wdiich  the  employee  had  made  and  carried  away  wdth  him."^ 
But  Avhere  a  telegraph  company  in  London  made  arrangements  witli 
individuals  in  Australia,  described  as  agents  of  the  company,  for  the 
transmission  of  its  messages,  using  certain  code  words  to  indicate 
the  names  of  firms  or  persons  in  Australia  to  whom  messages  were 
frequently  sent,  it  was  held  that  the  Australian  agents,  on  starting 
a  similar  business,  could  make  use  of  this  code,  the  property  in  it, 
if  there  was  any,  being  in  the  telegraph  company's  patrons,  not  in 
the  company.''  On  the  other  hand,  it  has  been  held  that  the  publisher 
of  a  trade  directory,  consisting  principally  of  classified  advertise- 
ments, could  restrain  former  emplo^^ees  from  using  for  the  benefit  of 
a  rival  company  blocks,  or  cuts,  and  other  materials  made  up  while  in 

iMorison  v.  Moat,  9  Hare,  241    (1851). 

2  Has?;  V.  Darley,  47  L.  J.  Ch.,  567    (1878). 

"Caribonum  Co.  r.  Le  Couch,  109  Law  Times  Reps.,  385  (1013),  s.  c,  ib.,  587.  See  also 
Rylands  v.  Ashley's  Tatent  Bottle  Co.,  7  R.  V.  C,  175   (Ct.  of  -Vppeal.  1800). 

1  Amber  Size  &  Chemical  Co.  v.  Menzel,  L.  U.  (1013),  2  Ch..  2.'iO.  See  also  Li(niicl 
Veneer  Co.  v.  Scott  et  al.,  29  R.  P.  C,  639  (Ch.  Div.,  1912)  ;  Litholite,  Ltd.,  v.  Travis 
and  Insulators,  Ltc"..,  30  R.   P.   C,  532    (Ch.  Div.,  1013). 

5  Morryweather  &  Sons  v.  Moore,  61   L.  J.  Ch.,  .505   (1802). 

"Renter's  Tel.  Co.  r.  P.yron,  43  L.  J.  Ch.  (N.  S.),  661  (l»74j.  See  also  Reddaway  v. 
Flynn   ct   al.,    .00   R.   P.   C,   10    (1012). 


3GG  EEPOET   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

his  employ  and  for  his  use.^  And  where  the  Queen  and  Prince  Albert 
made  a  number  of  etchings  which  they  had  not  published,  and  others 
surreptitously  secured  them  and  had  impressions  made  for  their  own 
private  use,  it  was  held  that  they  should  be  enjoined  from  making 
engravings  or  copies  of  the  etchings  or  from  publishing  or  selling  a 
descriptive  catalogue  of  them.-  Likewise,  where  an  engraver  was 
employed  to  make  copies  of  a  drawing  and  secretly  made  copies  for 
himself,  which  he  sold  in  competition  with  the  oAvners,  it  Avas  held 
that  the  latter  were  entitled  to  an  injunction  to  prevent  the  sale  of 
the  copies  thus  secretly  made,  and  to  damages.^ 

The  English  courts,  also,  hold  that  lists  of  customers  or  of  agents 
ai*e  confidential,  and  that  originals  of  such  lists  or  copies  thereof 
taken  away  by  employees  can  not  be  used  either  by  them  or  by  sub- 
sequent emploj^ers.  For  example,  Avhere  the  owner  of  a  game  farm 
employed  a  manager  under  a  contract  that  he  would  treat  everything 
in  connection  wdth  the  business  as  confidential,  it  was  held  that  the 
manager  must  return  a  list  of  his  employer's  customers  Avhich  he  took 
with  him  on  setting  up  in  business  for  himself,  and  must  pay  the 
damages  resulting  from  his  use  of  the  list.*  And  where  an  employee' 
of  a  dealer  in  mineral  waters  contracted  not  to  disclose  any  of  the 
trusts,  secrets,  or  dealings  of  his  employer,  but  on  leaving  took  Avith 
him  a  memorandum  book  containing  the  names  and  addresses  of  his 
employer's  customers,  the  court  commanded  the  return  of  the 
memorandum  book  and  enjoined  both  the  employee  and  his  ncAV 
master,  Avho  had  notice  of  the  contract,  from  using  the  same.^ 
Similarly  a  process  server  Avas  granted  an  injunction  restraining  a 
former  employee  from  making  use  of  any  copies  or  extracts  from  his 
register  of  agents,  or  index,  or  any  memoranda  made  by  the  employee 
Avhile  in  his  service  relating  to  any  persons  named  on  his  register 
or  index.*^  And  in  a  Canadian  case  it  Avas  held  that  lists  of  cus- 
tomers, and  prospective  customers,  prepared  by  an  agent  for  the 
territory  assigned  him,  as  Avell  as  a  similar  list  for  other  territory, 
Avhich  he  had  purchased  from  another  agent,  Avere  the  property  of 
the  employer ;  but  that  a  list  of  probable  purchasers  in  all  of  Canada, 

1  Liimb  V.  Evans,  G2  L.  J.  Ch.,  404  (Court  of  Appeal,  1892).  Per  Kay,  L.  .7.:  "Even 
if  it  were  established  that  the  plaintiff  could  not  prevent  anjijody  else  in  the  world  from 
publishing  or  using  these  materials  which  the  plaintiff  wishes  to  prevent  the  defendants 
from  using,  that  would  be  no  answer  to  the  plaintiff's  claim  for  an  injunction  against  the 
defendants,  because  the  defendants,  from  the  position  in  which  they  were,  are  put  under 
a  duty  toward  the  plaintiff  not  to  make  this  use  of  the  materials." 

2Prince  Albert  v.  Strange  et  al.,  18  L.  J.  Ch.   (N.  S.K  120   (1S49). 

3  Tuck  &  Sons  v.  Priester,  L.  II.  (1887),  19  Q.  B.  Uiv.,  629. 

*Robb  V.  Green,  L.  R.  (1895),  2  Q.  B.  Div.,  1 ;  s.  c,  ib.,  315. 

B  Summers  v.  Boyce  et  al.,  97  Law  Times  Reps.,  505  (Ch.  Div.,  1908). 

«  Louis  V.  Smellie,  7.3  Law  Times  Reps.,  22G  (Ct.  of  Appeal,  1895).  See  also  Measures 
Bros.  V.  Measures,   L.   R.    (1910),   1   Ch.,   33G. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  367 

compiled  by  the  agent,  was  his  own  property  in  which  his  employer 
had  no  rights.^ 

A  Canadian  court  has,  also,  held  that  an  employers  rate  of  profit 
and  his  cost  of  production  are  confidential  information  for  the  dis- 
closure of  which  he  may  recover  damages.  In  this  case  former  em- 
ployees of  a  manufacturer  of  what  was  known  as  the  "  Loose-leaf 
Business  System  of  Book  and  Account  Keeping,"  who  were  promot- 
ing a  competing  company  disclosed  to  others  the  company's  rate  of 
profit  and  cost  of  production,  and  the  court  directed  an  inquiry  into 
the  amount  of  damage  resulting  from  the  disclosure  as  well  as  from 
the  use  of  patterns  of  sheets  and  records  or  dimensions  of  blank 
sheets,  taken  from  the  employer's  place  of  business.- 

Section  6.  Appropriation  of  values  created  by  competitors'  expenditures. 

A  peculiarly  subtle  form  of  competition  is  disclosed  in  the  appro- 
priation in  diverse  ways  of  values  created  by  a  competitor's  expendi- 
tures. Such  a  method  of  obtaining  a  rival's  patronage  and  at  the 
same  time  profiting  by  his  pioneering  in  a  particular  business  has 
been  attempted,  among  other  ways,  by  surreptitiously  or  openly  tak- 
ing information  which  another  has  collected  for  sale  at  large  expense, 
and  disposing  of  it  in  competition  with  the  owner;  by  duplicating 
and  selling  another's  articles,  where,  without  the  use  of  the  original, 
a  competing  article  could  not  be  had  at  all,  or  could  be  produced 
only  at  great  expense;  by  filling  and  selling  a  competitor's  recepta- 
cles without  entirely  obliterating  his  name  and  that  of  his  product 
and  without  any  express  notice  to  the  purchaser  that  the  receptacle 
did  not  contain  the  same  article  with  which  it  was  originally  filled. 
The  cases  of  this  description  are  apparently  limited  in  number  and, 
while  they  show  a  tendency  on  the  part  of  the  courts  to  prevent  one 
from  dishonestly  acquiring  the  benefit  of  another's  investments  and 
labor,  the  limits  of  the  doctrine  do  not  appear  to  be  as  yet  well 
defined. 

AMERICAN  DECISIONS. 

An  illustration  of  the  principle  is  found  in  a  decision  of  the 
Supreme  Court  of  the  United  States  in  1005  where  it  was  held  that  the 
Chicago  Board  of  Trade,  which  permitted  certain  telegraph  com- 
panies to  have  its  quotations  for  transmission  to  parties  approved 
by  it,  could  enjoin  a  company,  which  secured  the  quotations  in  some 
unknown  manner,  from  distributing  them  to  others.  In  this  case  it 
was  held  that  the  exchange  did  not  lose  its  property  right  in  the 

1  Martin  r.  Brown,  11  Western  Law  Reporter,  237  (K.  B.,  Manitoba,  1910). 

2  Copeland-Chatterson  Co.  i;.  Business  Systems  (Ltd.),  8  Ont.  W.  R.,  888  (1906)  ;  s.  c, 
10  Oat.  W.  R.,  819   (1007). 


368  EEPORT   OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

quotations  by  communicating  them  to  the  telegraph  companies.^ 
In  a  subsequent  case  the  same  court  held  that  quotations  on  the  New 
York  Cotton  Exchange  were  the  property  of  the  exchange,  and  that 
it  could  control  their  distribution  in  such  a  way  as  it  saw  fit.- 
Similarly  where  a  telegraph  company,  at  considerable  expense,  col- 
lected news  relating  to  current  prices  of  securities,  race  track,  base- 
ball, and  other  events,  it  was  held  that  the  company's  property  in  the 
news,  which  consisted  largely  in  making  it  available  in  the  shortest 
possible  time  after  the  happening  of  the  events  reported,  was  entitled 
to  protection,  and  that  this  company  could  enjoin  another  from  tak- 
ing the  news  from  its  tape  in  the  office  of  its  patrons  and  delivering 
it  with  only  a  few  moments  loss  of  time  to  its  own  customers.^  And 
a  company  which  collected  advance  information  respecting  the  pro- 
posed construction  of  buildings,  sewers,  waterworks,  and  other  public 
works,  which  it  sold  to  subscribers  under  contract  that  it  should  be 
held  in  strict  confidence,  was  granted  an  injunction  restraining 
another  from  procuring  the  information  from  its  subscribers  and 
selling  it  in  competition  with  it.*  The  same  principle  appears  to 
have  been  applied  to  entirely  different  facts  in  Fonotipia  Co.  (Ltd.) 
et  al.  V.  Bradley.^  There  the  Fonotipia  Co.  manufactured  records 
for  use  on  graphophones.  The  Continental  Record  Co.  manufac- 
tured records  from  a  matrix  produced  by  them  from  the  commercial 
records  of  the  Fonotipia  Co.,  and  sold  them  in  competition  with  it, 
advertising  them  at  greatly  reduced  rates  and  as  reproductions  of 
the  voices  of  artists  under  contract  with  the  Fonotipia  Co.,  assert- 
ing also  that  the  records  were  identical  with  the  originals.  The 
Fonotipia  Co.  was  granted  an  injunction  restraining  the  rival 
company  from  selling  copies  of  its  records,  the  court  holding  it  to 
be  a  wrongful  appropriation  of  the  property  of  the  Fonotipia  Co. 
Similarly,  where  a  company  manufactured  illuminating  gas  called 
Prest-0-Lite  for  use  on  automobiles,  and  sold  it  in  containers  of 
j)eculiar  construction,  and  had  established  depots  in  all  the  larger 
towns  of  the  United  States,  where  an  empty  container  could  be  im-. 
mediately  exchanged  for  a  filled  one,  it  was  held  that  the  company 
could  restrain  a  dealer  from  having  said  containers  filled  with  a 
competing  gas  and  disposing  of  them  in  competition  with  it  with- 
out  first   obliterating   therefrom    the    company's   name,    the    word 

1  Board  of  Trade  v.  Christie  Grain  &  Stock  Company,  198  U.  S.,  236  (1905). 

2  Hunt  V.  New  York  Cotton  Exchange,  205  U.  S.,  322   (1907). 

3  National  Telegraph  News  Co.  v.  Western  Union  Telegraph  Co.,  119  Fed.,  294  (C.  C.  A., 
1902).  See  also  Board  of  Trade  v.  Haddcn-Krnll  Co.  et  al.,  109  Fed.,  705  (C.  C,  1901)  ; 
Illinois  Commission  Co.  et  al.  v.  Cleveland  Telegraph  Co.  et  al.,  119  Fed.,  301  (C.  C.  A.. 
1902)  ;  Board  of  Trade  v.  Cella  Commission  Co.  et  al.,  145  Fed.,  28  (C.  C.  A.,  1906)  ; 
Kiernan  v.  The  Manhattan  Quotation  Telegraph  Co.,  50  Hqw.  Prac,  194  (N,  Y.  Sup.  Ct., 
l'<7Gl  ;  Board  of  Trade   r.  Tucker,   221  Fed.,   305    (C.   C.  A.,   1915). 

*  Dodge  Co.  -v.  Construction  Information  Co.  et  a!.,  183  Mass.,  62  (1903). 
5  171  Fed.,  951   (C.  C.  1909). 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  369 

"  Prest-0-Lite "  and  any  other  marking  identifying  the  container 
with  the  manufacturer  of  Prest-O-Lite.^  So  also  a  company  whicli  had 
incurred  the  initial  expense  of  a  series  of  advertisements  by  publish- 
ing a  picture  of  a  young  woman  with  the  words  "  Wink  at  the  grocer 
and  see  what  you  will  get.  K.  T.  C,"  for  the  puii^ose  of  exciting 
curiosity  and  attracting  attention  to  subsequent  advertisements  that 
would  disclose  the  character  of  the  goods  advertised  and  the  name  of 
the  manufacturer,  was  granted  a  preliminary  injunction  restraining 
another  from  publishing  adveAisements  in  such  form  as  to  create  the 
belief  that  its  goods  were  referred  to  in  the  advertisement  first 
issued.^  The  case  was  not  carried  to  a  final  hearing.  On  the  other 
hand,  the  St.  Louis  court  of  appeals  held  that  a  laundry  company 
which  had  inaugurated  a  similar  series  of  advertisements  by  having 
an  advertising  companj^  'publish  on  signboards  and  cards  the  word 
"  Stopurkicken,"  could  not  recover  from  an  envelope  company  which, 
with  knowledge  of  the  purpose  for  which  public  attention  had  been 
directed  to  the  word,  itself  printed  and  distributed  a  large  number  of 
cards  bearing  that  word,  followed  by  the  name  of  the  envelope  com- 
pany.^ 

ENGLISH  DECISIONS. 

The  decisions  in  some  of  the  above  cases  are  in  accord  with  opinions 
of  the  English  courts.  Thus,  where  a  telegraph  company  purchased 
the  sole  privilege  of  obtaining  quotations  from  the  floor  of  the 
London  Stock  Exchange  and  sold  the  information  to  subscribers  on 
condition  that  they  would  not  sell  or  communicate  it  to  nonsub- 
scribers,  and  also  later  printed  it  on  sheets  for  the  use  of  subscribers, 
it  was  held  that  the  company  could  enjoin  othei's  from  ol)taining  the 
quotations  from  its  tapes  or  sheets  and  from  inducing  any  of  its 
subscribers  to  supply  the  information  in  violation  of  their  contract.* 
In  like  manner,  a  telegraph  company  which  collected  information 
regarding  the  results  of  horse  races  and  sold  it  to  hotels,  clubs,  and 
news  rooms,  vxas  granted  an  injunction  restraining  a  lival  company 
from  surreptitiously  obtaining  or  copying  this  news  from  its  sheets, 
tapes,  or  other  documents  and  from  communicating  the  news  so 
obtained.^ 

1  rrost-O-Lite  Co.  v.  Davis  et  al.,  209  Fed.,  917  (D.  C,  1913).  Cf.  Victor  Talking 
Mach.   Co.   V.  Armstrong,   132   Fed.,  711    (C.   C,   1901-). 

-  Case  not  reported. 

3  Westminister  Laundry  Co.  v.  Hesse  Envelope  Co.,  156  S.  W.,  7G7  (St.  Louis  court  of 
appeals,  191.")). 

■>  Exchange  Telegraph  Co.  v.  Gregory  &  Co.,  L.  R.   (1895),  1  Q.  B.,  147. 

=  Exchange  Telegraph  Co.  v.  Central  News  Co.  et  al.,  L.  R.  (1897),  2  Ch.,  48.  See  also 
Exchange  Tel.  Co.  v.  Howard  et  al.,  22  Times  Law  Reps.,  375   (1906). 

30035°— 10 24 


370  REPORT  OF    THE   COMMISSIONER   OF   CORPORATIONS. 

Section  7,  Defamation  of  competitors  and  disparagement  of  competitors' 
goods. 

The  reported  cases  show  that  it  is  not  unusual  for  one  competitor 
to  attempt  to  injure  another  by  means  of  libel  or  slander,  or  by  dis- 
paraging his  goods,  and  that  this  conduct  has  frequently  interfered 
with  the  business  of  a  rival  who  has  been  attacked.  As  shown  below, 
such  practices,  in  connection  with  other  acts  of  "  unfair  competition," 
have  been  enjoined  by  the  Federal  courts  in  enforcing  the  Sherman 
law.^  Other  courts,  when  declaring  such  methods  actionable,  have 
referred  to  them  in  substantially  similar  terms.  Thus  Vice  Chan- 
cellor Malins  described  a  proceeding  as  one  "  to  prevent  unfair  trad- 
ing, to  prevent  the  issuing  of  a  falsehood  to  the  detriment  of  an- 
other," and  in  referring  to  the  untrue  statements  complained  of, 
said:  "Is  that  fair  trading?"  and  "That  is  unfair  dealing."-  In 
another  case.  Lord  Justice  Cotton  expressed  the  opinion  that  a  circu- 
lar giving  the  impression  that  the  business  of  a  competitor  was 
about  to  fail  was  not  justified  as  an  act  of  "  fair  competition,"  and 
Lord  Justice  Bowen  reached  the  same  conclusion.^  Likewise  Brett, 
J.,  referring  to  an  alleged  libel,  left  it  to  the  jury  to  determine 
whether  the  defendant  had  not  "  gone  beyond  fair  fighting  and  done 
that  which  brings  him  within  the  law."^  Similarly,  in  this  country 
a  Federal  court  expressed  the  opinion  that  a  certain  advertisement 
was  not  justified  as  "proper  competition,"^  and  the  Supreme  Court 
of  Georgia,  while  conceding  that  it  is  not  always  easy  to  draw  the 
line  between  what  may  be  considered  "  legitimate  competition  "  and 
a  libelous  publication,  came  to  the  conclusion  that  an  advertisement 
complained  of  exceeded  the  bounds  of  "  legitimate  competition."  ^ 

AMERICAN   DECISIONS. 

Personal,  defamation. — Words  imputing  the  commission  of  a 
crime  are  actionable  in  themselves  without  proof  of  special  damage. 
Thus,  in  a  Federal  court  an  article  charging  a  competitor  with 
being  a  trust  was  held  actionable,  this  being  an  offense  punishable 
both  by  the  laws  of  the  United  States  and  the  State  of  Iowa,  where 
both  parties  were  engaged  in  business.'^  It  has  likewise  been  held 
actionable  to   charge   an  importer  with   attempting  to  evade   and 

1  U.  S.  V.  Central- West  Publishing  Co.  et  al..  p.  402. 

2Tliorley's  Cattle  Food  Co.  v.  Massam,  L.  R.  (1877 »,  6  Ch.  Div.,  574,  587,  588.  And 
see  L.  R.  (1880),  14  Ch.  Div.,  763,  780. 

srielmore  v.  Smith,  L.  R.   (1880),  35  Ch.  Div.,  449,  454,  456   (Ct.  of  Appeal). 

*  Latimer  v.  Western  Morning  News  Co.,  25  Law  Times  Reps.,  44,  46   (1871). 

6  Continental  Insurance  Co.  v.  Board  of  Fire  Underwriters  of  the  Pacific  et  al.,  67  Fed., 
310,  323   (C.  C,  1895). 

Tlolraes   r.   Clisby,    118   Ga.,    820,   824    (1903). 

'  Sternberg  Manufacturing  Co.  v.  Miller,  Du  Brul  &  Peters  Manufacturing  Co.,  170  Fed., 
298  (C.  C.  A.,  1909).  See  also  American  Malting  Co.  v.  Keitel,  217  Fed.,  072  (D.  C, 
1914), 


TUUST   LAWS   AND   UNFAIK   COMPETITION.  371 

defraud  the  revenue  laws  by  making  fraudulent  invoices  of  books 
imported  from  Canada.^ 

To  impute  a  want  of  integrity,  capacity,  or  skill  in  the  conduct 
of  a  business  is  also  actionable  without  proof  of  special  damage. 
It  was  so  held  where  a  grocer  distributed  circulars  in  which  it  was 
stated  "that  an  unscrupulous  grocer  of  the  same  name,  in  the  imme- 
diate vicinity  or  neighl)orhood  advertises  '  Davey's  teas  and  coffees,' 
with  a  view  to  deceive  the  public,  and  may  sell  an  inferior  article;  "  ^ 
and  where  an  art  dealer  informed  one  who  had  purchased  a  painting 
from  a  competitor  that  he  had  been  "  roped  in,"  and  that  the  paint- 
ing was  not  an  original,  but  a  copy,  the  court  held  that  the  words 
Avere  actionable  without  proof  of  special  damage,  pointing  out  that 
the  plaintiff  had  been  in  business  seven  years,  and  might,  therefore, 
be  assumed  to  know  an  original.''  The  same  rule  was  applied  where 
a  company  publishing  a  city  directory  issued  "a  warning"  to  the 
effect  that  "  certain  unscrupulous  parties,  in  making  a  pretended  can- 
vass of  the  city  for  a  directory,  persist  in  falsely  representing"  that 
the  defendant  company  did  "  not  intend  to  publish  a  directory  " ;  that 
"  these  untruthful  adventurers  "  knew  full  well  that  it  was  possible 
for  them  to  secure  business  only  on  the  basis  of  "  misrepresentation  " ; 
that  the  people  of  the  city  had  experience  with  "  wandering  fakirs, 
whose  only  capital"  was  "glowing  promises  and  only  object  to 
capture  their  money  " ;  and  that  it  was  "  folly  to  pay  money  to  irre- 
siK)nsible  directory  schemers  "  when  the}^  could  be  sure  of  a  reliable 
work  at  the  same  or  less  cost.*  On  the  other  hand,  where  the  plain- 
tiff' was  not  referred  to  by  name,  it  was  held  not  actionable  for  a 
competitor  to  issue  a  catalogue  containing  language  such  as  "  There 
is  no  intent  to  mislead,  exaggerate,  or  appeal  to  the  selfish  desire 
for  gain  through  the  imaginary  misfortunes  of  others"  and  "We 
do  not  advertise  books  at  the  price  of  paper  and  printing  because 
it  would  not  be  true."  ^     But  it  has  been  held  actionable  to  refer  to 

1  Worthlnston  v.  Houghton  ot  al.,  100  Mass.,  481  (1S72).  See  also  Young  et  al.  r. 
Kulin,  71  Tex.,  645  (1888)  :  Mowry  v.  Raal)o  et  al..  89  Cal.,  GOG  (1891)  ;  and  Blumhardt 
t'.  Rohr,  70  Md.,  328  (1889),  involving  cliarges  that  the  plaintiffs,  who  were  hutchers, 
sold  diseased  or  unwholesome  meat,  this,  according  to  the  latter  case,  being  punishable 
at  common  law  ;  and  see  Marino  r.  Di  Marco,  41  App.  D.  C,  76  (101.",),  where  it  was  held 
actionable  to  say  of  a  fruit  dealer  that  he  sells  "  rotten  goods,"  especially  in  view  of  the 
food  and  drugs  act;  and  Dorn  &  McOinty  et  al.  v.  Cooper,  117  N.  W.,  1,  127  N.  W.,  661 
(Iowa  Sup.  Ct.,  1910),  where  the  plaintiffs  were  charged  with  being  interested  in  a  pool 
to  control  the  local  hog  market. 

sDavey  v.  Davcy,  50  N.  Y.  Supp.,  161   (Sup.  Ct,  1898). 

apreisinger  r.  Moore,  65  N.  .1.  Law,  286  (1900). 

"Robinson  r.  Eau  Claire  Book  &  Stationery  Co.  et  al.,  85  N.  W.,  983  (Wis.  Sup.  Ct, 
1901). 

^Clarkson  v.  The  Book  Supply  Co.  ct  al..  170  111.  App.,  80  (1912).  Per  McRurely,  J.: 
"  We  fail  to  see  how  the  words  complained  of  can  possibly  be  stretched  so  as  to  be  held 
defamatory  of  the  plaintiff.  To  do  so  would  subject  any  merchant  advertising  articles 
for  sale  as  '  genuine  '  or  '  well  made  '  to  an  action  for  Iil)el  by  other  merchants,  on  the 
ground  that  the  advertiser  intended  to  charge  them  with  selling  articles  which  were  imi- 
tatirns  and  poorly  made."  Cf.  Hubbuck  &  Sons  (Ltd.)  v.  Wilkinson,  Ileywood  &  Clark 
(Ltd.),  p.  381. 


372  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

a  rival  trade  journal  as  a  "  fake,"  ^  to  charge  a  rival  press  associa- 
tion witli  stealing  news  by  means  of  tapped  wires,^  and  to  charge  a 
publisher  ^Yith  having  sold  the  support  and  advocacy  of  his  news- 
paper to  certain  corporations  for  a  large  sum  of  money .^  Likewise 
where  a  retail  druggist  advertised  the  goods  of  a  manufacturer  at  re- 
duced prices,  it  was  held  actionable  for  tlie  latter  to  reproduce  this 
advertisement,  followed,  in  large  type,  witli  the  words  "The  above 
ad  is  a  fraud."*  A  cause  of  action  was  also  disclosed  where  it  was 
alleged  tliat  a  corporation  published  an  advertisement  to  the  effect 
that  the  plaintiff,  its  former  agent,  had  not  been  connected  with  that 
company  since  a  specified  date,  and  that  any  contracts  made  by  him 
for  the  company  would  be  void,  the  purpose  being  to  injure  the 
plaintiff'  in  his  business  by  making  the  public  believe  he  was  under- 
taking to  act  as  the  agent  of  the  defendant  when  in  fact  he  was  not 
so  doing.^ 

As  noted  above,  it  is  actionable  to  charge  a  tradesman  with  being 
unskillful  in  the  conduct  of  his  business.  Thus,  where  the  agent  of 
a  corporation  manufacturing  ice  machines  wrote  a  letter  to  a  firm 
Avhich  had  accepted  the  bid  of  a  rival  manufacturer,  stating  that 
the  latter  was  a  "  secondhand  dealer,"  that  it  did  inferior  work,  and 
used  inferior  material,  that  it  ran  a  "  scab  establishment,"  and  did 
not  have  a  "mechanic"  in  the  whole  establishment,  "including  the 
head  of  the  concern,"  it  was  held  that  the  words  were  actionable 
Avithout  proof  of  special  damage."  And  in  Louisiana  it  has  been 
held  actionable  for  a  merchant  to  place  in  his  show  window  a  card 
bearing  the  words  "  Don't  be  misled.  This  store  and  window  has 
no  connection  with  the  would-be  auction  next  door."  ^ 

To  impute  dishonesty  to  a  trader  is  likewise  actionable.  Thus, 
where  a  commission  merchant  called  attention  to  the  fact  that  his 
former  partner  was  a  minor  and  not  legally  responsible  for  his  con- 
tracts, and  observed  that  "  a  word  to  the  wise  is  sufficient,"  it  was 
held  that  the  words  were  libelous  for  the  reason  that  they  conveyed 

1  Midland  PubUshing  Co.  v.  Implement  Trade  Journal  Co.  et  al.,  108  Mo.  App.,  223 
(1904). 

2  Union  Associated  Pi-ess  v.  Heath,  63  N.  Y.  Supp.,  96  (Sup.  Ct,  App.  Div.,  1900). 
spitcli  V.  De  Young,  66  Cal.,  339  (1885).     See  also  Coleman   r.  South  wick,  and  Marais 

V.  The  Volksstem  Co.,  p.  380. 

^  The  Washington  Post  and  Durham  rmplex  Razor  Co.  v.  O'Donnell,  43  App.  D.  C,  215 
(1915). 

BBehre  r.  National  Cash  Register  Co.,  100  Ga.,  213  (1897).  See  also  Warner  v.  Clark, 
45  La.  Ann.,  863  (1893),  and  Miller  v.  Green,  33  Nova  Scotia,  517  (1900). 

0  Pennsylvania  Iron  Works  Co.  v.  Henry  Voght  Machine  Co.,  96  S.  W.,  551  (Ky.  Ct. 
App.,  1906).  And  see  Green  r.  Davies,  83  N.  Y.  App.  Div.,  216  (1903),  where  it  was  held 
actionable  to  conspire  to  injure  a  competitor  by  causing  his  customers  to  believe  that  he 
was  insane  and  incapable  of  attending  to  his  business ;  and  Southwick  v.  Stevens,  10 
Johns.,  443  (1813),  where  the  editor  of  the  Albany  Register  recovered  damages  in  an 
action  against  the  editor  of  the  Ontario  Messenger,  based  on  an  article  appearing  in  the 
latter  paper  to  the  effect  that  the  plaintiff  was  insane  and  had  recently  been  restrained 
by  his  friends. 

'Gilly  V.  Uirsh,  122  La.,  966   (1909). 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  373 

the  imputation  of  dishonesty  in  connection  with  the  plaintiff's  busi- 
ness, that  he  was  wanting  in  honor  and  integrity,  and  that  those  who 
should  deal  with  him  would  suffer  loss.^  Similarly,  it  was  held 
actionable  for  a  milk  dealer  to  write  to  a  shipper,  advising  him  to 
"  look  out "  for  the  plaintiff',  a  rival  dealer,  "  unless  you  have  surety 
for  your  goods,  as  he  does  not  pay  any  of  his  shippers  anything."  - 

It  is  also  actionable  to  impeach  the  credit  of  traders  by  imputing 
bankruptcy  or  even  financial  embarrassment.  For  example,  in 
Florida  a  merchant  recovered  damages  from  a  competitor  who 
falsely  stated  that  he  had  failed  and  had  gone  into  bankruptcy.^ 
And  where  in  a  newspaper  it  was  stated  in  substance  that  a  rival 
paper  had  been  maintaining  for  some  time  a  precarious  existence; 
that  it  was  no  longer  able  to  meet  its  financial  obligations;  that  it 
was  tottering,  bankrupt,  and  about  to  pass  out  of  existence,  it  was 
held  that  the  article  was  libelous  per  se.* 

Disparagement  of  goods  as  an  indirect  attack  on  a  manufac- 
turer OR  dealer. — Although  statements  which  merely  disparage  the 
goods  of  a  tradesman  or  manufacturer  are  not  actionable  without 
proof  of  special  damage,  those  which  also  impeach  the  character  or 
reputation  of  the  plaintiff  in  his  business  are  actionable  per  se.  Ac- 
cordingly, it  has  been  held  actionable  to  charge  a  competitor  with 
selling  a  spurious  article  under  labels  and  wrappers  which  he  had 
caused  to  be  counterfeited,^  or  to  charge  a  butcher  with  selling  Chinese 
pork  and  lard  which  contained  the  seeds  of  disease  and  spread  pes- 
tilence and  death,**  or  to  make  false  statements  concerning  the  pedigree 
of  a  breeding  horse  which  had  been  represented  by  the  owners  to  be 
imported  and  registered.''  So  where  a  retailer  advertised  a  certain 
brand  of  shoes  as  perfect  and  undamaged  stock,  and  at  reduced  prices, 
it  was  held  actionable,  although  no  special  damage  was  averred,  for 
the  manufacturers  to  advertise  that  their  damaged  shoes  were  sold 
to  certain  dealers  under  an  agreement  that  they  should  be  sold  as 
imperfect  goods,  and  that  those  who  bought  their  shoes  of  others  than 
their  designated  agents  would  have  only  themselves  to  blame  for  any 

iHays  r.  Mather.  15  111.  App.,  30  (18<S4). 

2  Brown  v.  Vannaman.  85  Wis.,  451   (189.3). 

awolkowsky  v.  Garfunkel,  65  Fla.,  10  (1913). 

*Bee  Publishing  Co,  v.  World  Publishing  Co.,  82  N.  W.,  28  (Nebr.  Sup.  Ct.,  1900).  See 
also  Newell  r.  How,  31  Minn.,  235  (1883)  ;  Simons  v.  Burnham,  102  Mich.,  189  (1894)  ; 
and  Hynds  v.  Fourteenth  Street  Store,  144  N.  Y.  Supp.,  1030  (1913). 

'•  Stekotco  r.  Kimm  et  al..  48  ;Mirh.,  322  (1SS2K  See  also  Tiandon  et  al.  r.  Watkins,  61 
Minn.,  137  (1895)  ;  Burr's  Damascus  Tool  Works  v.  Peninsular  Tool  Mfg.  Co.,  142  Mich., 
417  (1905)  ;  X'ew  Iberia  Extract  Co.  v.  E.  Mcllhenny's  Son  et  al.,  61  So.,  131  (La., 
1912). 

oMowry  v.  Raabe  et  al.,  89  Cal.,  GOO  (1801). 

MIeukle  et  al.  r.  Schaub,  54  N'.  W..  293  (Mich.  Sup.  Ct.,  1893).  Per  Long,  J.:  "It  is 
apparent  *  *  *  that  the  action  is  based,  not  only  upon  the  slander  of  the  horse,  but 
also  upon  the  character,  fame,  and  credit  of  the  plaintiffs,  who  are  the  owners  thereof, 
and  engaged  in  the  business  and  calling  of  keeping  the  horse  for  hire,  gain  and  reward." 
See  also  Wier  r.  Allen,  51  N.  II.,  177   (1871). 


374  KEPOET  OF   THE   COMMISSIONER  OF    CORPOEATIONS. 

disappointment  or  loss  that  might  ensue.^  On  the  other  hand,  in 
a  case  in  which  the  facts  were  very  similar,  the  Supreme  Com^t  of 
Massachusetts  reached  a  different  conclusion.  There,  it  appeared 
that  a  representative  of  a  manufacturer  sold  a  tradesman  a  quantity 
of  stockings,  stating  that  they  were  first-quality  navy  blue,  and  that 
the  dealer  subsequently  advertised  them  for  sale  at  12i  cents  a  pair. 
The  manufacturer  thereupon  published  an  advertisement  containing 
the  following: 

Caution. — An  opinion  of  Shaw  Knit  hosiery  should  not  be  formed  from  the 
navy-blue  stockings  advertised  as  of  first  quality  by  Messrs.  S.  W.  Boyuton  & 
Co.  at  12J  cents,  since  we  sold  that  firm,  at  less  than  10  cents  a  pair,  some  lots 
which  were  damaged  in  the  dye-house. 

Although  tlie  plaintiff  submitted  evidence  tending  to  show  that 
the  stockings  were  not  damaged  in  any  respect,  but  were  of  first 
quality,  the  trial  court  instructed  the  jury  to  return  a  verdict  for  the 
defendant.     This  ruling  was  affirmed  on  appeal.- 

In  another  case  it  appeared  that  the  plaintiff  and  defendants  were 
the  only  persons  handling  stoves  in  a  certain  town,  and  that  the  de- 
fendants published  an  advertisement  purporting  to  be  the  statement 
of  a  satisfied  customer  to  the  effect  that  he  had  purchased  of  a  certain 
hardware  dealer,  not  the  defendants,  a  stove  which  was  represented 
as  new  and  one  of  the  best  on  the  market,  but  that  after  only  three 
years  of  careful  usage  he  gave  it  to  a  drayman  for  hauling  it  away ; 
and  further  stated  that  it  may  be  that  the  American  people  like  to 
be  humbugged,  and  that  some  dealers  still  think  so,  but  the  great 
majority  prefer  a  square  deal.  The  court  held  that  the  article  was 
libelous  and  that  the  contention  that  the  defendants'  interest  as  com- 
peting dealers  refuted  the  presumption  of  malice  and  made  the  arti- 
cle in  a  sense  privileged  was  without  merit.  Although  it  was  urged 
that  it  was  merely  a  disparaging  criticism  of  the  goods,  the  court 


1  Holmes  V.  Clisby,  118  Ga.,  820,  824  (100.''.).  Per  Cobb,  J.  :  "  Such  a  publication,  in  our 
opinion,  exceeds  the  bounds  of  legitimate  competition.  It  is  right  and  proper  for  trades- 
men to  puff  their  own  goods  to  the  disparagement  of  those  of  others,  but  they  must  not 
allow  their  zeal  to  betray  them  into  an  attack  upon  the  personal  reputation  of  their  com- 
petitors for  honesty  and  integrity." 

2Boynton  v.  Shaw  Stocking  Co.,  1.5  N.  E.,  507,  510  (1888).  Per  Allen,  J.:  "No  doubt 
a  case  might  be  imagined  where,  from  peculiar  circumstances,  as,  for  example,  from  the 
nature  of  the  article  offered  for  sale,  or  from  the  long  continued  habit  of  selling  goods  of  a 
different  character  or  quality  from  that  represented,  it  would  be  a  natural  inference  from 
a  charge  otherwise  like  that  which  is  the  subject  of  this  action  that  tlie  party  was  prac- 
ticing fraud  or  imposition,  or  was  guilty  of  trickery  or  meanness.  In  the  present  case, 
such  an  inference  does  not  naturally  arise,  and  the  object  of  the  defendant's  advertise- 
ment, jud.ging  from  its  language,  appears  to  have  been  rather  to  uphold  and  maintain 
the  character  of  their  goods,  than  to  attack  the  plaintiff's  character." 

The  Supreme  Court  of  Georgia,  in  Holmes  v.  Clisby,  nliovo,  referred  to  this  decision 
and  Boynton  v.  Remington,  3  Allen,  ."97,  and,  while  admitting  that  they  were  very  closely 
in  point,  declined  to  follow  them,  saying  :  "  Notwithstanding  the  very  high  respect  which 
we  entertain  for  the  distinguished  court  which  rendered  those  decisions,  we  are  unwilling 
to  allow  them  to  influence  us  to  make  a  decision  which  in  our  judgment  would  be 
unsound." 


TEUST   LAWS   AND   UNFAIR   COMPETITION.  375 

was  of  the  opinion  that  the  article  clearly  intended  to  charge  the 
dealer  of  being  guilty  of  deception  and  unfair  dealing.^ 

Disparagement  of  competitors'  goods. — Actions  based  on  state- 
ments merel}''  in  disparagement  of  a  trader's  goods  have  been  brought 
less  frequently  in  this  country  than  in  England,  and  they  have  gen- 
erally been  unsuccessful.  This  appears  to  be  due  partly  to  the  fact 
that  the  pleadings  were  drawn  on  tlie  theory  that  the  disparaging 
language  reflected  also  on  the  conduct  of  the  plaintiff  in  the  way  of 
his  trade,  and  was  therefore  actionable  per  se. 

One  of  the  earliest  American  cases  of  this  description  was  brought 
in  New  York  in  1830  by  a  watchmaker,  who  complained  that  a  rival 
had  said  that  the  plaintiff's  watches  were  not  good,  but  were  "bad" 
and  "  inferior."  The  court  gave  judgment  for  the  defendant,  observ- 
ing that  the  words  were  not  actionable  in  themselves  and  that  special 
damage  was  not  alleged.-  Likewise  in  Maryland,  where  the  manu- 
facturer of  a  dentifrice  brought  an  action  against  a  competitor  who, 
it  was  alleged,  had  falsely  stated  that  the  plaintiff's  article  was  noth- 
ing but  grit,  was  very  harmful  to  the  gums,  and  would  take  the 
enamel  off  the  teeth,  it  was  held  that  in  the  absence,  of  an  averment 
of  special  damage  the  plaintiff  could  not  recover.^ 

The  same  rule  is  applied  in  the  Federal  courts.  Thus,  where  the 
defendants,  in  referring  to  a  covering  manufactured  by  a  competitor, 
used  the  words,  "  You  recommend  something  which  the  experience 
of  all  practical  men  demonstrates  is  a  fraud,"  and  further,  "  that  it 
is  a  short-lived  affair ;  that  it  warps,  twists,  chars,  and  becomes  gen- 
erally disintegrated,  useless,  and  dangerous  as  a  nonheat  conducting 
cover  to  be  applied  to  steam  pipes,"  the  court  gave  judgment  for  the 
defendant,  being  of  opinion  that  the  word  "  fraud  "  related  to  the 
covering  and  not  to  the  plaintiff,  and  that  the  language  amounted 
merely  to  the  expression  of  an  unfavorable  opinion  of  the  goods  of  a 
competitor.^     So,  in  the  absence  of  an  allegation  of  special  damage, 

1  Ramharter  r.  Olson  et  al.,  128  N.  W.,  806  (S.  Dak.  Sup.  Ct.,  1910). 

aq^ohias  r.  Ilnrlanfl,  4  Wond..  5^7,  54.",  (N.  Y..  lS:^n).  Tor  Mnrcy,  .1.  :  "It  appears  to 
me,  that  when  the  words  are  spoken,  not  of  the  trader  or  manufacturer,  but  of  the  quality 
of  the  articles  he  makes  or  deals  in,  to  render  them  actionable,  per  se,  they  must  import 
that  the  plaintiff  is  guilty  of  deceit  or  malpractice  in  the  making  or  vending  of  them. 
The  words  used  by  the  defendant  here  do  not  import  such  charge,  nor  do  they  amount 
to  a  cliargo  of  the  want  of  skill.  They  do  not  assert  that  the  defendant  could  not  make 
or  did  not  deal  in  good  watches,  or  that  he  practiced  any  deceit  in  making  them  by  which 
purchasers  were  imposed  upon. 

"  The  principle  on  which  this  action  must  be  sustained,  if  it  be  sustainable,  would  make 
a  new  class  of  words  actionable ;  and  when  applied,  as  it  would  be,  to  the  business  com- 
munications  of  every  description  of  citizens,  its  practical  effects  would,  in  my  judgment, 
be  alarming." 

3  Hopkins  Chemical  Co.  r.  Read  Drug  &  Chemical  Co.  of  Baltimore  City,  02  Atl..  478 
(Md.  Ct.  of  App.,  1914). 

■•  Nonpareil  Cork  Manufacturing  Co.  v.  Keasbey  &  Mattison  Co.  et  al.,  108  Ked.,  7-1,  72.3 
(C.  C,  1901 1.  Per  Dallas,  Circuit  Judge:  "  *  •  »  Such  expressions  are  not  uncommon 
among  rivals  in  trade,  and  their  correctness  in  each  instance  is  for  determination  by 
those  whose  custom  is  sought,  and  not  by  the  courts." 


376  EEPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

it  has  been  held  not  actionable  to  state  that  safes  of  a  certain  make 
and  type  are  "  very  cheaply  constructed  "  and  "  easily  burglarized."  ^ 

Owing  to  the  absence  of  decisions  on  the  merits  in  cases  of  this 
description,  it  is  impossible  to  determine  the  extent  to  which  a  manu- 
facturer or  dealer  in  this  country  may  disparage  the  goods  of  a  com- 
petitor without  rendering  himself  liable.  This  branch  of  the  law, 
however,  has  been  developed  to  some  extent  in  England,  as  will  ap- 
pear hereafter.^ 

Libel  and  slander  not  enjoined. — It  appears  to  be  a  settled  doc- 
trine in  this  country  that  the  courts  will  not  restrain  the  publication 
of  a  libel,  as  such,  however  great  the  injury  to  property  may  be. 
Thus,  the  United  States  Supreme  Court  directed  the  dismissal  of  a 
bill  in  which  it  was  alleged  that  the  defendants  had  combined  for 
the  purpose  of  destroying  the  plaintiff's  business  "  by  publications  in 
the  newspapers  "  and  in  various  other  waj^s.  Mr.  Justice  Field  ob- 
served that  the  plaintiff  had  a  full  remedy  in  the  courts  of  law,  and 
that  if  the  publications  were  false  and  injurious  he  could  prosecute 
the  publishers  for  libel. ^  Likewise,  a  Federal  circuit  court  de- 
clined to  restrain  a  light  and  power  company  from  making  state- 
ments to  the  effect  that  a  certain  competitor  was  insolvent,  in  great 
financial  straits,  or  on  the  verge  of  bankruptcy,  that  it  would 
very  soon  be  out  of  business  or  in  the  hands  of  a  receiver,  or  that  it 
would  not  be  able  long  to  furnish  electricity  to  its  customers ;  ^  and 
in  another  case  refused  to  restrain  the  editor  of  a  commercial  news- 
paper from  publishing  articles  supporting  certain  action  taken  by  a 
retail  merchants'  association  against  mail-order  houses.^  Likewise, 
where  the  manufacturer  of  Everett  pianos  alleged  that  a  dealer  kept 
at  his  place  of  business  an  untuned  instrument  which  he  falsely  rep- 
resented to  be  a  new  Everett  piano,  just  received  from  the  factory, 
the  court  declined  to  grant  an  injunction,  being  of  opinion  that  the 
bill  stated  nothing  more  than  a  trade  libel  and  consequently  not  a  case 
for  the  interposition  of  a  court  of  equity.'^  In  an  early  case  in  New 
York  the  court  refused  to  restrain  a  pill  manufacturer  from  publish- 
ing a  pamphlet  unquestionably  intended  as  a  gross  libel  upon  a  rival 

1  Victor  Safe  &  Lock  Co.  r.  Deright,  147  Fed.,  211  (C.  C.  A.,  1906).  See  also  Swan  v. 
Tappan,  5  Ciish.,  104  (Mass.,  1849)  ;  Dooling  v.  Budget  Publishing  Co.,  144  Mass.,  258 
(1887)  ;  Wilson  v.  Dubois,  35  Minn,,  471  (1886)  ;  Dust  Sprayer  Manufacturing  Co.  V. 
Western  Fruit  Grower,  126  Mo.  App.,  139  (1907)  ;  Kennedy  v.  Press  Publishing  Co.,  41 
Hun,  422  (N.  Y.,  1886)  ;  Bosi  v.  New  York  Herald  Co.,  68  N.  Y.  Supp.,  898  (1901)  ;  Le 
Massena  v.  Storm,  62  N.  Y.  App.  Div.,  150  (1901)  ;  Marliu  Mre  Arms  Co.  v.  Shields,  171 
N.  Y.,  384  (1902)  ;  and  West  Va.  Transportation  Co.  r.  Standard  Oil  Co.  et  al.,  50  W.  Va., 
611,  622  (1902). 

2  See  p.  382. 

3  Francis  et  al.  v.  Flinn,  118  U.  S.,  385   (1886). 

*  Citizens'  Light,  Heat  &  Power  Co.  v.  Montgomery  Light  &  Water  Power  Co.,  171  Fed., 
553  (C.  C,  1909).     See  also  American  Malting  Co.  v.  Keitel,  217  Fed.,  672  (D.  C,  1914). 

^Montgomery  Ward  &  Co.  v.  South  Dakota  Retail  Merchants  &  Hardware  Dealers' 
Association  et  al.,  150  Fed.,  413  (C.  C,  1907). 

«  Everett  Piano  Co.  v.  Maus.,  200  Fed.,  718  (C.  C.  A.,  1912). 


TBUST   LAWS   AND   UNFAIK   COMPETITION.  377 

manufacturer.^  And  in  Pennsylvania,  where  it  was  alleged  that  an 
agent  and  collector  formerly  employed  by  the  complainant,  an  insur- 
ance company,  entered  the  service  of  a  competitor  and  falsely  in- 
formed the  members  of  the  complainant  association  that  it  was  going 
out  of  the  sick-benefit  branch  of  its  business  and  w^ould  pay  no  more 
sick  benefits,  the  court  refused  an  injunction,  observing  that  so  far  as 
a  cause  of  action  had  been  stated  it  was  one  for  slander  or  libel  and 
cognizable  at  law.-  So  in  Georgia  the  supreme  court  held  that  a 
sewing  machine  company  was  not  entitled  to  an  injunction  to  prevent 
a  rival  from  publishing  false  statements  to  the  effect  that  it,  and  not 
the  complainant,  had  received  a  premium  at  a  certain  exhibition.^  It 
is  likewise  the  rule  in  Massachusetts  that  a  court  of  equity  will  not 
restrain  false  representations  as  to  the  character  and  business  stand- 
ing of  the  plaintiff,^  or  as  to  the  character  or  quality  of  his  property 
or  his  title  thereto,^  if  there  is  no  breach  of  trust  or  contract  involved. 

ENGLISH  AND  COLONIAL  DECISI0NS.6 

Personal  defamation. — In  England  as  in  this  country  false  words 
disparaging  another  in  the  way  of  his  trade,  by  imputing  fraudulent 
or  dishonorable  conduct  in  business,  are  actionable  without  proof  of 
special  damage.  Thus  it  has  been  held  a  libel  to  state  that  a  certain 
newspaper  of  limited  circulation  had  reprinted  columns  of  old  ad- 
vertisements from  other  newspapers  to  inveigle  manufacturers  into 

^  BraiKlreth  r.  Lance,  8  Paige,  23  (1830).  See  also  Manger  v.  Dick,  55  How.  Tr.,  ir.2 
(1878J,  wliere  it  was  said  that  "the  jurisdiction  of  a  court  of  equity  does  not  extend  to 
false  representations  as  to  the  character  or  quality  of  the  plaintiff's  property,  or  to  his 
title  thereto,  when  it  involves  no  breach  of  trust  or  contract,  nor  does  it  extend  to  cases 
of  libel  or  slander."  And  see  Marlin  Fire  Arms  Co.  v.  Shields,  171  N.  Y.,  384  (1902), 
refusing  to  enjoin  the  proprietor  of  a  magazine  from  publisliing  any  article  attacking, 
misrepresenting,  or  depreciating  the  plaintifC"s  rifle,  although  the  plaintiff  had  no  remedy 
at  law  because  of  his  inability  to  prove  special  damage. 

-  Baltimore  Life  Insurance  Co.  v.  Gleisner  and  The  Commonwealth  Beneficial  Associa- 
tion, 202  Fa.  St.,  386  (1902).  But  see  Continental  Insurance  Co.  v.  Board  of  Fire  Under- 
writers of  the  Pacific  et  al.,  67  Fed.,  310,  323  (C.  C,  1895),  where  McKenna,  circuit 
judge,  continued  a  restraining  order  prohibiting  advertisements  by  a  representative  of 
certain  insurance  companies  to  the  effect  that  he  had  authority  to  cancel  the  policies  of 
certain  competing  companies  when  in  fact  he  had  no  such  authority.  In  answer  to  the 
claim  that  it  was  competitive  retaliation,  the  court  said  :  "  But  the  advertisement  exceeds 
proper  competition,  and  advertises  to  the  public  that  which  is  not  true,  to  wit,  that  said 
Rucker  &  Co.  had  the  right  to  cancel  policies  issued  by  plaintiff." 

■''  Singer  Manufacturing  Co.  v.  Domestic  Sewing  Machine  Co.  ct  al.,  49  Ga.,  70,  74 
(1873),  Per  McCay,  J. :  "  If  a  wrong  capable  of  redress  before  the  courts  at  all,  It  comes 
more  nearly  within  the  definition  of  a  libel  or  of  slander  concerning  one's  trade  or  busi- 
ness, than  anything  else.  Equity,  it  must  be  remembered,  will  not  enjoin  every  wrong. 
*     *     *     Libel  and  slander,  however  illegal  and  outrageous,  will  not  be  enjoined." 

••Raymond  v.  Russell  et  al.,  143  Mass.,  295   (1887). 

•5  Boston  Diatite  Co.  v.  Florence  Manufacturing  Co.  et  al.,  114  Mass.,  69  (1873)  ;  White- 
head et  al.  V.  Kitson,  119  Mass.,  484  (1S7G). 

".Vets  passed  in  Fngland  in  1854  and  1873  conferred  on  the  coiu-ts  of  common  law  and 
chancery  power  to  grant  injunctions  in  all  personal  actions  of  contract  or  tort  wiih  no 
limitation  as  to  defamation. 


378  REPOET   OF   THE   COMMISSIOlSrER   OF   COEPOEATIONS. 

paying-  for  the  spurious  advertisements,^  or  printed  articles  stolen 
from  the  office  of  another  newspaper,-  or  to  state  that  a  rival  news- 
paper offers  reduced  rates  to  induce  respectable  advertisers  to  ap- 
pear in  the  "usury  and  quack  doctor  page,"^  or  that  a  newspaper 
secured  a  contract  for  public  printing  "  in  a  mean  and  contemptible 
manner"  and  by  taking  an  "unfair  advantage."*  So  it  has  been 
held  libelous  to  charge  that  an  optician  is  a  licensed  hawker  and  a 
quack  in  spectacle  secrets.^  So,  where  the  court  found  that  there 
was  no  substantial  difference  between  the  cattle  food  manufactured 
by  the  J.  W.  Thorley's  Cattle  Food  Co.  and  that  manufactured  by 
the  executors  of  Joseph  Thorley,  it  was  held  that  the  latter  had  no 
right  to  advertise  that  they  were  alone  possessed  of  the  secret  for 
compounding  the  food,  or  to  issue  circulars  warning  customers  against 
a  company  which  was  seeking  to  "  foist "  upon  the  public  an  article 
which  they  pretend  is  the  same  as  that  manufactured  by  the  late 
Joseph  Thorley.  An  injunction  was  issued  restraining  the  defendants 
from  representing  or  suggesting  that  the  cattle  food  manufactured 
and  sold  by  the  defendants  is  spurious  and  not  genuine.  Vice  Chan- 
cellor Malins  observed  that  "  an  untrue  statement  ought  not  to  be 
made  for  the  purpose  of  pushing  a  trade,"  and  further  stated  that 
he  did  not  entertain  the  least  doubt  that  it  is  right  and  proper  for 
the  court  to  issue  an  injunction  "  where  it  sees  that  one  trader  is 
practicing  an  unfair  mode  of  trading,  representing  that  his  article 
is  the  only  genuine  one,  from  which  it  follows  that  all  others  are 
spurious." ''  And  where  a  manufacturer  of  cotton  belting  published 
a  "  caution  "  in  a  trade  journal,  stating  in  substance  that  unprincipled 
persons  were  imitating  his  belting,  issuing  misleading  figures  respect- 
ing the  strength  of  their  goods,  and  inducing  buyers  to  take  the 
imitation  as  the  genuine  belting,  an  injunction  issued  against  both 
the  publisher  of  the  journal  and  the  manufacturer,  the  latter  being 

1^  Latimer  v.  Western  Morning  News  Co.,  25  Law  Times  Reps.,  44,  46  (1871).  Per 
Brett,  J.  :  "  Tlie  question  before  you  will  be  this,  whether  the  proprietors  of  these  two 
newspapers,  after  liaving  done  that  which  in  law  they  were  perfectly  justified  in  doing, 
viz,  to  praise  themselves  as  much  as  they  possibly  could  in  order  to  obtain  the  support 
and  custom  of  the  public — for  I  know  of  no  law  against  self-laudation — whether  one  of 
them  has  not  gone  beyond  fair  fighting  and  done  that  which  brings  him  within  the  law." 

^Hartnett  et  al.  v.  Wilson  et  al.,  1  Victoria  Law  Times,  45  (185G). 

3  Russell  et  al.  v.  Webster,  23  Weekly  Reporter,  59   (1874). 

*Waddell  v.  Roxburgh,  21  Session  Cases   (4th  Series),  883   (1894). 

SKeyzor  et  al.  v.  Newcomb,  1  F,  &  F.,  559   (1859). 

6  Thorley's  Cattle  Food  Co.  r.  Massam,  L.  R.  (1880),  14  Ch.  Div.,  763,  782,  Per  James 
L.  J. :  "  They  had  a  right  to  warn  the  public  that  the  company  were  not  carrying  on  the 
business  carried  on  by  the  defendants,  and  were  not  the  successors  of  Joseph  Thorley  ; 
but  they  did  more  than  this — they  went  on  to  make  allegations  imputing  to  the  company 
that  they  were  foisting  a  fictitious  article  on  the  public." 

Cf.  Liebig's  Extract  of  Meat  Co.  (Ltd.)  v.  Anderson,  55  Law  Times  Reps.,  206  (ISSO), 
where  the  defendant  was  enjoined  from  issuing  labels  and  advertisements  containing  tin- 
words  "  This  is  the  only  genuine."  It  was  not  suggested  that  the  labels  were  defamatory 
and  they  were  apparently  regarded  a  mere  trade  libel.  See  also  Hatchard  v.  Mege,  L.  R. 
(1887J,  18  Q.  B.  D.,  77L 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  379 

also  ordered  to  pay  damages.^  Similarly,  where  Eichard  Hay  ward 
&  Sons  distributed  circulars  stating  in  substance  that  Hayward  & 
Co.  in  previous  litigation  had  been  "  ordered  "  by  the  court  not  to 
represent  themselves  as  the  original  firm  of  Richard  Hayward  & 
Sons,  when  in  fact  the  action  had  been  dismissed,  and  a  voluntary 
undertaking  had  been  entered  into,  it  was  held  that  the  report  was 
libelous  as  imputing  fraudulent  and  dishonest  conduct,  and  the  court 
awarded  nominal  damages  and  an  injunction.^ 

In  Scotland  an  injunction  was  granted  to  restrain  an  insurance 
company  from  circulating  handbills  entitled  "  Scandalous  revela- 
tions,'' stating  that  a  rival  company  was  conducting  its  business  in 
a  scandalous  and  improper  manner,  and  had  defrauded  a  woman 
policyholder  and  withheld  money  legally  due  under  its  policies.' 

In  Canada  it  has  been  held  actionable  for  a  watch  manufacturer 
to  charge  that  a  rival  deceived  and  defrauded  the  public  by  selling 
cheap  Swiss  watches  as  English,  at  twice  or  three  times  their  true 
value,  and  to  caution  the  public  that  certain  unprincipled  dealers 
sold  worthless  Swiss  counterfeits  as  genuine  American  watches  at 
far  more  than  their  value.*  In  another  Canadian  case  it  appeared 
that  the  defendant,  who  sold  lightning  rods,  published  a  statement 
to  the  effect  that  a  competitor  charged  from  37  to  42^  cents  per  foot 
whereas  the  defendant  could  furnish  a  better  rod  at  from  7  to  10 
cents  per  foot,  and  that  he  felt  it  to  be  an  imposition  practiced  by 
the  plaintiffs  on  the  public  wlien  rods  couhl  be  sold  at  such  low  prices. 
The  statements  were  untrue,  in  that  the  prices  charged  by  the  plain- 
tifl's  included  the  cost  of  erection,  while  the  sums  charged  hj  the 
defendant  only  included  the  price  of  the  rod,  although,  as  the  jury 
found,  they  Ivere  intended  to  convey  tlie  impression  that  the  cost 
of  erection  was  also  included.  The  jury  found  for  the  plaintiffs, 
and  on  appeal  it  was  held  that  a  cause  of  action  had  been  disclosed.'"' 
It  has  also  been  held  actionable  to  publish  a  "  caution,"  warning  those 
dealing  with  the  plaintiff  that  his  pumps  are  an  infringement  of  the 
defendant's  patent,  and  advising  them  to  "beware  of  the  fraud  and 
save  costs." " 

Statements  impeaching  the  credit  of  business  rivals  have  also  been 
condemned.  Thus,  a  firm  dealing  in  sewing  machines  secured  an 
injunction  against  their  former  manager  restraining  him  from  stat- 

iKerr  v.  Gandy,  3  Times  Law  Reps.,  75  (1886). 

2  Hayward  &  Co.  r.  Hayward  &  Sons,  34  Oh.  D.,  lOS  (1886).  See  Saxby  r.  Easter- 
brook  and  Hannaford,  L.  R.  (1878),  3  C.  P.  D.,  3.39. 

2  British  Legal  Life  Assurance  &  Loan  Co.  (Ltd.)  r.  Pearl  Life  .Vssurance  Co.  (Ltd.), 
14  Session  Cases  (4th  Series),  818  (1887). 

Miussell  et  al.  v.  Wilkes.  27  Upper  Canada  Q.  15.,  2S0  (1868). 

I*  Ontario  Copper  Lightning  Rod  Co.  v.  Hewitt,  30  Ontario  Conmion  Pleas,  172  (1879). 
See  also  Sloman  v.  Chisholm,  22  Upper  Canada  Q.  B.,  20  (1862),  and  Cohen  v.  Bell, 
(1910)  Transvaal  I-cader  Law  Reps.,  331. 

0  Cousins  V,  Merrill,  Kj  Upper  Canada  C.  I'.,  114   (1SG5). 


380  REPORT  OF   THE   COMMISSIONER   OF   CORPORATIONS. 

ing  to  their  customers  that  they  were  about  to  stop  payment,  or  were 
in  difficulties,  or  were  insolvent,  or  from  making  other  statements 
of  like  effect.^  And  where  a  business  was  being  conducted  by  a 
receiver,  a  circular  leading  customers  to  believe  that  the  business  was 
in  a  failing  state,  or  would  shortly  fail,  was  held  libelous,  and  was 
punished  as  a  contempt  of  court.  In  this  case  it  was  urged  that  the 
business  when  under  the  management  of  a  receiver  was  no  more 
entitled  to  protection  from  fair  competition  than  the  business  car- 
ried on  by  the  original  firm.  With  respect  to  this,  Bowen,L.  J., said: 
"  If  the  acts  complained  of  merely  amounted  to  such  fair  competition, 
the  argument  would  be  unanswerable.  But  when  I  examine  the  facts 
I  come  to  a  different  conclusion."  Likewise,  Cotton,  L.  J,,  observed : 
"  If  it  had  been  fair  competition,  that  argument  would  have  to  be 
dealt  with.  But  in  my  opinion  this  was  not  a  case  of  fair  competi- 
tion. No  fair  competition  would  justify  the  act  of  the  appellant  in 
sending  round  a  copy  of  the  report  in  the  Times,  which,  if  taken 
alone,  would  lead  the  customers  to  think  that  the  business  was  in  a 
failing  state  or  would  shortly  fail."^ 

Publications  tending  to  expose  competitors  to  public  hatred,  con- 
tempt, or  ridicule  are  also  actionable.  Thus  an  English  court 
granted  an  injunction,  where  it  appeared  that  a  firm,  taking  ad- 
vantage of  popular  prejudice,  caused  the  publication  of  a  statement 
to  the  effect  that  the  directorate  of  a  rival  company  was  composed 
of  Germans,  and  that  by  purchasing  its  commodities  the  public  would 
be  assisting  the  enemies  of  Great  Britain.^ 

1  nermann  Loog  v.  Bean,  L.  R.   (1884),  26  Ch.  Div.,  .'506. 

=  nelmore  r.  Smith,  L.  R.,  .".5  Ch.  Div.,  449,  454,  456  (1S86). 

■•'.T.  Lyons  &  Co.  (Ltd.)  ?'.  Lipton  (Ltd.),  Law  Journal,  Sept.  26,  1914,  p.  542;  and 
see  Berridge  v.  Billinghurst,  il).,  nnd  IIaml)Ourf;  r.  The  London  Mail  (Ltd.),  Law  Journal, 
Oct.  31,  1914,  p.  597. 

See  also  Coleman  v.  Southwick,  9  Johns.,  44,  where  the  editor  of  the  New  York  Evening 
Po.st,  in  1812,  recovered  damages  for  a  libel  appearing  in  the  Albany  Register,  the  efCect 
of  which  was  to  cause  it  to  be  believed,  among  other  things,  that  the  plaintiff  was  under 
the  influence  of  an  unprincipled  devotion  to  Great  Britain  and  promulgated  treasonable 
sontiments. 

See  also  Marais  v.  The  Volksstem  Co.,  3  O.  R.,  66  (1896),  where  the  following  words 
which  appeared  in  the  Volksstem,  under  the  heading  "  British  intervention,"  were  held 
by  the  high  court  of  the  South  African  Republic  to  constitute  a  libel : 

"  This  is  the  actual  state  of  affaii-s,  wliich  widely  differs  from  the  view  of  the  Star, 
of  Land  en  Volk,  Cape  Times,  Argus,  and  other  hired  Rhodes's  organs. 

"  Many  of  the  colonial  newspapers,  among  others  the  South  African  Telegraph  and  De 
Zuid  Af  rikaan,  agree  with  our  views  ;  but  what  can  we  say  of  papers  in  the  employ  of 
Mr.  Rhodes,  which  exist  in  this  country,  such  as  the  Star,  Advertiser,  Land  en  Volk, 
which  throw  their  weight  against  the  true  interests  of  their  country  in  favor  of  a 
foreign  power?  " 

It  was  alleged  that  as  Rhodes  was  considered  by  the  burghers  to  be  an  enemy  of  the 
State,  the  plaintiff's  paper  was  brought  into  contempt,  and  he  suffered  serious  and 
irremediable  damage  through  the  withdrawal  of  subscriptions. 

In  1905  the  United  Flexible  Metallic  Tubing  Co.  brought  an  action  against  one  Crow- 
ther,  alleging  that  he  had  slandered  their  goods  by  stating  that  they  were  made  in 
Germany  and  not  in  England.  The  defendant  offoied  a  perpetual  undertaking,  which  was 
accepted.     (Crowther  v.  United  Flexible  Metallic  Tubing  Co.  (Ltd.),  22  R.  P.  C.,.  549,  551.) 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  381 

Disparagement  of  goods  as  an  indirect  attack  on  a  manufac- 
turer OR  dealer. — As  noted  above,  a  statement  disparaging  the 
quality  of  goods  may  also  be  defamatory  of  the  manufacturer  or 
dealer,  and  actionable  without  proof  of  actual  damage.  Such  a  case 
was  Salmon  v.  Isaac,  where  the  plaintiff,  a  manure  dealer,  recovered 
damages  from  a  competitor  who  distributed  circulars  stating  in  effect 
that  the  plaintiff  sold  a  mixture  of  sand,  sawdust,  and  other  worth- 
less materials  as  genuine  Peruvian  guano.^  In  another  case  it  ap- 
peared that  the  Linotype  Co.  sent  to  the  editors  of  two  papers  an 
article  referring  to  certain  Empire  composing  machines  which  had 
been  installed  in  the  office  of  the  New  York  Evening  Sun.  The  ar- 
ticle concluded  with  the  following  paragraph : 

So  short-lived,  however,  does  this  installation  appear  to  have  been  that  we 
learn  the  machines  were  discontinued  on  Wednesday,  April  29,  and  now  the 
Empire  Co.  is  in  receipt  of  notice  to  remove  them  altogether  in  the  course  of  a 
few  days.     This  will  be  a  very  serious  blow  for  this  machine. 

It  appeared  that  in  conseciuence  of  trade-union  rules,  the  presence 
of  the  machines  made  it  necessary  for  the  owners  of  the  Sun  to  pay 
higher  wages  to  their  workmen,  and  that  the  machines  Avere  removed 
for  this  reason.  The  jury  found,  among  other  things,  that  the  publi- 
cation imputed  that  the  plaintiff's  were  knowingly  selling  useless 
machines,  and,  although  no  special  damage  was  alleged  or  proved, 
judgment  was  entered  for  the  plaintiffs  in  the  sum  of  £500.  This 
judgment  was  affirmed  in  the  court  of  appeal  and  the  House  of 
Lords."  On  the  other  hand  where  a  firm  of  paint  manufacturers 
complained  of  a  circular  issued  by  a  competitor  which  purported  to 
be  the  report  of  a  test  of  the  latter's  "  Bell  Brand  Genuine  White 
'Zinc  "  and  the  plaintiff's  Patent  White  Zinc,  shoAving  that  the  former 
was  slightly  better  than  the  latter,  it  was  held  that  the  circular  was 
not  defamatory  of  the  plaintiff  company.^ 

So  where  the  publishers  of  a  newspaper  brought  an  action  against 
the  Advertiser's  Protection  Society  grounded  on  a  published  state- 
ment by  the  latter  to  the  effect  that  the  paper  had  a   circulation 

1  Salmon  v.  Isaac,  20  Law  Times  Reps.,  885  (1869). 

"  British  Empire  Typesetting  Macliino  Co.  and  Empire  Typesetting  Machine  Co.  of  Now 
York  c.  Linotype  Co.,  14  Times  Law  Reps.,  253  (Q.  B.  D.,  1898)  ;  79  Law  Times  Reps.,  8 
(ISOS)  ;    SI    Law   Times   Reps.,    :]:i]     (1899). 

■' Ilubbuck  &  Sons  (Ltd.)  r.  Wilkinson,  Ileywood  .&  Clark  (Ltd.),  L.  R.  (1.S99),  1  Q.  B., 
80,  92.  I'or  Lindley,  M.  R.  :  "The  fact  that  the  defendants  call  their  .white  zinc  genuine 
and  contrast  it  with  the  plaintiff's  patent  white  zinc,  which  is  not  called  genuine,  is 
relied  upon  by  the  plaintiffs  as  sliowing  that  the  circular  is  or  may  be  fairly  regarded  ag 
a  defamatory  libel  on  the  plaintiffs,  i.  e.,  a  lil)el  on  them  in  the  way  of  their  trade.  But 
wlien  the  whole  circular  is  looked  at,  and  it  is  found  that  tlie  defendants  state  that  for 
all  practical  purposes  the  two  contrasted  paints  are  in  every  respect  equal,  it  is  impossible 
to  treat  the  circular  as  anything  more  than  a  disparagement  of  the  while  zinc  paint  made 
and  sold  by  the  plaintiffs.  No  ingenuity  can  convert  the  circular  into  a  defamatory  libel 
on  the  plaintiff  company."     Cf.  Clark.son  c.  Tlie  Book  Supply  Co.,  p.  371. 


382  KErORT   OF    THE    COMMISSIONER   OF    CORPORATIOISTS. 

of  about  5,000,  when,  it  was  alleged,  the  circulation  amounted  in 
fact  to  some  30,000,  it  was  held  that  the  statement  was  not  libelous.^ 
Likewise  where  an  action  was  brought  by  certain  contractors  in- 
stalling the  "  G.  B."  system  of  electric  traction,  grounded  on  cer- 
tain statements  imputing  that  the  system  was  a  failure  both  gener- 
ally and  with  reference  to  a  particular  installation,  it  was  held 
that  the  language  was  not  susceptible  of  a  defamatory  meaning.^ 
In  another  case  it  appeared  that  an  asphalt  company  laid  some 
roofing  for  a  customer,  and  that  the  secretary  of  a  rival  company 
said  to  him :  "  You  will  regret  ever  using  the  rubbish  put  on  by 
others  as  asphalt;  it  is  only  Trinidad  rock,  and  not  asphalt  at  all." 
The  jury  found  that  the  w^ords  referred  only  to  the  article  sold, 
and  as  it  was  also  found  that  they  were  not  used  maliciously,  and 
that  there  was  no  sj^ecial  damage,  judgment  was  given  for  the 
defendant.^ 

Disparagement  of  competitors'  goods. — Although  it  now  appears 
to  be  a  well-settled  rule  in  England  that  it  is  actionable 
to  publish  false  statements  disparaging  the  goods  manufac- 
tured by  another,  provided  that  they  have  resulted  in  actual 
damage,  it  would  seem  that  this  branch  of  the  law  is  of  com- 
paratively recent  origin.  Thus,  in  18G2  Chief  Justice  Cockburn 
speaking  for  the  court,  observed  that  "  not  one  of  us  recollects  such 
an  action  in  the  course  of  his  experience."  *  The  first  successful 
action  of  this  description  appears  to  have  been  brought  in  1874. 
In  this  case  a  manufacturing  company  published  a  comparative 
analysis  of  four  samples  of  artificial  manure,  accompanied  with  the 
statement  that  one  of  them,  manufactured  by  the  plaintiffs,  ap- 
peared to  contain  "  a  considerable  quantity  of  coprolites,"  and  was 
"  altogether  an  article  of  low  quality,  and  ought  to  be  the  cheapest 

1  Puhlisliors  of  the  Observer  (Ltd.')  i\  Advertiser's  rrotoction  Society  (Ltd.)  et  al., 
London  Times,  Feb.  o  (p.  3),  11)10.  Per  Darling,  J.:  "The  action  was  based  on  two 
grounds,  first,  on  that  of  libel,  secondly,  it  was  what  might  be  called  an  action  on  the 
case.  It  was  clear  law  that  a  company  might  be  libeled  as  well  as  an  individual,  but  a 
libel  could  only  bo  constituted  by  something  calculated  to  bring  the  company  into  ridicule 
or  contempt.  This  might  be  done  by  statements  relating  to  the  conduct  of  the  business 
by  the  directors,  but  he  did  not  think  that  a  mere  statement  that  the  circulation  of  a 
newspaper  was  5,000  could  amount  to  a  libel,  and  therefore  he  held  that  as  far  as  the 
action  was  based  on  libel  there  was  no  case."  Cf.  Ileriot  v.  Stuart,  1-2  Espinasse,  437 
(1796). 

2  Griffiths  et  al.  1'.  Bonn,  27  Times  Law  Reps.,  34G,  350  (C.  A.,  1911).  Per  Cozens- 
Hardy,  M.  II. :  "  There  is  a  violent,  and,  as  the  jury  have  found,  an  unjustifiable  attack 
upon  the  '  G.  B.'  system — an  attack  which  has  not  been  proved  to  have  caused  any  special 
damage.  It  seems  to  me  extravagant  to  argue  that  an  attack  upon  the  system  must  be 
regarded  as  an  imputation  upon  the  owner  of  the  patents  who  supplies  the  parts  and 
licenses  the  use  of  the  system." 

■■I  Societe  Francaiso  Des  Asphaltes  r.  Farroll,  1  Cababe  &  Ellis,  563  (1885). 

*  Young  V.  Macrae,  3  B.  &  S.,  264,  269  (1862).  The  court  did  not  refer  to  Evans  V. 
Harlow,  5  A.  &  E.  (n.  s.),  Q.  B.,  624,  8  Jurist,  571  (1844),  where  the  court  held  that 
an  advertisement  disparaging  the  plaintiff's  lubricators  was  not,  in  the  absence  of  an 
allegation  of  special  damage,  ground  for  an  action. 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  383 

of  the  four/'  It  was  alleged  that  in  consequence  of  these  statements, 
which  were  untrue,  certain  persons  ceased  to  deal  with  the  plaintiffs. 
The  court  therefore  held  that  the  action  could  be  maintained.^  Upon 
similar  principles  it  was  held  actionable  for  a  company  which  im- 
ported Australian  karri  and  jarrah  wood  for  street  paving  to  write 
to  members  of  a  borough  council  advising  them,  before  deciding 
to  use  American  red-gum  blocks  on  a  certain  roadway,  to  inspect 
certain  roads  which  had  been  paved  with  this  wood  and  were  in  a 
rotten  condition  after  from  G  to  18  months'  use.  A  firm  importing 
the  American  blocks  brought  an  action  based  on  these  letters  and 
alleged  special  damage.  Damages  were  awarded  and  the  judg- 
ment was  affirmed  on  appeal.-  In  an  earlier  case  where  it  appeared 
that  "  Liebig's  Extract  of  IMeat "  was  merely  a  descriptive  title 
that  might  be  used  by  any  person  manufacturing  the  article  accord- 
ing to  the  Liebig  recipe,  the  defendant  was  enjoined  from  issuing 
labels  and  advertisements  containing  the  words  "This  is  the  only 
genuine  "  in  connection  with  extract  sold  by  him.^ 

Similarly,  in  New  South  Wales  it  has  been  held  actionable  for  a 
photographer  to  state,  "  AYe  are  the  only  photographers  supplying 
the  rococo,  as  it  is  our  own  production,"  where  it  appeared  that  the 
plaintiff  also  used  the  so-called  rococo  process,  and  that  the  state- 
ment had  resulted  in  loss  of  business.*  And  in  Canada,  where  the 
Acme  Silver  Co.  sought  to  recover  special  damages  resulting  from 
the  publication  by  a  competitor  of  an  advertisement  in  which  it  was 

1  Western  Counties  Manure  Co.  v.  Lawes  Chemical  ivranure  Co.,  L.  B.  (1874),  9  Ex.,  218, 
222.  Per  Bramwell,  B. :  "  On  the  general  principle,  *  *  *  that  an  untrue  statement 
dispara.ccing  a  man's  goods,  published  without  lawful  occasion,  and  causing  him  Special 
damage,  is  actionable,  we  give  our  judgment  for  the  plaiutiflfs." 

I'or  roHock.  P>.  :  "  This  case,  no  doubt,  involves  first  principles.  On  tlie  one  liand,  the 
law  is  strongly  against  the  invention  or  creation  of  any  riglits  of  action,  but  on  tlie  other 
hand,  where  a  wrong  has  actually  been  suflfered  by  one  person  in  consequence  of  the  con- 
duct of  another,  one  is  anxious  to  uphold  as  far  as  possible  the  maximum  '  ubi  jus  ibi 
remedium.'     It  seems  to  me  the  present  case  comes  within  that  rule." 

-  Alcott  V.  Millar's  Karri  and  .Tarrah  Forests  (Ltd.)  ct  al.,  91  Law  Times  Reps.,  7-2 
(C.  A..  1904).  Per  Collins,  M.  R.  :  "  The  learned  judge,  in  his  summing  up,  pointed  out 
clearly  to  the  jury  what  are  the  conditions  under  which  an  action  of  this  kind  can  be 
maintained.  The  learned  judge  told  the  jury  that  '  you  may  crack  up  your  own  goods  as 
long  as  you  like  ;  you  may  say  that  your  goods  are  better  than  anybody  else's,  and  that 
your  goods  iiave  qualities  that  otliers  have  not.  It  may  be  true  or  untrue,  but  you  are 
entitled  to  do  tliat.  You  have  no  right  to  say  of  your  neiglibor's  goods  that  tliey  are 
bad,  or  rotten,  or  whatever  it  may  be,  if  it  is  untrue,  and  if  damage  results  to  your 
rival.'  " 

sLiebig's  Extract  of  Moat  Co.  (Ltd.)  v.  Anderson,  55  Law  Times  Reps.,  206  (1886). 

1  George  v.  Blow,  20  New  South  Wales  Law  Reps.,  395,  399  (1899).  Per  Darley,  C.  J. : 
"  The  case  *  *  *  closely  resembles  the  case  of  Liebig's  Extract  of  Meat  Co.  v.  Ander- 
son. *  *  *  Mr.  Justice  Chitty,  in  granting  an  injunction  to  restrain  the  use  of  these 
words,  stated  that  they  amounted  to  a  clear  statement  that  what  the  plaintiffs  sold  was 
not  genuine,  and  so  in  this  case  the  statement  put  forward  to  the  public  was  a  clear 
intimation  that  no  photographer  but  the  dofondant  can  supply  genuine  rococo  photo- 
graplis,  and  that  all  others  purporting  to  be  rococo  pliotographs  are  spurious."  Cf. 
Thorh\v's  Cattle  Food  Co.  v.  Massam,  p.  378,  and  .larrahdale  Timber  Co.  v.  Tempcrley 
&  Co.,  p.  o85n. 


384  EEPOET   OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

stated  that  the}^  did  not  keep  "Acme  or  common  plate,"  it  was  held 
that  the  action  could  be  maintained.^ 

A  distinction  has  been  drawn  between  direct  statements  of  fact 
respecting  the  goods  of  another  and  mere  "  puffs,"  or  statements 
made  in  the  form  of  a  comparison  favorable  to  one's  own  goods 
and  incidentally  disparaging  the  goods  of  a  competitor.  Although 
statements  of  either  description  may  result  in  damage,  the  former 
only  are  actionable.  In  the  language  of  Lord  Watson  in  a  leading 
case,  "  Every  extravagant  phrase  used  by  a  tradesman  in  commenda- 
tion of  his  own  goods  mnj  be  an  implied  disparagement  of  the  goods 
of  all  others  in  the  same  trade ;  it  may  attract  customers  to  him  and 
diminish  the  business  of  others  who  sell  as  good  and  even  better 
articles  at  the  same  price ;  but  that  is  a  disparagement  of  which  the 
law  takes  no  cognizance."-  In  an  early  case  it  appeared  that  the 
defendant  published  the  report  of  a  professor  of  chemistry  in  which 
the  defendant's  oil  was  compared  with  that  sold  by  the  plaintiff,  and 
the  opinion  w^as  expressed  that  the  latter  was  inferior.  As  it  was 
not  shown  in  what  particular  the  report  was  untrue,  and  it  appeared 
that  the  only  false  statement  might  have  been  the  representation 
that  the  defendant's  oil  Was  of  a  superior  quality,  the  court  held 
that  the  action  could  not  be  maintained.^  Likewise,  where  the  pro- 
j)rietor  of  "  Dr.  Vance's  prepared  food  for  infants  and  invalids " 
sold  "Mellin's  Infants'  Food"  after  affixing  thereto  labels  recom- 
mending a  trial  of  the  former,  which  was  stated  to  be  "  far  more 
nutritious  and  healthful  than  any  other  preparation  yet  offered,"  it 
was  held  that  no  action  would  lie  and  that  no  injunction  should  be 
granted.  The  trial  court,  being  of  opinion  that  the  label  was  merely 
the  puff  of  a  rival  trader,  dismissed  the  action,  and  this  judgment 
w  as  affirmed  by  the  House  of  Lords.*    So  it  was  held  not  actionable 

lAcme  Silver  Co.  v.  Stacey  Hardware  and  Manufacturing  Co.,  21  Ontario  Reps.,  2G1 
(1891J,  and  see  Hamilton  r.  Walters.  4  Upper  Canada  Q.  B.,  24  (1834).  See  also  Du  Toit 
V.  Robinsljy  &  Gotz,  2  Soutli  Africa  Reps.,  Cape  Provincial  Div.,  307,  311  (1911),  in 
■which  the  court  said  :  "  I  take  it  *  *  *  that  where  a  person,  with  the  malicious  in- 
tention of  injuring  another,  and  to  prevent  his  selling  his  goods,  falsely  depreciates  the 
goods  and  by  so  doing  actually  causes  damage  to  such  other  person,  he  would  be  liable 
in  damages  for  such  wrongful. act,  but  in  my  opinion  none  of  the  necessary  elements  of 
such  action  exist  in  this  case." 

2  White  V.  Mellin.  L.  R.  (1895).  A.  C,  154,  107,  171.  Per  Lord  Shand  :  "When  all 
that  Is  done  is  making  a  comparison  between  the  plaintiff's  goods  and  the  goods  of  the 
person  issuing  the  advertisement,  and  the  statement  made  is  that  the  plaintiff's  goods 
are  inferior  in  quality  or  inferior,  it  may  be,  in  some  special  qualities,  I  think  this  cannot 
be  regarded  as  a  disparagement  of  which  the  law  will  take  cognizance." 

s  Young  V.  Macrae,  3  B.  &  S.,  264  (1862).  Per  Wightman,  J.:  "What  is  here  com- 
plained of  was  a  comparison  between  the  oil  manufactured  by  the  plaintiffs  and  that  sold 
by  the  defendant.  There  is  no  statement  in  the  alleged  libel  that  the  article  sold  or 
manufactured  by  the  plaintiffs  is  a  bad  article ;  it  is  only  said  that  it  is  inferior  to  that 
of  some  one  else ;  and  that  is  consistent  with  the  plaintiff's  article  being  in  itself  a  very 
good  article." 

*  White  V.  Mellin,  L.  R.  (1895),  A.  C,  154,  165.  Per  Herschell,  L.  C. :  "  If  an  action 
will  not  lie  because  a  man  says  that  his  goods  are  better  than  his  neighbour's,  it  .swms 
to  me  impossible  to  say  that  it  will  lie  because  he  says  that  they  are  bett(>r  in  this  or 
that  or  the  other  respect.     Just  consider  what  a  door  would  be  opened  if  this  were  per- 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  385 

to  publish  a  circular  concluding  with  the  words,  "Judging  the  fin- 
ished work,  it  is  quite  evident  that  W.  H,  &  Co.'s  zinc  has  a  slight 
advantage  over  Hubbuck's,  but  for  all  practical  purposes  they  can 
be  regarded  as  being  in  every  respect  equal."  ^  On  the  other  hand, 
where  a  newspaper  published  false  statements  to  the  effect  that  its 
circulation  was  20  to  1  of  any  other  weekly  paper  in  a  specified  dis- 
trict, and  that  "where  others  count  by  the  dozen  we  count  by  the 
hundred,"  it  was  held  that  the  statements  were  more  than  mere  puffs, 
but  were  definite  statements  of  fact,  and  being  wholly  untrue,  were 
actionable  on  proof  of  special  damage.  As  the  plaintiffs  failed  to 
prove  any  actual  damage,  the  action  was  dismissed.- 

FaLSELT   representing   that   a    competitor    HAS    CEASED   TO    CARRY 

ON  BUSINESS. — False  representations  to  the  effect  that  a  firm  is  about 
to  retire  from  business,  or  is  no  longer  in  existence,  are  not  defama- 
tory, and  are  actionable  only  when  actual  damage  has  resulted.  Thus, 
where  an  engineer  and  boilermaker  brought  an  action  against  a 
newspaper,  grounded  on  a  statement  to  the  effect  that  he  had  ceased 
to  carry  on  business  and  that  the  firm  no  longer  existed,  the  jury 
found  that  the  words  did  not  reflect  upon  the  plaintiff's  character 
and  were  not  libelous,  but  that  the  statement  was  not  published  bona 
fide,  and  that  the  plaintiff's  business  had  suffered  injury  to  t^ie  extent 
of  £120.  A  judgment  for  that  sum  was  accordingly  entered.^  So, 
M'here  the  agent  of  a  publishing  company  knowingly  made  false  state- 

mittcd.  That  this  sort  of  puffing  advertisement  is  in  use  is  notorious ;  and  we  see  rival 
cures  advertised  for  particular  ailments.  The  court  would  then  be  bound  to  inquire,  in 
an  action  brought,  whether  this  ointment  or  this  pill  bettor  cured  the  disease  which  it  was 
alleged  to  cure — whether  a  particular  article  of  food  was  in  this  respect  or  that  better 
than  another.  Indeed,  the  courts  of  law  would  be  turned  into  a  machinery  for  adver- 
tising rival  productions  by  obtaining  a  judicial  determination  which  of  the  two  was  the 
bettor." 

iTTuhbuck  &  Sons  v.  Wilkinson,  Iloywood  &  Clark,  L.  R.  (1800),  1  Q.  R.,  86,  92,  94. 
Per  Lindloy,  M,  K. :  "  Even  if  each  particular  charge  of  falsehood  is  established,  it  will 
only  come  to  this — that  it  is  untrue  that  the  defendants'  paint  is  better  than  or  equal  to 
that  of  the  plaintiffs,  for  saying  which  no  action  lies.  *  *  *  It  is  not  necessary  to 
consider  how  the  case  would  have  stood,  if  the  defendants  had  not  been  rival  traders 
simply  puffing  their  own  goods  and  comparing  theirs  with  tliose  of  the  plaintiffs." 

2  Lyne  v.  Nicholls,  23  Times  Law  Reps.,  86  (190G), 

■MJatclifrc  r.  Evans,  L.  R.  (1892),  2  Q.  B.,  524.  Per  Bowen,  L.  .1.  :  "  Tliat  an  action 
will  lie  for  written  or  oral  falsehoods,  not  actionable  per  se  nor  even  defamatory,  where 
they  are  maliciously  published,  where  thoy  are  calculated  in  the  ordinary  course  of  things 
to  produce,  and  where  they  do  produce,  actual  damage,  is  established  law.  Such  an  action 
is  not  one  of  libel  or  of  slander,  but  an  action  on  tlie  case  for  damage  wilfully  and  in- 
tentionally done  without  just  occasion  or  excuse,  analogous  to  an  action  for  slander  of 
title.  To  support  it,  actual  damage  must  be  shewn,  for  it  is  an  action  wliich  only  lies 
in  respect  of  such  damage  as  has  actually  occurred." 

See  also  .Tarrahdalo  Timber  Co.  (Ltd.)  r.  Tomporley  &  Co.,  11  Tim<»s  Law  Reps.,  119 
(Q.  H.  Div..  1S04I,  where  the  plainliff  firm  imported  .\ustralinn  j.irrali  timlior,  and  a  com- 
petitor dealing  in  karri  as  well  as  jarrah  was  restrained  from  advertising  that  they  were 
"  the  only  importers  of  both  timbers  in  the  United  Kingdom,"  or  from  stating  directly 
or  indirectly  that  they  were  the  only  importers  of  jarrah  timl)cr.  Although  it  docs  not 
appear  frcm  the  report  of  this  case  whether  or  not  special  damage  was  alleged,  counsel 
for  plaintiff  relied  upon  Western  Counties  Manure  Co.  v.  Lawes  Chemical  Manure  Co. 
(see  p.  3831,  and  Ratdiffo  r.  Evans  (above),  in  both  of  which  cases  the  court  pointed 
out  the  necessity  of  such  an  allegation. 

30035°— 16 25 


386  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

ments,  some  to  the  effect  that  the  business  of  a  competitor  had  been 
taken  over  by  his  employers,  and  others  to  the  effect  that  it  was  going 
out  of  one  branch  of  its  business,  a  judgment  for  damages  and  an 
injunction  was  entered  by  a  Canadian  court  against  the  agent  and  the 
company  he  represented.  It  may  be  noted  that  the  statements  had 
been  acted  upon  by  the  persons  to  whom  they  were  made  and  resulted 
in  actual  damage  to  the  plaintiff.^  On  the  other  hand,  where  a  pro- 
ceeding was  instituted  in  the  form  of  an  action  for  slander  against 
a  lawyer  who  circulated  a  report  to  the  effect  that  an  insurance  com- 
pany was  about  to  be  taken  over  by  a  rival,  a  Scottish  court  refused 
to  submit  the  case  to  the  jury,  being  of  opinion  that  the  statement 
would  not  amount  to  slander,  although  it  might  be  injurious  to  the 
business.-  And,  where  the  evidence  of  damage  was  not  sufficient,  the 
court  declined  to  restrain  a  company  from  falsely  representing  by 
circulars  that  a  certain  partnership  was  retiring  from  business,  not- 
withstanding the  fact  that  the  circulars  were  issued  maliciously  and 
were  calculated  to  keep  customers  away.^ 

Section  8.  Misrepresentation  by  means  other  than  words. 

AMERICAN  DECISIONS. 

There  may  be  acts  which  do  not  constitute  libel  or  slander  in  the 
ordinary  sense,  but  which  have  substantially  the  same  effect  upon 
the  business  of  another.  Thus  where  such  conduct  resulted  in  the 
loss  of  patronage  it  was  held  actionable  to  loosen  a  horseshoe  re- 
cently put  on  by  a  blacksmith  and  to  drive  a  nail  into  the  horse's 
foot  for  the  purpose  of  injuring  the  reputation  of  the  workman.* 

igheppard  Publishing  Co.  v.  Press  Publishing  Co.,  10  Ontario  Law  Reps.,  243  (1905). 
Cf.  Dudley  v.  Briggs,  141  Mass.,  582   (1886). 

2  General  Accident  Assurance  Corporation  (Ltd.)  v.  Miller,  9  Scots  Law  Times,  510 
(1902).  Per  Lord  Low:  "No  doubt  the  statement  that  one  insurance  company  is  to  be 
taken  over  by  another  is  likely  to  give  rise  to  speculation  as  to  the  reason,  but  I  do  not 
see  why  it  should  induce  the  '  belief '  in  the  public  mind  that  the  company  to  be  amal- 
gamated was  in  a  weak  condition  financially." 

Cf.  Continental  Insurance  Co.  r.  Board  of  Underwriters  of  the  Pacific,  p.  377n  ;  Balti- 
more Life  Insurance  Co.  v.  Gleisner,  202  Pa.  St.,  386  (1902)  ;  and  American  Insurance 
Co.  V.  France,  111  111.  App.,  382   (1903). 

sConcarls  v.  Duncan  &  Co.   (1909),  Weekly  Notes,  51. 

*  Hughes  V.  McDonough,  43  N.  J.  Law,  459,  463,  464  (1881).  Per  Beasley,  C.  J.: 
"  What,  in  point  of  substance,  was  done  by  the  defendant,  was  this  :  He  defamed,  by  the 
medium  of  a  fraudulent  device,  the  plaintiff  in  his  trade,  and  by  means  of  which  defama- 
tion, the  latter  sustained  special  detriment.  If  this  defamation  had  been  accomplished 
by  words  spoken  or  written,  or  by  signs  or  pictures,  it  is  plain  the  wrong  could  have  been 
remedied,  in  the  usual  form,  by  an  action  on  the  case  for  the  slander ;  and,  plainly,  no 
reason  exists  why  the  law  should  not  afford  a  similar  redress  when  the  same  injury  has 
been  inflicted  by  disreputable  craft."  (N.  B. — It  does  not  appear  whether  the  defendant 
was  a  competitor  or  not.) 

Cf.  United  States  v.  Patterson  et  al.,  205  Fed.,  293,  300  (1913),  where  there  was 
evidence  tending  to  show  that  one  of  the  agents  of  the  National  Cash  Register  Co.  "  dis- 
tributed small  wires  to  other  agents  in  his  territory  for  the  purpose  of  their  surreptitious 
introduction  into  competitors'  cash  registers,  if  the  customer  gave  opportunity  to  the 
National's  agents  for  close  examination  of  the  competitors"  cash  register  in  the  customer's 
possession."     See  also  Attorney  General  v.  National  Cash  Register  Co.,  148  N.  W.,  420 


THUST   LAWS   AND    UNFAIR   COMPETITION.  387 

Likewise  the  omission  of  the  name  of  a  company  may  be  action- 
able where  it  amounts  to  a  statement  that  no  such  company  exists. 
Where,  for  example,  the  owner  of  an  express  business  in  Boston 
brought  suit  against  tAvo  competitors  and  a  corporation  publishing 
what  purported  to  be  a  complete  list  of  all  reputable  express  com- 
panies doing  business  in  that  city,  alleging  that  the  defendant  com- 
petitors induced  the  corporation  to  exclude  the  complainant 'froili 
its  publications  by  falsely  stating  that  complainant's  business  was 
not  conducted  in  a  proper  and  reliable  manner  and  by  threatening, 
in  case  of  a  refusal,  that  they  would  not  furnish  data  for  such  pub- 
lication, that  they  would  diminish  the  advertising  obtainable  by  it 
and  otherwise  injure  its  business,  the  court  expressed  the  opinion 
that  the  desire  of  the  defendants  to  advance  their  own  interests  in 
competition  was  not  a  justification  and  held  that  upon  proof  of 
the  facts  alleged  the  complainant  would  be  entitled  to  an  injunction 
to  protect  him  from  the  wrongful  publication  and  to  prevent  the 
defendant  competitors  from  attempting  to  procure  this  kind  of 
publication  in  the  future.^ 

Section  9.  False  claims  to  testimonials,  medals,  and  other  distinctions. 

The  reports  of  a  number  of  cases  disclose  the  fraudulent  use  by 
manufacturers,  of  testimonials,  medals,  or  other  distinctions  awarded 
competitors.  Under  such  circumstances,  however,  and  in  the  absence 
of  any  attempt  to  pass  off  the  goods  of  one  manufacturer  as  those  of 
another,  the  courts  have  refused  to  interfere.- 

(Mich.  Sup.  Ct.,  1914),  and  petition  and  decree  in  United  States  v.  Burroughs  Adding 
Macliine  Co.  et  al. 

In  United  States  v.  Standard  Oil  Co.  of  New  Jersey  et  al.  tlie  Government  contended 
that  "  the  plan  of  pretending  to  the  trade  that  competitors  were  overgauging  barrels  was 
one  that  was  adopted  and  put  into  force  by  the  Standard  Oil  Co.  itself.  It  has  cropped 
out  here  and  there  in  this  testimony  that  Standard  Oil  agents  would  go  to  the  dealers 
and  nfter  gauging  their  cans  or  their  Iiarrels  invariably  found  them  incorrect  and  in- 
variably found  that  the  dealer  was  cheating  his  patrons,  and  sought  in  that  way  to  get 
the  business  away  from  the  independents."  (C.  C,  E.  D.  Mo.,  Brief  of  Facts  and  Argu- 
ment for  Fetitioner,  vol.  2,  pp.   .529,   .536-537.) 

1  Davis  V.  New  England  Railway  Fuhlishing  Co.  et  al.,  203  Mass.,  470,  478,  479  (1909). 
Fer  Knowlton,  C.  J.  :  "  The  defendant  corporation  professes  to  give  the  public  a  full  list 
of  all  the  reputable  express  companies  doing  business  in  Boston.  While  it  does  not  saiy 
in  express  words  that  the  list  is  complete,  that  is  the  meaning  which  the  publication  is 
intended  to  convey  and  does  convey.  Its  list  is  false  and  misleading,  to  the  plaintiffs 
injury.  *  *  *  The  direct  effect  of  the  false  statement  is  to  point  those  who  want  the 
services  of  an  express  company  to  other  companies,  and  (o  divert  them  from  the  plaintiff. 
They  are  told,  in  substance,  that  there  is  no  such  person  as  the  plaintiff,  and  no  such 
company  as  the  Northern  Express  Co.  (plaintiff's  company),  engaged  in  this  kind  of  busi- 
ness. *  *  *  An  intentional  act  of  this  kind,  without  excuse,  is  a  violation  of  his 
legal  rights.  It  is  the  publication  of  a  falsehood  concerning  him,  the  direct  and  natural 
effect  of  which  is  to  injure  him  in  his  business.  The  public  is  misled  by  the  intentional 
publication  of  an  incorrect  list.  *  *  *  p.ut  the  gist  of  the  plaintiff's  action  is  the 
wrong  done  him  by  intentionally  turning  away  from  him  those  who  otherwise  would  do 
business  with  him.  He  is  entitled  to  a  remedy  for  this  wrong.  *  *  *  The  injury  is 
to  property,  and  it  is  not  technically  a  libel  upon  the  plaintiff." 

2  This  practice  has  been  prohibited  by  statute  in  a  number  of  States.     See  p.  517. 


388  REPOKT   OF    THE    COMMISSIONER   OF    COKPOKATIONS. 

AMERICAN  DECISIONS. 

The  best  known,  if  not  the  only  case  of  this  description  in  this 
country  ayrs  decided  by  the  Supreme  Court  of  Georgia,  which  de- 
nied an  injunction  to  restrain  the  Domestic  Sewing  Machine  Co. 
from  publishing  statements  to  the  effect  that  the  exhibition  com- 
mittee of  the  State  agi-icultural  society  had  reported  that  the  Do- 
mestic was  the  best  family  machine,  notwithstanding  the  fact  that 
the  Singer  Co.  had  been  awarded  a  diploma  for  exhibiting  the  best 
family  machine  and  the  best  machine  for  manufacturing  purposes.^ 

ENGLISH  DECISIONS. 

A  somewhat  similar  case  had  previously  been  decided  in  England 
when  a  manufacturer  who  had  been  aw^arded  a  prize  medal  at  an 
exposition  comi:)lained  of  the  action  of  a  competitor  in  selling  pickles 
under  labels  bearing  the  words,  "  Prize  medal,  1862."  The  court  Con- 
cluded that  there  had  been  no  attempt  to  pass  off  the  defendant's 
goods  as  those  of  the  plaintiff,  and  refused  an  injunction.- 

In  a  more  recent  case  it  appeared  that  extracts  from  an  article  in 
a  medical  journal  commenting  favorably  on  a  certain  patented 
system  of  treating  disease  had  been  reprinted  in  a  manner  calculated 
to  lead  readers  to  believe  that  they  referred  to  a  rival  system  of  treat- 
ment. Urging  that  this  was  an  attempt  to  appropriate  the  repu- 
tation acquired  by  the  system  thus  favorably  mentioned,  and  a  species 
of  unfair  competition,  the  patentee  sought  an  injunction.     It  was 

1  Singer  Manufacturing  Co.  v.  Domestic  Sewing  Machine  Co.  et  al.,  49  Ga.,  70  (1872). 

"Batty  V.  Hill,  1  H.  &  M.  Cti.  Cas.,  204  (1863).  After  this  juclgment  was  rendered, 
and  partly  in  consequence  thereof,  Parliament  passed  "  The  Exhibition  Medals  Act,  1863  " 
26,  27  Vict.,  ch.  110  (.Tuly  28,  186."^).  providing  for  the  summary  prosecution  of  any 
trader  who  (1)  falsely  represents  that  he  has  obtained  a  medal  or  certificate  from  the 
exhibition  commissioners  in  respect  of  any  article  or  process  for  which  a  medal  or  cer- 
tificate has  been  awarded  by  the  commissioners ;  (2)  falsely  represents  (knowing  such 
representation  to  be  false)  that  any  other  trader  has  obtained  a  medal  or  certificate  from 
the  exhibition  commissioners  ;  or  (.3)  falsely  represents  (knowing  such  representation  to 
be  false)  that  any  article  sold  or  exposed  for  sale  has  been  made  by,  or  by  any  process 
invented  by,  a  person  who  has  obtained  in  respect  of  such  article  or  process  a  medal  or 
certificate  from  the  exhibition  commissioners. 

During  the  debate  on  this  measure  it  was  stated  that  "  a  monstrous  system  of  fraud 
prevailed  in  regard  to  these  medals,  which  ought  to  be  checked  without  delay."  (Great 
Britain,   Parliamentary   Debates,   July   27,   1863,   pp.    1483-1486.) 

See  also  Green  ik  Archer,  7  Times  Law  Reps.,  542  (Q.  B.  Div.,  1801),  where  it  appeared 
that  the  parties,  who  were  architects,  had,  while  conducting  their  business  as  partners, 
jointly  designed  and  supervised  the  construction  of  many  important  buildings  in  London. 
Immediately  after  a  dissolution  of  the  partnership  Archer  circulated  photographs  of  these 
buildings,  bearing  in  large  letters  at  the  foot  of  each  copy  the  words  "  Designed  by 
Thomas  Archer,  R.  R.  I.  B.  A.,  14'  Sackville  Street,  Piccadilly,"  omitting  all  reference 
to  the  former  partner.  Green  brought  an  action  for  libel  and  sought  an  injunction.  Mr. 
Justice  Denman  gave  judgment  for  the  defendant,  holding  that  the  words  conveyed  no 
imputation  upon  the  character  of  the  plaintiff  and  did  not  allude  to  him  as  an  architect, 
and,  further,  that  there  was  no  slander  of  title. 


TRUST   LAWS   AND   UNFAIR  COMPETITION.  389 

held,  however,  that  in  the  absence  of  any  attempt  to  pass  off  the  de- 
fendant's system  as  the  plaintiff's  the  court  ought  not  to  interfere.^ 

Likewise  in  Canada  the  court  refused  to  enjoin  the  publication,  in 
an  altered  form,  of  certain  testimonials  respecting  organs  manufac- 
tured by  the  D.  W.  Karn  Co.  under  the  superintendence  of  one 
Warren,  in  which  the  latter  as  well  as  the  company  had  been  com- 
mended.^ 

On  the  other  hand  an  injunction  was  granted  where,  in  addition 
to  the  reproduction  of  certain  testimonials  given  to  the  plaintiff,  it 
appeared  that  his  reputation  was  being  used  as  a  means  of  passing 
off  the  defendant's  goods.^ 

Section  10.  Intimidation  of  competitors'  customers  by  threats  of  infringe- 
ment suits. 

Manufacturers  of  patented  articles  have  not  infrequently  sought 
to  prevent  the  sale  of  competing  articles  by  circulating  broadcast 
printed  statements  asserting  that  such  articles  infringed  their  patents 
and  threatening  all  dealers  handling  them  with  suits  for  infringe- 
ment. Circulars  or  letters  of  this  character  have  at  times  been 
supplemented  by  oral  statements  of  traveling  salesmen  and  other  em- 

iTallerman  v.  Dowsing  Radiant  Heat  Co.,  L.  R.  (1900),  1  Ch.  Div.,  1.  The  plaintiflfs 
appealed.  Tlie  appeal  was  not  heard,  but  on  the  defendants  givin?  a  perpetual  under- 
taking not  to  print,  publish,  issue,  or  circulate  any  pamphlet,  notice,  circular,  or  adver- 
tisement containing  any  press  notice,  testimonial,  or  other  document,  or  any  extract 
therefrom,  originally  written  in  favor  of  the  plaintiffs'  hot-air  treatment,  it  was  ordered 
that  the  defendants  should  pay  to  the  plaintiffs  £2.5  for  their  costs  of  the  action,  and  that 
all  further  proceedings  in  the  action  should  be  stayed.  The  plaintiffs  were  to  be  at 
liberty  for  one  month  from  the  date  of  the  order  to  advertise  in  any  manner  they  might 
think  proper  a  statement  of  the  names  of  the  parties  to  the  action,  that  the  action  was 
for  an  injunction,  and  the  contents  of  this  order,  but  without  making  any  comment  thereon, 
and.  save  as  aforesaid,  the  plaintiffs  agreed  not  to  advertise  or  publish  the  order. 

=  Warren  v.  The  D.  W.  Karn  Co.,  15  Ontario  Law  Reps.,  115,  117  (1907).  Per  Boyd, 
C. :  "  Many  doubtful  and  it  may  be  unwarrantable  acts  must  be  left  to  the  verdict  of 
conscience  or  to  the  judgment  of  public  opinion,  and  the  present  grievance  appears  to  be 
one  falling  outside  of  legal  limits  and  to  be  resolved  in  the  court  of  conscience. 

"  Tested  by  the  business  maxim  '  Every  man  for  himself,'  the  pamphlet  may  be  regarded 
as  a  shrewd  stroke  of  advertising;  tested  by  the  golden  rule  of  fair  dealing,  it  would 
not,  in  my  opinion,  fare  so  well.  The  testimonials  were  given  for  tlie  joint  work  of  the 
company  and  its  guiding  spirit,  the  then  superintendent ;  to  use  them  so  as  to  exclude 
the  latter  appears  to  be  an  unfair  use." 

»  Pranks  v.  Weaver,  10  Beav.,  297  (1847)  ;  8  Law  Times  Reps.  (O.  S.),  510,  512.  Per 
Ijord  Langdale  :  "  *  ■*  *  if  anybody  critically  reads  the  advertisement  of  the  defend- 
ant, he  will  find  that  he  does  not,  in  direct  terms,  apply  the  encomiums  given  to  the 
plaintiff's  preparation  to  his  own;  he  does  not  even  say,  that  the  preparation  he  is  sell- 
ing is  made  by  the  plaintiff,  and  yet,  for  all  that,  nobody  can  look  at  all  these  things 
without  observing  that  the  name  and  tlie  testimonials  of  the  plaintiff  are  so  craftily  em- 
ployed, as  to  be  well  calculated  to  produce,  in  the  minds  of  ordinary  readers,  Ihe  impres- 
sion that  the  mixture  or  solution  prepared  and  sold  by  the  defendant  is  the  same  as  that 
to  which  these  testimonials  are  applicable ;  that  is  to  say,  the  mixture  or  solution  of  the 
plaintiff." 

After  granting  an  injunction  in  the  ordinary  form  the  master  of  the  rolls  restrained 
the  defendant  from  publishing  or  circulating  any  cover,  wrapper,  etc.,  containing  any 
testimonial  in  favor  of  the  plaintiff's  preparation,  or  in  which  any  use  was  made  of  the 
character  and  reputation  of  the  plaintiff  as  applicable  to  any  preparation  or  compound 
of  the  defendant  or  his  firm. 


390  REPORT  OF    THE   COMMISSIONER  OF   CORPORATIONS. 

ployees.  The  destructive  effects  of  this  practice,  when  persisted  in, 
are  thus  described  by  Quarles,  J.,  in  Dittgen  v.  Racine  Paper  Goods 
Co.:^ 

If  such  a  campaign  be  skillfully  conducted  for  a  series  of  years,  as  seems  to 
have  been  the  case  here,  the  competitor  is  helpless.  His  orders  are  counter- 
manded, old  customers  desert  him,  through  fear  of  litigation,  or  demand  bond 
of  indemnity  as  a  condition  for  placing  orders.  His  business  is  melting  away. 
Evei'ywhere  the  trade  is  apprehensive  of  '  peremptory  measures '  if  they  buy 
goods  of  an  infringer.  He  appeals  to  the  patentee  to  bring  suit,  and  offers  to 
enter  an  appearance  in  any  court  having  jurisdiction,  but  all  to  no  purpose. 
Customers  will  not  listen  to  his  explanations  or  denials,  and  unless  he  can  get 
relief  in  a  court  of  equity,  his  business,  which  represents  20  years  of  effort,  may 
be  entirely  ruined  by  a  competition  which  is  malicious  and  unfair. 

Both  Federal  and  State  courts  have  characterized  this  practice  as 
"  unfair  competition,"  ^  as  being  "  unfair  in  the  business  world,"  or  as 
constituting  "unfair  business  methods."^  Thus  where  a  manufac- 
turer had  persisted  in  threatening  a  competitor's  customers  with 
suits  for  infringement,  the  Federal  circuit  court,  in  the  course  of  an 
opinion  in  a  suit  to  restrain  such  threats,  said :  ^ 

Without  reciting  the  evidence  more  in  detail,  I  am  driven  to  the  conclusion 
that  defendant  has  been  guilty  of  unfair  competition  and  has  thereby  maliciously 
diverted  and  injured  the  trade  of  complainant ;  that  against  such  unfair  methods 
complainant  could  obtain  no  adequate  remedy  in  the  courts  of  law ;  that  he  has 
sustained  substantial  loss  in  his  business,  and  is  therefore  entitled  to  an  injunc- 
tion and  an  accounting  as  prayed. 

And  the  circuit  court  of  appeals  in  the  same  case  said,  per  Kohl- 
saat,  J. :  ^ 

Undoubtedly,  one  claiming  that  his  patent  is  being  infringed  should  take  steps 
to  advise  the  public  of  his  rights  as  provided  by  statute,  provided,  however,  that 
if  it  is  made  to  appear  that  under  pretense  of  so  doing  he  is  pursuing  a  course 
which  is  calculated  to  unnecessarily  injure  another's  business,  and  with  the 
plain  intention  of  so  doing,  his  conduct  will  be  deemed  malicious,  and  he  brings 
himself  within  the  rule  of  law  obtaining  in  cases  of  unfair  competition  in 
trade,  and  subject  to  injunction. 

In  a  subsequent  suit  of  the  same  character  the  Federal  circuit  court, 
referring  to  similar  threats,  said :  ^ 
A  threat  of  punishment  is  intimidation  and  is  xuifair  in  the  business  world. 

And  the  Michigan  Supreme  Court,  in  an  action  by  the  State  against 
the  National  Cash  Register  Co.,  in  which  the  latter  was  charged  with 
certain  unfair  competitive  methods,  said :  ^ 

1  164  Fed.,  85  (C.  C,  1908)  ;  s.  c,  171  Fed.,  631  (C.  C.  A.,  1909). 

2  Dittgen   v.   Racine   Paper   Goods    Co.,   al)ove. 

3  Electric  Renovator  Mfg.  Co,  v.  Vacuum  Cleaner  Co.  et  al.,  189  Fed.,  754  (C.  C,  1911). 
*  Dittgen  v.  Racine  Paper  Goods  Co.,  164  Fed.,  85,  91  (C.  C,  1908). 

^ni  Fed.,  631   (1909). 

«  Electric  Renovator  Mfg.  Co.  v.  Vacuum  Cleaner  Co.  et  al.,  189  Fed.,  754  (C.  C,  1911). 
■J  Attorney  General  v.  National   Cash   Register  Co.,   148  N.    W.,   420,   428    (Mich.    Sup. 
Ct.,  1914). 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  391 

There  is  do  question  that  it  is  lawful  and  proper  for  the  owner  of  a  patent 
to  give  a  notice  of  infringement  of  liis  patent  to  any  infringer  thereof,  or  to  any 
user  of  an  infringing  article.  It  is  also  his  legal  right  to  bring  and  prosecute 
a  proper  suit  to  restrain  an  infringer  or  user,  and  he  may  bring  and  prosecute 
a  suit  for  recovery  of  damages  against  an  infringer  or  user.  Sucli  suit,  how- 
ever, must  be  honestly  brought  and  prosecuted  in  good  faith,  and  not  commenced 
and  prosecuted  to  harass,  annoy,  intimidate,  financially  embarrass,  and  drive 
out  of  business  a  competitor,  for  such  acts  and  conduct  would  amount  to  un- 
lawful and  unfair  competition. 

AMERICAN  DECISIONS. 

It  appears  to  be  settled  that  the  Federal  courts  will  restrain  the 
issuance  of  letters  or  circulars  threatening  to  sue  a  competitor's 
customers  for  infringement  where  such  letters  are  written,  not  bona 
fide  to  warn  the  trade  of  the  writer's  claims  of  infringement,  and  in 
good  faith  intending  to  bring  such  actions  as  are  threatened,  but  for 
the  express  purpose  of  frightening  aAvay  a  competitor's  customers 
and  thus  injuring  his  business. 

Thus  Avhere  a  manufacturer  of  slates  persisted  in  distributing  cir- 
culars threatening  to  sue  dealers  for  infringement  if  they  handled 
the  slates  of  a  rival,  it  was  held  that  an  injunction  should  issue  re- 
straining the  distribution  of  such  circulars,  it  clearly  appearing  that 
the  threats  were  not  made  in  good  faith,  but  for  the  express  purpose 
of  frightening  the  competitor's  customers  and  injuring  his  business.^ 
Similarly  the  Federal  circuit  court  of  appeals  held  that  a  com- 
pany owning  patents  on  spring-tooth  harrows,  and  licensing  manu- 
facturers to  make  them,  should  be  enjoined,  at  the  instance  of  a 
rival,  from  distributing  circulars  claiming  that  the  hitter's  harrows 
were  an  infringement  and  threatening  to  sue  dealers  who  handled 
them,  where  the  company  charged  with  infringement  had  requested 
the  competitor  to  bring  suit  to  determine  the  question,  but  it  de- 

lEmack  v.  Kane  et  al.,  34  Fed.,  46,  49,  51  (C.  C,  1888).  Per  Blodgett.  J.  :  "The  proof 
In  this  case  also  satisfies  me  that  these  threats  made  by  defendants  were  not  made  in 
good  faith.  The  proof  shows  that  defendants  brought  three  suits  against  Emack's  cus- 
tomers, for  alleged  infringement  of  the  Goodrich  patent  by  selling  the  Emack  slates  ;  that 
Emack  assumed  the  defense  in  these  cases,  and,  after  the  proofs  were  taken,  and  the 
suits  ripe  for  hearing,  the  defendants  voluntarily  dismissed  them,  the  dismissals  being 
entered  under  such  circumstances  as  to  fully  show  that  the  defendants  knew  that  they 
could  not  sustain  the  suits  upon  their  merits  ;  that  said  suits  were  brought  in  a  mere 
spirit  of  bravado  or  intimidation,  and  not  with  the  bona  fide  intent  to  submit  the  ques- 
tion of  infringement  to  a  judicial  decision     *     *     *. 

"  The  elTect  of  the  circulars  sent  out  by  the  defendant  Kane  certainly  must  have  been 
to  intimidate  dealers  from  buying  of  the  complainant,  or  dealing  in  slates  of  his  manu- 
facture, because  of  the  alleged  infringement  of  the  Goodrich  patent.  Xo  business  man 
wants  to  incur  the  dangers  of  a  lawsuit  for  the  profits  which  he  may  make  as  a  jobber 
in  handling  goods  charged  to  be  an  infringement  of  another  man's  patent.  The  inclina- 
tion of  most  business  men  is  to  avoid  litigation,  and  to  forego  even  certain  profits,  if 
threatened  with  a  lawsuit  which  would  be  embarrassing  and  vexatious,  and  might  mulct 
them  in  damages  far  beyond  their  profits  ;  and  hence  such  persons,  although  having  full 
faith  in  a  man's  integrity,  and  in  the  merit  of  his  goods,  would  naturally  avoid  dealing 
with  him  for  fear  of  possibly  becoming  involved  in  the  threatened  litigation." 


392  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

clined  to  do  so  and  continued  to  distribute  the  circulars,  and  where 
it  otherwise  appeared  that  the  company  did  not  in  fact  believe  that 
it  could  recover  in  an  action  for  infringement,  but  was  making  the 
threats  with  the  sole  purpose  of  intimidating  the  rival's  customers.^ 
And  where  a  manufacturer  of  cigar  pouches  represented  to  the 
trade,  by  letters  and  oral  statements,  that  a  competitor's  pouches  in- 
fringed its  patents,  and  threatened  to  sue  any  who  continued  to  use 
them,  and  further  represented  that  it  had  secured  an  injunction 
restraining  the  competitor  from  manufacturing  such  pouches,  and 
where  it  also  appeared  that  the  competitor  charged  with  infringe- 
ment had  requested  the  company  making  such  charges  to  commence 
suit  to  determine  the  rights  of  the  respective  parties  and  had  offered 
to  accept  service  in  any  court  of  competent  jurisdiction,  but  it  never- 
theless refused  to  bring  suit  and  persisted  in  circulating  the  threat- 
ening letters,  it  was  held  that  their  distribution  should  be  restrained 
and  that  the  injured  rival  was  also  entitled  to  damages,-  In  like 
manner  where  a  company  engaged  in  the  manufacture  of  apparatus 
for  renovating  house  furnishings,  distributed  letters  threatening  suit 
against  the  users  of  a  competitor's  machines,  demanding  an  account- 
ing of  the  profits  realized  from  such  machines  and  for  damages  suf- 
fered, notwithstanding  the  fact  that  the  competitor  had  requested 
that  suit  be  instituted  to  determine  the  question  of  infringement,  the 
Federal  circuit  court  held  that  the  rival  company  attacked  in  this 
manner  was  entitled  to  an  injunction.  The  court  stated  in  this  case 
that  the  company  distributing  such  circulars  was  chargeable  with 
bad  faith  and  unfair  business  methods  in  threatening  its  competitor's 
customers  with  suits  and  refusing  to  bring  any  suit  to  determine  the 
rights  of  the  parties.^ 

On  the  other  hand,  where  it  appears  that  such  letters  are  sent 
out  in  good  faith,  for  the  purpose  of  protecting  the  writer's  patents 
and  as  a  bona  fide  warning  to  supposed  infringers,  the  courts  decline 

^Adrianee,  Piatt  &  Co.  v.  National  Harrow  Co.  et  al.,  121  Fed.,  827,  829  (C.  C.  A., 
100."i).  Per  Wallace,  J,:  "Undoubtedly  the  owner  of  a  patent  is  acting  within  his  rights 
in  notifying  infringers  of  his  claims,  and  threatening  them  with  litigation  if  they  con- 
tinue to  disregard  them  ;  nor  does  he  transcend  his  rights  when,  the  infringer  being  a 
manufacturer,  he  sends  such  notices  to  the  manufacturer's  customers,  if  he  does  so  in 
good  faith,  believing  his  claims  to  be  valid,  and  in  an  honest  effort  to  protect  them  from 
invasion.  The  question  whether  the  patent  owner  is  acting  in  good  faith  in  advertising 
his  claims  to  the  manufacturer's  customers  by  circulars  or  letters  can  seldom  be  deter- 
mined from  the  contents  of  the  communication  alone,  and,  like  all  questions  of  intent, 
must  generally  be  determined  by  the  extrinsic  facts.  It  is  always  easy  to  fi'ame  such 
circulars  in  guarded  terms,  which  will  not  commit  the  sender  to  any  definite  libelous 
charges,  omitting  specific  statements  of  fact,  and  substituting  statements  of  opinion ;  and 
when  they  are  sent  for  an  illegitimate  purpose  they  are  likely  to  be  so  framed."  See  also 
Farquhar  Co.  (Ltd.)  v.  National  Harrow  Co.,  102  Fed.,  714  (C.  C.  A.,  1900),  and  Lewin 
V.  Welsbach  Light  Co.,  81   Fed.,   904    (C.   C,   1897). 

sDittgen  v.  Racine  Paper  Goods  Co.,  104  Fed.,  85  (C.  C,  190S)  ;  affirmed,  171  Fed., 
631   (1909). 

3  Electric  Renovator  Mfg,  Co.  v.  Vacuum  Cleaner  Co,  et  al.,  189  Fed,,  754  (C.  C,  1911)  ; 
s.    c,   ibid,    1023. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  393 

to  interfere.  For  example,  where  a  company  broiiofht  suit  against 
a  competitor  for  infringement  of  its  patents  and  notified  the  latter's 
customers  of  the  alleged  infringement  and  of  the  institution  of  the 
suit,  an  injunction  to  prevent  the  further  circulation  of  such  letters 
was  refused,  there  being  no  proof  that  they  were  sent  out  for  any 
purpose  other  than  the  protection  of  the  company's  rights  under  its 
patent.^  So,  also,  a  manufacturer  who  had  brought  suit  to  deter- 
mine the  question  of  infringement  was  held  to  be  within  his  rights 
in  circulating  letters  warning  the  customers  of  the  infringer  of  the 
proposed  suits,  and  the  fact  that  the  patent  had  been  declared  in- 
valid in  another  circuit  was  held  not  to  affect  the  right  of  the 
patentee  to  distribute  warnings  in  a  circuit  where  the  question  was 
still  open  and  suit  had  been  brought  to  determine  it.^  And  in  an- 
other case,  where  the  owner  of  a  patent  had  instituted  suit  for  its 
infringement  and  was  circulating  letters  notifying  the  infringer's 
customers  of  its  claims,  it  was  held  that  an  injunction  should  not 
issue  to  restrain  the  distriljution  of  the  letters,  it  not  being  proven 
that  the  complaining  patentee  did  not  intend  to  prosecute  the  suit  to 
a  conclusion.  The  mere  fact  that  a  suit  had  previously  been  brought 
by  the  complaining  patentee's  assignor  in  another  jurisdiction,  and 
had  been  dismissed,  was  held  not  sufficient  to  show  want  of  good 
faith  in  sending  out  the  warning  letters.^ 

The  decisions  of  the  State  courts  on  this  subject  are  not  in  accord. 
An  injunction  has  been  granted  restraining  the  issuance  of  threaten- 
ing communications  where  the  language  was  too  "  excessive  and  ill 
chosen  to  convey  simple  information  "  that  the  sender's  patent  was 
being  infringed.^  The  publication  of  an  advertisement  falsely  stat- 
ing that  another's  article  was  an  infringement  has  been  restrained,^ 
and  an  injunction  has  also  been  granted  restraining  a  patentee  from 
issuing  or  publishing  any  demand  for  royalty  or  license  fees  for 
the  use  of  an  invention  covered  by  another's  patent,  and  from 
threatening  litigation  against  those  who  might  buy  the  patented 

1  United  Electric  Co.  r.  Creamery  Taclca^e  Mfff.  Co.  et  al.,  203  Fed.,  53   (D.  C,  1913). 

=  Clip  Bar  Mffr.  Co.  v.  Steel  Protected  Concrete  Co.,  209  Fed.,  874,  875  (D.  C,  1913). 
Per  Thompson,  J. ;  "  It  nowhere  appears  on  the  record  that  the  notices  jiiven  to  the 
plaintiff's  customers  were  not  in  good  faith  or  that  the.v  were  false  or  malicious  or  for 
the  purpose  of  destroying  the  business  of  the  plaintiff.  To  the  contrary,  the  defendant, 
so  far  as  appears,  believing  its  claims  to  be  valid,  has  proceeded  to  bring  suit  in  this  dis- 
trict to  establish  infringement.  Under  these  circumstances,  it  must  be  held  for  the  pur- 
pose of  the  present  motion  that  tho  defendant  is  acting  within  its  rights." 

■■'New  York  IMlter  Co.  r.  Schwarzwalder  ct  al.,  58  Fed.,  577  (C.  C,  1893).  See  also 
Kelley  r.  Ypsilanti  Dross-Stay  IMfg.  Co.,  44  Fed..  19  (C.  C,  1890 1  ;  Warren  Featherbone 
Co.  V.  Landauer,  151  Fed.,  130  (C.  C,  1903)  ;  Mitchell  v.  International  Tailoring  Co.,  169 
Fed.,  145  (C.  C,  1909)  ;  Welsbach  Light  Co.  r.  American  Lamp  Co.,  99  Fed.,  501 
(C.    C,    1899). 

*  Croft  V.  Richardson,  59  How.  Prac.  Reps.,  .356  (N.  Y.,  1880).  See  also  Schwanbeck 
Bros.  V.  Backus  &  Sons,  148  Mich.,  508   (1907). 

5  Snow  &  Bush  v,  Judson,  38  Barbour,  210  (N.  Y.,  1802). 


394  KEPORT  OF    THE   COMMISSIONER   OF   CORPORATIONS. 

article.^  In  the  latter  case,  however,  it  appeared  that  the  defendant 
was  insolvent,  thus  making  the  remedy  by  a  suit  at  law  for  damages 
inadequate.  The  Illinois  Appellate  Court  has  declined  to  grant  an 
injunction  where  the  threats  were  made-  in  good  faith  but  before 
any  suit  was  begun  to  settle  the  question  of  infringement.-  The 
Massachusetts  courts  regard  the  circulation  of  communications  of 
this  sort  as  constituting  either  libel  or  slander  of  title  or  merely 
misrepresentation  as  to  the  character  or  quality  of  the  patentee's 
property  or  the  title  thereto,  and  hold  that  a  court  of  equity  has  no 
jurisdiction  to  grant  injunctions  in  cases  of  this  character.^ 

ENGLISH  DECISIONS. 

The  liability  of  patentees  for  threats  to  institute  infringement  pro- 
ceedings was  the  subject  of  legislation  in  England  in  1883.*  For 
this  reason  the  decisions  at  the  common  law  are  here  dealt  with  very 
briefly. 

There  were  a  number  of  cases  prior  to  1883  in  which  the  plain- 
tiffs sought  to  restrain  the  issuance  of  circulars  or  letters  threat- 
ening to  sue  their  customers  for  infringement  or  to  recover  damages 
for  such  action.  The  decisions  are  not  entirely  in  accord,  but  it  ap- 
pears that  to  recover  damages  at  common  law  it  was  necsssary  for 
the  plaintiff  to  prove  not  only  that  the  statements  of  infringement 
were  untrue  but  also  that  they  were  not  made  bona  fide  or,  as  it  is 
sometimes  expressed,  that  they  were  made  without  reasonable  or 
probable  cause.  An  injunction  would  also  issue  in  such  cases  to  re- 
strain the  further  circulation  of  such  threats.  Where  the  statements 
of  infringement  were  proved  to  be  untrue  and  there  was  evidence 
that  the  defendants  subsequently  continued  to  distribute  the  notices, 
an  injunction  to  restrain  such  distribution  would  lie,  mala  fides  being 
necessarily  shown  by  the  continued  publication  after  the  untruth  had 
been  determined.^     In  Wren  v.  Weild°  the  court  said  : 

"  *  *  *  We  think  the  action  could  not  lie  luiles.s  the  plaintiffs  affirmatively 
prove  that  the  defendant's  claim  was  not  a  bona  fide  claim  in  support  of  a  right 
which,  with  or  without  cause,  he  fancied  he  had ;  but  a  mala  fide  and  malicious 
attempt  to  injure  the  plaintiffs  by  asserting  a  claim  of  right  against  his  own 
knowledge  that  it  was  without  any  foundation." 

1  Shoemaker  v.  South  Bend  Spark  Arrester  Co.,  22  L.  R.  A.,  332  (Ind.  Supreme  Ct, 
1893).  See  also  New  Iberia  Extract  of  Tabasco  Pepper  Co.  v.  E.  McUhenny's  Son  et  al., 
61    So.,    131    (La.    Sup.    Ct.,    1912). 

2  Everett  Piano  Co.  v.  Bent,  60  111.  App.,  372  (1895). 

3  Boston  Diatite  Co.  v.  Florence  Mfg.  Co.  et  al.,  114  Mass.,  69  (1873)  ;  Whitehead  v. 
Kitson,  119  Mass.,  484  (1876)  ;  Aberthaw  Construction  Co.  v.  Ransome,  192  Mass.,  434 
(1906). 

*  See  p.  543. 

EWren  v.  Weild,  L.  R.  (1869),  4  Q.  B.,  730;  Rollins  v.  Hinks,  L.  R.  (1872),  13  Eq., 
355;  Axmann  v.  Lund,  L.  R,  (1874),  18  Eq.,  330;  Halsey  v.  Brotherhood,  L.  R.  (1880), 
15  Ch.  Div.,  514;  s.  c,  L.  R.   (1881),  19  Ch.  Div.,  386. 

"L.  R,   (1869),  4  Q.  B.,  730. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  395 

In  Lycett  Saddle,  etc.,  Co.  v.  Brooks  &  Co.^  the  court  said : 

"  *  *  *  It  is  necessary  for  them  suing  under  the  common  law  to  prove 
not  only  that  the  statements  are  untrue  but  that  they  are  made  maliciously, 
or,  as  it  has  been  sometimes  expressed,  without  reasonable  and  probable 
cause."  ^ 

Section  11.  Combinations  to  cut  off  competitors'  supplies  or  to  destroy 
their  market. 

A  number  of  cases  have  arisen  involving  the  legality  at  the  com- 
mon law  of  concerted  action  by  manufacturers  or  traders  to  embar- 
rass or  drive  out  of  business  an  objectionable  competitor.  The  prin- 
cipal methods  employed  for  this  purpose  have  been  in  the  case  of  re- 
tail dealers,  to  cut  off  their  supplies  by  boycotting,  or  threatening  to 
boycott,  the  wholesalers  or  manufacturers  from  whom  they  piu-chase ; 
and  in  the  case  of  manufacturers  or  wholesale  dealers,  to  destroy  the 
market  for  their  goods  by  a  concerted  withdrawal  of  patronage.  In 
practically  all  of  the  reported  cases  involving  the  legality  of  these 
methods  of  competition  the  defendants  have  been  members  of  trade 
associations.  In  one  case,  however,  the  plaintiff  claimed  to  have 
been  injured  by  the  members  of  a  steamship  conference.^ 

By  the  weight  of  American  authority  these  methods  appear  to  be 
illegal.  The  English  courts,  however,  in  most  cases  have  adopted 
the  contrary  view.  It  may  be  noted  that  even  in  England,  where  the 
efforts  of  a  print  sellers'  association  to  cut  off  the  supplies  of  a  com- 
petitor by  inducing  dealers  not  to  patronize  publishers  who  sold  to 
him  were  held  lawful,  the  defendant's  counsel,  one  of  whom  was 
Rufus  Isaacs  (now  lord  chief  justice),  urged  that  the  statement  of 
claim  disclosed  no  cause  of  action,  "  as  it  only  alleged  an  unfair  com- 
petition on  the  part  of  the  defendants."*  In  some  cases  American 
courts  have  not  only  condemned  such  practices  but  have  contrasted 
them  wdth  "  honest "  ^  and  "  lawful " "  competition,  "  fair,  open  com- 
petition "  ^  or  "  fair  and  free  competition."  ^ 

On  the  other  hand,  Carland,  district  judge,  expressed  the  opinion 
that  the  action  of  an  association  of  retail  dealers  in  notifying  whole- 
salers and  jobbers  that  they  were  opposed  to  sales  by  such  wholesalers 
and  jobbers  to  mail-order  houses  and  requesting  the  former  not  to 

121  R.  r.  C,  656  (1904). 

2.\s  to  common-law  liability,  see  also  Dredfje  v.  Parnell,  13  R.  P.  C,  392  (1896)  ;  Alfred 
Appleby's  Twin  Roller  Chain  (Ltd.)  v.  Albert  Eadie  Chain  (Ltd.),  16  R.  P.  C,  318 
(1899)  ;  Craig  v.  Dowding,  25  R.  P.  C,  259  (1908). 

3  Mogul  Steamship  Co.  v.  McGregor,  Gow  &  Co.,  L.  R.  (1892),  A.  C,  25. 

••Boots  V.  Grundy,  16  Times  Law  Reps.,  457   (1900). 

G  Doremus  v.  Hennessy,  62  111.  App.,  391  (1896),  aflf.,  176  111.,  608  (1898). 

«  Doremus  v.  Hennessy,  supra,  and  Klingel's  Pharmacy  v.  Sharp  &  Dohme  et  al.,  104 
Md..  218   (1906). 

■'.Jackson  et  al.  v.  Stanfield  et  al.,  137  Ind.,  592  (1894). 

8  Bailey  v.  Master  Plumbers,  103  Tenn.,  99  (1899). 


396  REPORT  OF    THE   COMMISSIONER  OP   CORPORATIONS. 

sell  to  the  latter,  was  not  "  unfair  trade  competition,"  and  that  "  per- 
suasion "  was  not  "  unfair  competition."  ^ 

AMERICAN  DECISIONS. 

Cutting  off  competitors'  supplies. — In  a  number  of  cases  con- 
certed action  by  dealers  to  cut  off  supplies  from  objectionable  com- 
petitors has  been  held  lawful.  Thus  a  Federal  circuit  court  has  held 
that  it  is  not  unlawful  for  the  members  of  a  retail  dealers'  association 
to  mutually  agree  that  they  will  not  purchase  merchandise  from 
wholesalers  and  jobbers  who  sell  to  catalogue  or  mail-order  houses, 
and  in  pursuance  of  such  agreement  to  notify  wholesalers  and  job- 
bers that  they  are  opposed  to  such  sales  and  request  that  their  trade 
be  confined  to  "  legitimate  "  retail  dealers.^  And  in  Rhode  Island, 
where  it  appeared  that  the  members  of  a  national  association  of 
master  plumbers  resolved  to  withdraw  their  patronage  from  any  firm 
selling  supplies  to  others  than  members  of  their  association  or  local 
affiliated  organizations,  and  that  as  a  result  of  notice^s  sent  to  certain 
wholesale  dealers  not  to  sell  to  nonmembers  the  complainants,  master 
plumbers,  were  unable  to  purchase  supplies,  the  court  denied  an 
injunction,  being  of  opinion  that  the  object  of  the  members  of  the 
association  w%as  to  free  themselves  from  the  competition  of  non- 
members,  and  that  this  was  lawful;  that  the  agreement  not  to  deal 
with  wholesalers  who  sold  to  nonmembers,  and  the  sending  of  notices 
to  that  end,  was  lawful;  and  that,  as  neither  the  object  of  the 
combination  nor  the  means  adopted  was  unlawful,  there  was  no 
ground  for  a.  charge  of  conspiracy.^  In  a  Pennsylvania  case  it 
appeared  that  in  resisting  the  demands  of  striking  workmen  the 
members  of  a  planing-mill  association  and  a  builders'  exchange 
induced  lumber  dealers  and  others  not  to  sell  materials  to  dealers 
who  in  turn  supplied  certain  contractors  and  builders  who  had  con- 
ceded the  demands  of  the  workmen.  It  appeared  that  one  dealer 
had  been  advised  that  "  it  would  be  to  his  advantage  to  discon- 
tinue" supplying  the  plaintiff,  and  that  thereafter  his  orders  had 
been  refused.  In  view  of  the  Pennsylvania  statutes  legalizing  com- 
binations of  workmen  for  certain  purposes,  it  was  held  that  the  com- 

1  Montjiomery  Ward  &  Co.  v.  South  Dakota  Retail  Merchants  &  Hardware  Dealers' 
Association  et  al.,  150  Fed.,  413  (C.  C,  1907 J. 

"Montgomery  Ward  &  Co.  v.  South  Dakota  Rotail  Merchants  &  Hardware  Dealers' 
Assn.  et  al.,  150  Fed.,  413,  418  (C.  C,  Dist.  S.  Dak.,  1007).  Per  Garland,  J.:  "  It  must 
be  conceded  that  complainant  has  the  right  to  transact  and  carry  on  its  business  free 
from  intimidation  or  coercion,  that  this  is  a  property  right,  and  that  a  combination  to 
interfere  with  this  right  otherwise  than  in  fair  competition  must  show  justification.  The 
American  cases,  however,  when  carefully  considered,  show  that  the  great  weight  of 
authority  in  the  United  States,  is  in  favor  of  the  proposition  that  it  is  not  unfair  com- 
petition, intimidation,  or  coercion  for  a  combination  to  interfere  with  this  right  by  per- 
suasion or  any  peaceable  means.  *  *  *  ^  thus  appears  that  the  retail  dealers  have 
done  nothing,  nor  threatened  to  do  anything,  which  is  actionable." 

^Macauley  Bros.  v.  Tierney  et  al.,  19  R.  I.,  255  (1895). 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  397 

bination  complained  of  was  not  unlawful,  because  (1)  it  was  not 
made  to  lower  wages  regulated  by  the  supply  and  demand,  but  to 
resist  an  artificial  price  made  by  a  lawful  combination  of  workmen, 
and  (2)  the  methods  adopted  to  further  the  objects  of  the  employers' 
combination  were  not  unlawful.^ 

In  other  States,  however,  the  interference  by  combinations  of 
dealers  Avith  the  business  of  competitors  has  been  condemned  by 
the  courts.  Thus  in  Indiana,  where  a  retail  lumber  dealers'  asso- 
ciation collected  from  a  wholesale  dealer  a  penalty  for  having  sold 
lumber  through  a  broker  in  violation  of  a  rule  of  the  association, 
and  so  prevented  further  sales  of  like  description,  it  was  held  that 
the  broker  Avas  entitled  to  damages  and  an  injunction  restraining 
certain  members  of  the  organization  from  in  any  Avay  other  than 
by  "  fair,  open  competition,"  interfering  with  his  business  and  from 
demanding  a  penalty  from  anyone  who  might  sell  to  him,  or  through 
him  to  a  consumer.^ 

In  a  subsequent  case  it  appeared  that  two  corporations  control- 
ling the  manufacture  and  sale  of  plumbers'  supplies  in  Indianapolis 
refused  to  sell  to  a  licensed  plumber  solely  because  he  was  not  a 
member  of  the  Merchant  Plumbers'  Association.  The  plumber 
thereupon  brought  an  action  based  on  certain  sections  of  the  Indiana 

iCotp  V.  Murphy  et  al.,  159  Pa.  St.,  420,  431  (1894).  Per  Dean,  J.:  "If  the  em- 
ployers' combination  hei'e  had  used  Illegal  methods  or  means  to  prevent  other  dealers 
from  selling  supplies  to  plaintiff,  the  conspiracy  might  still  have  been  found  to  exist. 
The  threats  referred  to,  although  what  are  usually  termed  threats,  were  not  so  in  a  legal 
sense.  To  have  said  they  would  inflict  bodily  harm  on  other  dealers,  or  villify  them  in 
the  newspapers,  or  bring  on  them  social  ostracism,  or  similar  declarations,  these  the  law 
would  have  deemed  threats,  for  they  deter  a  man  of  ordinary  courage  from  the  prosecu- 
tion of  his  business  in  a  way  which  accords  with  his  own  notions ;  but  to  say,  and  even 
that  is  inferential  from  the  correspondence,  that  if  they  continued  to  sell  to  plaintiff  the 
members  of  the  association  would  not  buy  from  them,  is  not  a  threat.  It  does  not  inter- 
fere with  the  dealer's  free  choice ;  it  may  have  prompted  him  to  a  somewhat  sordid  cal- 
culation ;  he  may  have  considered  which  custom  wasi  most  profitable,  and  have  acted 
accordingly  ;  but  this  was  not  such  coercion  and  threats  as  constituted  the  acts  of  the 
combination  unlawful."  See  also  Buchanan  v.  Kerr  et  al.,  1.59  Pa.  St.,  433  (1894). 
Cf.  Lefebvre  r.  Knott,  p.  239. 

2  Jackson  et  al.  v.  Stanfleld  et  al.,  1.37  Ind.,  592,  608,  614  (1894).  Per  Dailey,  J.: 
"  There  is  such  an  element  of  coercion  and  intimidation  in  the  by-law  under  consideration, 
towards  the  wholesale  dealers,  manufacturers,  and  even  the  members  of  the  society,  and 
such  provision  made  for  penalties  and  forfeitures  against  them,  that  it  will  not  do  to 
say  it  was  optional  with  the  wholesale  dealer  whether  it  would  pay  the  demand  or  not, 
or  that  it  was  left  to  the  discretion  or  choice  of  the  members  to  either  trade  with  the 
wholesaler  or  abandon  the  association.  A  conspiracy  formed  and  intended  directly  or 
indirectly  to  prevent  the  carrying  on  of  any  lawful  business,  or  to  injure  the  business  of 
anyone  by  wrongfully  preventing  those  who  would  bo  customers  fi'om  buying  anything 
from  the  representatives  of  such  Inisiness,  by  threats  or  intimidation,  is  in  restraint  of 
trade  and  unlawful.  *  *  *  It  is  not  in  point  to  cite  cases  wliere  men  voluntarily 
agree  to  observe  rules  adopted  by  themselves.  This  is  no  voluntary  affair  of  the  whole- 
sale dealers.  It  is  not  even  a  combination  of  wholesalers.  They  may,  and  do,  sometimes 
become  honorary  members,  so  as  to  keep  within  touch  of  the  retail  dealers  and  secure 
trade.  It  is,  as  staled,  an  association  of  retailers  to  restrict  the  liberty  of  wholesalers 
to  sell  to  consumers  and  brokers,  and  tiie  wholesalers  must  obey  or  lose  their  trade. 
*  •  *  Such  rules  contravene  the  rights  of  nonmembers  to  earn  their  living  by  fair 
competition." 


398  EEPOET   OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

statutes/  charging  the  supply  companies  and  the  association  with 
having  combined  to  suppress  competition  by  fixing  prices  arbi- 
trarily and  selling  to  members  of  the  association  at  from  30  to  75 
per  cent  less  than  list  prices,  or  by  refusing  to  sell  to  nonmembers 
and  driving  them  out  of  business  unless  they  joined  the  association. 
The  defendants  were  perpetually  enjoined  from  refusing  to  sell, 
or  inducing  others  not  to  sell  to  the  plaintiff  for  cash,  at  the  usual 
and  customary  prices.  This  judgment  was  affirmed  by  the  Supreme 
Court  of  Indiana,  which  held  that  the  statute  created  no  new  offense 
but  was  declaratory  of  the  common  law.^ 

Likewise  in  Tennessee  the  supreme  court  held  that  certain  by- 
laws of  a  master  plumbers'  association  in  Memphis  constituted  an 
unreasonable  restraint  upon  trade,  and  were  contrary  to  public 
policy  and  void  under  the  common  law.  As  demonstrating  the 
"hurtful  and  unlawful  tendency"  of  the  association,  the  court  re- 
ferred to  certain  by-laws  which  prohibited  members  from  purchas- 
ing supplies  from  any  dealer  who  did  not  comply  with  the  rules  of 
the  association,  or  purchasing  "  from  a  jobber  who  buys  material 
from  a  manufacturer  who  sells  plumbing  or  gas-fitting  material  to 
any  one  in  our  city  who  is  not  a  member  of  our  association."^ 

In  Wisconsin  it  has  been  held  actionable  for  wholesale  coal  dealers 
owning  practically  all  the  coal  docks  at  Superior  and  Duluth,  to 
enter  into  a  combination  with  certain  retail  dealers  in  Superior  and 
agree  to  sell  coal  only  to  such  retailers,  for  the  purpose  of  forcing 
out  of  the  trade  all  retailers  not  in  the  combination,  where  it  further 
appeared  that  the  conspiracy  had  been  successful  and  that  the  busi- 
ness of  the  plaintiff  had  been  destroyed.*  So  in  Georgia  where  a 
retail  druggists'  association,  in  order  to  prevent  a  certain  firm  from 
obtaining  supplies,  notified  wholesalers  and  manufacturers  through- 
out the  country  that  said  firm  was  an  aggressive  price  cutter,  and 
required  traveling  salesmen  to  procure  from  the  association  a  card 
which  could  be  obtained  only  by  signing  an  agreement  not  to  sell  to 
said  firm,  and  further,  gave  the  manufacturers  and  wholesalers  to 
understand  that  unless  they  refused  to  sell  goods  to  said  firm  the 
members  of  the  association  would  not  buy  from  them,  it  was  held  that 
the  injured  firm  was  entitled  to  an  injunction  against  the  members  of 

lActs  1899,  p.  257;  Burns'  Ann.  Stats.  (1908),  sees.  3884-3887. 

2  Knight  &  JUlson  Co.  et  al.  v.  Miller,  172  Ind.,  27   (1909). 

=  Bailey  v.  Master  Plumbers,  103  Tcnn.,  99,  116,  117  (1899).  Per  Caldwell,  J.:  "These 
by-laws  virtually  divided  the  trade  in  plumbing  materials  and  supplies  for  Memphis  into 
two  main  parts,  in  the  nature  of  combinations,  one  of  them  being  represented  by  members 
of  the  association  and  dealers  who  sell  to  them  alone,  and  the  other  being  represented 
by  nonmembers  and  dealers  who  sell  to  them  alone ;  and,  thereby,  the  two  classes  are  in- 
tended to  be  arrayed  against  each  other  ;  not  in  fair  and  free  competition,  but  with  a 
view  to  the  utter  demolition  of  the  latter  class  and  the  entire  control  of  the  trade  by  the 
former  class." 

*  Hawarden  v.  The  Youghiogheny  &  Lehigh  Coal  Co.,  Ill  Wis.,  545  (1901). 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  399 

the  association  both  collectively  and  individually.^  And  in  Mary- 
land, where  a  retail  druggist  brought  an  action  for  damages  against 
two  firms  dealing  in  supplies,  and  a  retail  druggists'  association, 
and  alleged  that  the  latter  was  formed,  among  other  things,  for  the 
purpose  of  maintainmg  prices  and  preventing  sales  to  druggists  who 
were  unwilling  to  maintain  prices,  by  threats  to  blacklist  and  boycott 
those  who  made  such  sales,  and  that  pursuant  to  this  plan  the  de- 
fendant firms  had  refused  to  sell  supplies  to  the  plaintiff,  it  was 
held  that  a  cause  of  action  had  been  disclosed.-  In  Iowa,  where  it 
was  found  that  the  officers  and  members  of  an  implement  dealers'" 
association  had,  by  fraud,  coercion,  persuasion,  and  intimidation, 
prevented  and  threatened  to  prevent  jobbers  and  manufacturers 
from  dealing  with  the  plaintiff,  a  farmers'  elevator  company,  they 
were,  among  other  things,  enjoined  from  in  any  manner  interfering 
with  its  business,  and  from  threatening,  annoying  or  harassing  any 
jobber,  wholesaler,  or  manufacturer  for  the  purpose  of  preventing 
them  from  making  or  performing  any  contract  with  that  company.^ 
And  where  a  by-law  of  a  farmers'  cooperative  society  required  mem- 
bers to  sell  all  their  live  stock  to  the  society  or  to  forfeit  5  cents  per 
hundredweight  from  the  proceeds  of  stock  sold  to  competitors,  it 
was  held  by  the  Supreme  Court  of  Iowa  that  a  competitor  was  en- 
titled to  an  injunction  restraining  the  defendants  from  demanding 
or  receiving  any  sum  as  a  condition  upon  which  live  stock  might  be 
sold  to  him."*  In  another  Iowa  case  it  appeared  that  certain  trade 
associations  had  adopted  a  system  of  espionage  for  the  purpose  of 
ascertaining  the  names  of  the  wholesale  and  jobbing  houses  that 
supplied  the  Farmers'  Elevator  Co.  of  Gowrie,  and  resorted  to  some 
form  of  coercion  to  cause  them  to  desist.  As  a  result  of  these 
methods  the  elevator  company  was  compelled  to  keep  secret  the 
names  of  the  persons  with  whom  it  dealt,  and  was  frequently  unable 
to  secure  supplies.  In  a  suit  to  compel  the  elevator  company  to 
transfer  certain  stock  to  the  plaintiff,  and  to  permit  the  latter  to 
examine  its  books,  the  court,  being  of  the  opinion  that  certain  mem- 
bers of  these  associations  were  guilty  of  an  unlawful  conspiracy  to  de- 
stroy the  business  of  the  defendant,  or  to  coerce  it  into  maintaining 
an  approved  scale  of  prices,  and  further,  that  the  plaintiff  stock- 

1  Brown  &  Allen  et  al.  v.  Jacobs'  Tharmacy  Co.,  115  Ga.,  429  (1902). 

=  Klingel's  Pharmacy  v.  Sharp  &  Dohme,  104  Md.,  218  (1906). 

3  Farmers'  Elevator  Co.  v.  Iowa  Implement  Dealers'  Association  et  al.,  unreported  de- 
cision of  Wright,  J.,  in  district  court  of  Webster  County,  Iowa,  September  term,  1909.  See 
also  Report  of  the  Commissioner  of  Corporations  on  Farm-Machinery  Trade  Associations, 
pp.    154-158. 

*  Reeves  i;.  Decorah  Farmers'  Cooperative  Society  et  al.,  100  Iowa,  194,  205  (1913). 
Per  Deemer,  J. :  "  It  seems  to  us  that  plaintiff  has  suffered  a  wrong  and  that  he  is  threat- 
ened with  further  injury  to  his  business,  growing  out  of  defendants'  illegal  acts.  In  virtue 
of  his  being  a  competitor  with  the  defendant  association,  he  has  the  right  to  free  and 
untrammeled  competition  with  it,  and  if  tlirough  illegal  means  he  has  been  made  to 
suffer  in  the  past,  and  will  do  so  in  the  future,  he  is  entitled  to  the  protective  arm  of 
the  court."    See  also  Ludowese  c.  Farmers'  Mutual  Cooperative  Co.,  164  Iowa,  197  (1914  j. 


400  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

holder  was  acting  in  furtherance  of  the  conspiracy,  held  that  he  was 
entitled  to  ho  aid  from  a  court  of  equity.^ 

A  few  attempts  have  been  made  to  compel  competitors  to  main- 
tain prices  or  otherwise  comply  with  the  demands  of  a  trade  associa- 
tion by  preventing  them  from  obtaining  labor  necessary  for  the  con- 
duct of  their  business.  Such  methods  have  also  been  condemned  by 
the  courts.  Thus,  in  Illinois,  it  has  been  held  unlawful  for  certain 
members  of  a  laundrymen's  association  to  conspire  to  injure  the 
business  of  a  competitor  because  she  would  not  maintain  the  prices 
fixed  by  the  combination,  and  to  that  end  to  induce  various  persons 
wdio  were  doing  her  laundry  work  to  break  their  contracts,  by  falsely 
representing  that  she  was  financially  irresponsible,  and  by  threaten- 
ings  to  injure  the  business  of  such  parties,  and  also  to  induce  other 
laundrymen  to  refuse  to  take  work  from  her.  Although  the  defend- 
ants contended,  among  other  things,  that  their  acts  in  inducing  others 
to  break  their  contracts  were  not  malicious,  but  were  in  the  Ime  of 
"legitimate  trade  competition"  for  which  they  could  not  be  held 
liable,  a  judgment  in  favor  of  the  plaintiff  was  affirmed  by  the 
Supreme  Court  of  Illinois.'  In  a  Georgia  case  it  appeared  that  an 
employing  printers'  club  had  adopted  a  system  of  maintaining 
prices,  regulating  bidding,  and  distributing  contracts  among  its  mem- 
bers, and  that  upon  the  refusal  of  the  plaintiff  printing  company  to 
comply  with  a  certain  demand  made  by  the  club  the  latter  had  in- 
duced the  plaintiff's  pressmen  and  other  employees  to  quit  work. 
It  was  further  alleged  that  when  some  of  the  employees  returned 
to  work  the  members  of  the  club  threatened  that  unless  the  labor 
unions  called  a  strike  in  the  plaintiff's  shop  they  would  no  longer 
observe  union  regulations,  and  that  in  pursuance  of  this  threat  some 
of  the  members  posted  their  respective  businesses  as  "  open  shop." 
Under  such   circumstances   it  was  held   proper  to  enjoin  the   de- 

1  Funck  V.  Farmers'  Elevator  Co.  of  Gowrie,  Iowa  et  al.,  142  Iowa,  621,  625  (1909). 
Per  Evans,  C.  J. :  "  The  evidence  discloses  an  active  conspiracy,  whicli  it  would  be  the 
duty  of  the  court  to  enjoin  if  proper  jurisdiction  could  be  acquired.  Can  a  court  con- 
sistently enjoin  and  punish  a  conspiracy  with  one  hand,  and  aid  and  abet  it  with  the 
other?  It  is  true  that  the  plaintiff  asks  nothing  in  this  case  that  is  of  itself  illegal. 
If  this  transaction  stood  alone,  the  plaintiff  would  have  the  absolute  right  to  the  relief 
demanded,  as  held  by  the  trial  court.  But  must  the  court  aid  a  conspiracy  to  its  final 
goal  simply  because  it  travels  this  part  of  the  way  over  a  legal  highway?  We  think  not. 
In  the  light  of  the  evidence  the  plaintiff  does  hot  stand  before  the  court  as  a  mere  pur- 
chaser of  stock  in  the  defendant  company,  but  as  a  conspirator,  or  a  puppet  of  con- 
spirators, working  in  conjunction  with  many  othei's  by  unlawful  means  toward  an  un- 
lawful end."     Cf.  Forrest  v.  Ry.  Co.,  p.  461. 

^Doremus  et  al.  v.  Hennessy,  62  111.  App.,  391  (1896)  ;  176  111.,  609,  614,  615  (1898). 
Per  Phillips,  J. :  "Appellants,  and  those  persons  who  refused  to  do  appellee's  work,  had 
each  a  separate  and  independent  right  to  unite  with  the  organization  known  as  the 
Chicago  Laundrymen's  Association,  but  they  had  no  right,  separately  or  in  the  aggregate, 
with  others,  to  insist  that  the  appellee  should  do  so,  or  to  insist  that  appellee  should 
make  her  scale  of  prices  the  same  as  that  fixed  by  the  association,  and  make  her  refusal 
to  do  this  a  pretext  for  destroying  and  breaking  up  her  business.  A  combination  by 
them  to  induce  others  not  to  deal  with  appellee  or  to  enter  into  contracts  with  her  or 
do  any  further  work  for  her  was  an  actionable  wrong." 


TEUST   LAWS  AND   UNFAIR   COMPETITION.  401 

fendants  from  interfering  with,  or  inducing  a  labor  organization  to 
obstruct,  the  plaintiff's  business.^ 

Destroying  competitors'  market. — Methods  similar  to  those  dis- 
closed above  have  also  been  employed  to  prevent  manufacturers  and 
others  from  disp)osing  of  their  goods.  Although  in  the  majority  of 
such  cases  the  defendants  have  been  held  lialile,  in  others  the  courts 
have  held  that  the  acts  complained  of  were  not  unlawful.  Thus,  in 
Minnesota,  where  it  appeared  that  the  members  of  a  retail  lumber- 
men's association  had  agreed  not  to  deal  with  any  manufacturer  who 
sold  direct  to  consumers  at  points  where  members  were  engaged 
in  business,  the  action  of  the  secretary  of  that  organization  in  threat- 
ening to  notify  members  that  a  certain  manufacturer  had  made  such 
sales  was  held  lawful  and  no  ground  for  an  injunction.^  And  in 
Colorado  it  has  been  held  lawful  for  members  of  a  master  builders' 
association  to  address  a  letter  to  a  firm  of  architects  about  to  con- 
struct a  building,  declining  to  bid  on  the  work  if  the  plaintiff's  bid 
was  received  in  competition.^  The  court  expressed  the  opinion  that 
the  architects  had  not  been  coerced  or  intimidated,  pointing  out 
that  there  were  at  least  50  other  contractors  from  whom  they  could 
have  solicited  bids. 

In  Texas,  on  the  other  hand,  it  has  been  held  actionable  for  a  lum- 
ber dealers'  association  to  distribute  circulars  to  dealers,  including 
the  customers  of  a  certain  wholesale  and  retail  firm,  naming  the 
latter  as  one  which  sold  to  others  than  "  legitimate "  dealers,  and 
urging  a  withdrawal  of  patronage  until  this  practice  was  discon- 
tinued.^ And  in  Vermont,  where  it  appeared  that  the  members  of  a 
granite  manufacturers'  association  agreed  not  to  sell  to  nonmembers, 
and  to  impose  fines  for  the  violation  of  the  rules  of  the  organization, 
it  was  held  that  the  proprietors  of  a  mill  who  had  refused  to  join 
the  association  were  entitled  to  damages  caused  by  a  forced  with- 


1  Employing  Trinters'  Club  et  al.  r.  Doctor  Blosser  Co.,  122  Ga.,  509  (1905).  See  also 
Leonard  et  al.  v.  Abner-Drury  Brewing  Co.  et  al.,  25  App.  D.  C,  161  (1905),  and  Globe 
&  Rutgers  Fire  Insurance  Co.  v.  Firemen's  Fund  Insurance  Co.  et  al.,  97  Miss.,  148 
(1910). 

2Bohn  Manufacturing  Co.  v.  W.  G.  Ilollis  et  al.,  .54  Minn.,  22.-},  2:{4,  235  (189:!).  Per 
Mitchell,  J.  :  "It  is  perfectly  lawful  for  any  man  (unless  under  contract  obligation,  or 
unless  his  employment  charges  him  with  some  public  duty)  to  refuse  to  work  for  or  to 
deal  with  any  man  or  class  of  men,  as  he  sees  fit.  This  doctrine  is  founded  upon  the 
fundamental  right  of  every  man  to  conduct  his  own  business  in  his  own  way.  subject  only 
to  the  condition  that  he  does  not  interfere  with  the  legal  rights  of  others.  And,  as  has 
been  already  said,  the  right  which  one  man  may  exercise  singly,  many,  after  consulta- 
tion, may  agree  to  exercise  jointly,  and  make  simultaneous  declaration  of  their  choice. 
This  has  been  repeatedly  held  as  to  associations  or  unions  of  workmen,  and  associations 
of  men  in  other  occupations  or  lines  of  business  must  be  governed  by  the  same  principles. 
Summed  up,  and  stripped  of  all  extraneous  matter,  this  is  all  that  defendants  have  done, 
or  threatened  to  do,  and  we  fall  to  see  anything  unlawful  or  actionable  in  it." 

3  Master  Builders'  Association  et  al.  r.  Domascio,  16  Colo.  App.,  25   (1901). 

*  Olive  &  Sternenberg  v.  Van  Patten  et  al.,  7  Tex.  Civ.  App.,  6o0  (1894). 

30035°— IG 26 


402  EEPORT  OF   THE   COMMISSIONER  OF    COEPOKATIONS. 

drawal  of  patronage  secured  by  the  action  of  the  association.^  Like- 
Avise  in  Massachusetts,  where  a  qiiarryman  brought  an  action  against 
the  members  of  a  granite  manufacturers'  association  charging  a  con- 
spiracy to  injure  him  in  his  business^  and  it  appeared  that  the  by-laws 
provided  that  members  dealing  with  nonmembers  should  "  contrib- 
ute" from  $1  to  $500  to  the  association,  and  that  certain  members, 
including  most  of  the  customers  of  the  plaintiff,  had  been  compelled 
to  contribute  as  above  stated  and  had  thereafter  declined  to  deal 
with  him,  it  was  held  on  appeal  that  it  was  error  to  order  a  verdict 
for  the  defendants,  and  that  the  case  should  have  been  submitted  to 
the  jury.-  A  more  elaborate  combination  was  involved  in  a  case  de- 
cided by  the  Supreme  Court  of  Illinois.  It  appeared  that  the 
plaintiff  was  the  principal  competitor  of  the  members  of  a  brick 
manufacturers'  association  from  which  he  had  been  excluded,  and 
that  this  organization  procured  an  agreement  with  a  masons  and 
builders'  association  whereby  the  members  of  the  latter  were  to  pur- 
chase brick  only  from  members  of  the  former.  It  also  appeared  that 
the  members  of  a  bricklayers'  union  had  agreed  to  handle  brick  only 
for  members  of  the  masons  and  builders'  association.  There  w^as 
also  evidence  tending  to  show  that  plaintiff's  business  was  interfered 
with  by  representatives  of  the  associations  and  the  labor  union,  and 
that  hodcarriers  as  well  as  bricklayers  had  refused  to  handle  his 
brick.  A  judgment  against  certain  members  of  the  manufacturers' 
association  and  the  masons  and  builders'  organization  was  affirmed 

iBoutwell  et  al.  r.  Man-  et  al.,  71  Vt.,  1,  8,  9  (1899).  Per  Munson,  J.;  "Without 
undertaking  to  designate  with  precision  the  lawful  limit  of  organized  effort,  it  may 
safely  be  aflSrmed  that  when  the  will  of  the  majority  of  an  organized  body,  in  matters 
involving  the  rights  of  outside  parties,  is  enforced  upon  its  members  by  means  of  fines 
and  penalties,  the  situation  is  essentially  the  same  as  when  unity  of  action  is  secured 
among  unorganized  individuals  by  threats  or  intimidation.  The  withdrawal  of  patronage 
by  concerted  action,  if  legal  in  itself,  becomes  illegal  when  the  concert  of  action  is  pro- 
cured by  coercion.  *  *  *  The  voluntary  acceptance  of  by-laws  providing  for  the  im- 
position of  coercive  fines  does  not  make  them  legal  and  collectible,  and  the  standing 
threat  of  their  imposition  may  properly  be  classed  with  the  ordinary  threat  of  suits  upon 
groundless  claims.  The  fact  that  the  relations  and  processes  deemed  essential  to  a  re- 
covery are  brought  within  the  membership  and  proceedings  of  an  organized  body,  cannot 
change  the  result.  The  law  sees  in  the  membership  of  an  association  of  this  character 
both  the  authors  of  its  coercive  system  and  the  victims  of  its  unlawful  pressure." 

See  also  April  et  al.  v.  Baird  et  al.,  32  N.  Y.  App.  Div.,  226  (1898),  where  it  was  held 
that  an  action  might  be  maintained  against  certain  members  of  an  unincorporated  asso- 
ciation to  recover  damages  for  a  conspiracy  to  prevent  the  plaintiffs  from  carrying  on 
their  trade  of  buying,  cutting  and  selling  stone  in  the  city  of  Brooklyn. 

^Martell  r.  White  et  al.,  185  Mass.,  255,  261  (1904).  Per  Hammond,  .T.  :  "  In  the  case 
before  us  the  members  of  the  as.sociation  were  to  be  held  to  the  policy  of  refusing  to  trade 
with  the  plaintiff  by  the  imposition  of  heavy  fines,  or  in  other  words  they  were  coerced 
by  actual  or  threatened  injury  to  their  property.  It  is  true  that  one  may  leave  the  asso- 
ciation if  he  desires,  but  if  he  stays  in  it  he  is  subjected  to  the  coercive  effect  of  a  fine 
to  be  determined  and  enforced  by  the  majority.  This  method  of  procedure  is  arbitrary 
and  artificial  and  is  based  in  no  respect  upon  the  grounds  upon  which  competition  in 
business  is  permitted,  but  on  the  contrary  it  creates  a  motive  for  business  action  incon- 
sistent with  that  freedom  of  choice  out  of  which  springs  the  benefit  of  competition  to  the 
public,  and  has  no  natural  or  logical  relation  to  the  grounds  upon  which  the  right  to 
compete  is  based.     Such  a  method  of  influencing  a  person  may  be  coercive  and  illegal  " 


TRUST   LAWS  AND   UNFAIR  COMPETITION.       '  403 

by  the  appellate  court  ^  and  by  the  Supreme  CouFt  of  Illinois.^  In 
California,  where  a  fire  insurance  company  complained  that  certain 
representatives  of  a  board  of  underwriters  had  threatened  to  boycott 
firms  and  individuals  holding  policies  issued  by  the  complainant  and 
other  "  nonboard "  companies  unless  the}^  forthwith  canceled  the 
policies,  a  Federal  court  enjoined  such  threats,  and  referred  to  the 
defendants'  conduct  as  unlawful  and  unjustifiable.^  Still  other 
methods  employed  by  combinations  of  dealers  have  been  declared 
unlawful.  Thus  in  New  York  it  has  been  held  actionable  for  the 
president  of  a  retail  druggists'  association  and  others  to  conspire  to 
ruin  the  business  of  other  druggists,  and  to  resort  to  threats,  in- 
timidation, libel  and  slander,  and  interference  with  the  plaintiffs' 
advertising.*  In  another  case  it  appeared  that  the  agents  of  an  im- 
plement and  hardw^are  dealers'  association  in  Washington  had  inter- 
fered with  salesmen  peddling  wagons  and  buggies  for  a  manufac- 
turer in  another  State,  by  following  and  intimidating  them,  inter- 
rupting their  conversations  with  customers,  and  advising  the  latter 
not  to  buy.  Some  of  the  followers  carried  rifles,  some  had  been  made 
deputy  sheriffs,  and  in  one  instance  one  of  the  salesmen  was  ar- 
rested by  such  a  sheriff  under  a  provision  of  a  law  which  had  been 
declared  void.  The  Federal  court  was  of  the  opinion  that  such  acts 
constituted  an  unwarranted  interference  with  the  plaintiffs'  business 
and  issued  a  temporary  injunction.^ 

ENGLISH  DECISIONS. 

The  most  important  English  case  involving  the  legality  of  certain 
methods  of  competition  was  decided  by  the  House  of  Lords  in  1891. 
It  was  then  held  lawful  for  the  owners  of  a  number  of  steamships 
operating  between  China  and  England,  in  order  to  secure  the  entire 
tea-carrying  trade,  to  enter  into  agreements  providing  for  the  regula- 
tion of  this  traffic  as  among  themselves,  the  determination  of  the 
rates  of  freight,  the  semiannual  payment  of  rebates  to  such  persons 
as  shipped  exclusively  by  their  vessels,  and  the  sending  of  vessels  to 
a  certain  shipping  point  to  secure  freight  without  regard  to  remu- 

1  rurinfrton  et  al.  v.  Hincbliff,  120  HI.  App.,  523,  533  (1905).  Per  Freeman,  J.  :  "  Law- 
ful competition  in  trade  may  have  tlie  eCfect  of  driving  men  out  of  business  and  creating 
a  practical  monopoly  in  those  who  survive  the  struggle.  Such  competition  is  legitimate, 
however,  and  not  actionable,  although  its  effect  in  particular  cases  may  be  similar  to  that 
brought  about  by  unlawful  means  employed  to  destroy  competition.  That  this  may 
happen  is  no  excuse  or  justification  for  the  use  of  unlawful  methods,  by  combination  or 
otherwise,  with  intent  to  do  a  wrongful  injury  by  inducing,  as  ip  the  case  before  us, 
former  customers  not  to  deal  with  appellee  nor  to  buy  or  use  brick  of  his  manufacture." 

sPuriugton  et  al.  v.   mnchliff,   219    111.,    150    (1005). 

=»  Continental  Insurance  Co.  v.  Board  of  Fire  Underwriters  of  the  Pacific,  67  Fed.,  310 
(C.  C,  1895). 

*Rourkc  et  al.  v.  Elk  Drug  Co.  et  al.,  75  N.  Y.  App.  Div.,  145  (1902). 

5  Spaulding  et  al.  v.  Evenson  et  al.,  149  Fed.,  913  (1906)  ;  aff.  Evenson  et  al.  v.  Spauld- 
ing  et  al.,  150  Fed.,  517   (1907).     See  form  of  injunction,  p.  407. 


404  REPORT  OF    THE   COMMISSIONER   OF   CORPORATIONS. 

nerative  rates  whenever  a  rival  vessel  left  for  that  port,  and  further 
providing  that  the  agents  of  parties  to  the  agreement  should  be  pro- 
hibited from  being  interested  in  rival  steamers  or  from  loading  sail- 
ing vessels  belonging  to  outsiders.  A  shipping  company  which  had 
been  excluded  from  this  association  or  conference  and  had  been  in- 
jured by  the  carrying  out  of  these  agreements  brought  an  action 
against  the  members  of  the  combination,  alleging  a  conspiracy,  and 
claiming  damages  and  an  injunction.  It  was  held  by  the  House  of 
Lords  that  as  neither  the  object  of  the  combination  nor  the  means 
emplo3^ed  were  unlawful  the  action  could  not  be  maintained.  Lord 
Halsbury  observed  that  if  an  offer  by  the  members  of  an  associated 
body  of  traders  of  reduced  freights  to  persons  who  would  deal  ex- 
clusively with  them  was  unlawful,  it  would  seem  "that  the  greater 
part  of  commercial  dealings,  where  there  is  rivalry  in  trade,  must  be 
equally  unlawfid ;"  and  Lord  Hannen  expressed  the  opinion  that  this, 
in  effect,  is  "  nothing  more  than  the  ordinary  form  of  competition  be- 
tween traders  by  offering  goods  or  services  at  a  cheaper  rate  than 
their  rivals." 

With  respect  to  rate  cutting,  Lord  Watson  said,  in  part:  "I  can 
not  for  a  moment  suppose  that  it  is  the  proper  function  of  English 
courts  of  law  to  fix  the  lowest  prices  at  which  traders  can  sell  or  hire, 
for  the  purpose  of  protecting  or  extending  their  bnsiness,  without 
committing  a  legal  wrong  which  will  subject  them  in  damages." 
Lord  Bramwell  also  expressed  the  opinion  that  in  resorting  to  this 
method  of  attracting  customers  "the  defendants  did  no  more  than 
they  had  a  legal  right  to  do." 

Lord  Watson  and  Lord  Hannen  were  of  opinion  that  the  with- 
drawal of  the  defendants'  agency  from  persons  who  also  represented 
nonconference  steamers,  could  not  be  regarded  as  an  illegal  act, 
and  Lord  Morris  expressed  the  view  that  the  dismissal  of  agents 
might  be  questionable,  according  to  circumstances,  but  in  the  present 
case  they  filled  an  irreconcilable  position  in  being  the  agents  for  two 
rivals,  and  that  "  dismissal  under  such  circumstances  became,  per- 
haps, a  necessary  incident  of  the  warfare  in  trade."  ^  It  has  also 
been  held  lawful  for  members  of  a  print  sellers'  association  to  publish 
circulars  suggesting  that  dealers  agree  not  to  order  from  houses 
whose  publications  were  systematically  offered  by  certain  notorious 
undersellers,  although  the  effect  of  such  action  was  to  prevent  the 
plaintiffs  from  obtaining  further  supplies  from  the  publishers.^ 

1  Mogul  steamship  Co.  (Ltd.)  v.  McGregor,  Gow  &  Co.  et  al.,  L.  R.  (1892),  A.  C,  25, 
affirming  L.  R.  (1889),  23  Q.  B.  D.,  598,  and  L.  R.  (1888),  21  Q.  B.  D.,  544.  Cf.  Lougli 
et  al.  V.  Outerbridge  et  al.,  p.  455. 

2  Boots  et  al.  v.  Grundy  et  al.,  16  Times  Law  Reps.,  457  (Q.  B.  Div.,  1900).  It  may 
be  noted  that  defendants'  counsel,  one  of  whom  was  Rufus  Isaacs,  Q.  C.  (now  Lord  Chief 
Justice)  contended,  among  other  things,  that  the  statement  of  claim  disclosed  no  cause 
of  action,  "as  it  only  alleged  an  unfair  competition  on  the  part  of  the  defendants." 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  405 

In  Scotland,  where  it  appeared  that  American  and  Canadian  meat 
could  be  obtained  only  at  the  Yorkhill  Wharf,  Glasgow,  where  it  was 
sold  at  auction,  it  was  held  law^f ul  for  a  butchers'  association  to  notify 
the  cattle  salesmen  that  they  would  not  buy  at  their  auction  sales  un- 
less they  declined  to  sell  to  certain  competing  cooperative  stores,  and 
likew^ise  to  threaten  to  withdraw  their  patronage  from  hide  mer- 
chants who  dealt  with  cooperative  societies.  The  court  was  of 
opinion  that  it  was  lawful  for  the  salesmen  to  decline  to  receive  bids 
from  such  stores  and  that  the  butchers  were  not  liable  for  inducing 
by  lawful  means,  an  act  which  was  lawful  in  itself.^ 

On  the  other  hand,  in  Ireland,  w^here  the  acts  complained  of  would 
apparently  have  been  illegal  in  the  absence  of  a  combination,  the  de- 
fendants have  been  held  liable.  Thus  where  it  w^as  found  that  certain 
members  of  a  stevedores'  association  and  representatives  of  a  labor 
union  agreed  to  compel  another  stevedore  to  join  the  employers' 
organization,  and  to  that  end  used  threats  and  procured  his  laborers 
to  break  their  contracts  of  employment,  it  was  held  by  the  Court  of 
Appeal  that  such  conduct  was  actionable.^ 

In  an  earlier  Irish  case  it  appeared  that  certain  coopers,  in  order 
to  injure  the  business  of  a  manufacturer  of  machine-made  firkins, 
induced  a  number  of  butter  merchants  to  publish  a  notice  to  farmers 
stating  that  they  would  not  purchase  butter  packed  in  machine-made 
firkins,  as  they  had  been  found  to  be  most  injurious  to  the  keeping 
qualities  of  butter,  and  urging  the  necessity  of  packing  their  butter 
in  hand-ma de  firldns.  The  manufacturer  thereupon  brought  an  action 
against  several  of  the  merchants  and  officers  of  coopers'  societies  and 
guilds  claiming  an  injunction  and  damages  for  libel  and  conspiracy. 
The  court  granted  an  injunction  pending  the  hearing  of  the  case, 
being  of  the  opinion  that  if  the  allegations  were  proved,  damages 
would  not  afford  sufficient  compensation,  but  that  an  injunction  would 
be  awarded  to  restrain  future  acts  of  a  like  character.^ 

In  Australia  it  has  been  held  unlawful  for  a  grocers'  association  to 
induce  the  members  of  a  brewers'  club  not  to  sell  beer  to  grocere  who 
did  not  maintain  list  prices,  and  accordingly  to  refuse  to  sell  to  a 
grocer  who  had  reduced  prices,  until  he  should  join  the  association.* 
In  a  more  recent  case,  however,  involving  substantially  similar  facts, 
another  Australian  court  held  a  contrary  view.    There  it  appeared 

1  Scottish  Cooperative  Wholesale  Society  (Ltd.)  v.  Glasgow  Fleshers'  Trade  Defense 
Association  et  al.,  35  Scottish  Law  Rep.,  G45  (1898).  An  ordinance  siibsequpntly  passed 
by  the  local  authority  providing  that  sale  rings  at  the  public  wharf  should  not  be  used 
for  private  sales,  sales  to  any  limitod  number  of  persons,  or  sales  in  which  any  class  of 
the  public  are  excluded  from  bidding  or  l)uying,  was  hold  valid  by  the  Court  of  Sessions, 
in  Scott  et  al  v.  Magistrates  of  filnsgow,  :'.(>  Scottish  Law  Rep.,  4r>S  (18901. 

2  Long  V.  Larlcin  et  al.  (1914),  2  Irish  Reps.,  285,  329.  While  this  report  was  on  the 
press  the  above  decision  was  affirmed  by  the  House  of  Lords.  See  Larkin  et  al.  v.  Long, 
L.  R.  (1915),  A.  C,  814. 

3  Punch  1'.  Boyd  et  al.,  10  L.  R.   (Ireland),  476  (1885). 

*  Taffs  V.  Beesley,  16  Australian  Law  Times,  59  (Victoria,  1894). 


406  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

that  a  retail  butchers'  association  entered  into  an  arrangement  with 
a  wholesalers'  association,  the  members  of  the  latter  agreeing  not 
to  supply  retailers  who  sold  below  certain  fixed  prices.  The  plaintiff, 
a  retail  butcher,  became  a  member  of  the  association,  but  refused  to 
be  bound  by  the  prices  agreed  upon,  and  as  a  consequence  the  whole- 
salers refused  to  supply  him  further  with  meat.  A  verdict  for  the 
plaintiff  was  set  aside  on  appeal,  the  court  being  of  opinion  that  the 
defendants  were  merely  acting  for  the  protection  of  their  own 
interests  and  not  to  injure  the  plaintiff  whose  legal  rights  had  not 
been  infringed.^ 

Section  12.  Intimidation,  obstruction,  and  molestation  of  competitors  or 
their  customers. 

In  1914  the  Supreme  Court  of  Michigan  expressed  the  opinion  that 
"  there  are  many  ways,  other  than  by  interference  with  contract,  of 
harassing,  interfering  with,  and  obstructing  a  competitor  in  such  a 
manner  as  to  amount  to  unfair  competition,  in  the  broadest  sense  of 
the  term,"  and  that  "  the  business  of  another  may  be  unlawfully  ob- 
tained by  harassing  his  customers  and  salesmen,  just  as  effectively  as 
by  passing  off  his  [sic]  goods  as  those  of  another."  -  The  Supreme 
Court  of  Massachusetts  has  also  declared  that "  no  man  can  justify  an 
interference  with  another  man's  business  through  fraud  or  misrepre- 
sentation, nor  by  intimidation,  obstruction,  or  molestation "  ^  and 
the  courts  of  a  number  of  other  States  have  used  similar  expressions.* 
Likewise  in  England  the  lord  chancellor  observed  that  "  intimida- 
tion, violence,  molestation,  or  the  procuring  of  people  to  break  their 
contracts  are  all  of  them  Unlawful  acts."  ^ 

AMERICAN  DECISIONS. 

The  reported  cases  disclose  the  fact  that  these  methods  have  in  a 
few  instances  been  employed  to  embarrass  competitors  or  drive  them 
out  of  business.  Thus,  in  Standard  Oil  Co.  v.  Doyle,*'  where  the 
testimony  tended  to  prove  such  practices,  the  court,  while  conceding 
that  "  one  man  may  by  fair  methods  compete  with  a  rival  until  by 
sheer  force  of  competition,  by  underselling  or  outbidding  him,  his 
own  business  is  built  up  to  the  detriment  and  ruin  of  his  rival," 


iRea  et  al.  (defendants)  v.  Buckland  (plaintiff),  11  Western  Australian  Law  Reps.,  2 
(1908 J. 

2  Attorney  General  v.  National  Cash  Re^ster  Co.,  148  N.  W.,  420,  428  (Mieh.  Sup.  Ct., 
1914). 

3Martell  v.  White,  185  Mass.,  255,  261   (1904). 

*  Crump  V.  Commonwealth,  84  Va.,  927,  940,  941  (1888);  Jackson  v.  Stanfleld,  137 
Ind.,  592,  613  (1893)  ;  Vegelahn  v.  Guntner,  167  Mass.,  92,  99  (1896)  ;  Doremus  v. 
Hennessy,  176  111.,  608,  614  (1898);  My  Maryland  Lodge  v.  Adt,  100  Md.,  238,  250 
(1905)  ;  Victor  Talking  Machine  Co.  v.  Lucker,  150  N.  W.,  790  (Minn.  Sup.  Ct.,  1915). 

==  Mogul  Steamship  Co.  v.  McGregor,  Gow  &  Co.,  L.  R.  (1892),  A.  C,  25,  37. 

«118  Ky.,  662,  670  (1904). 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  407 

declared  that  a  different  case  is  presented  where  one  seeks  to  destroy 
the  rival's  business  by  unlawful  means  and  that  it  was  most  assuredly 
unlawful  to  obstruct,  harass,  and  annoy  Doyle's  employees,  to 
threaten  his  customers,  and  to  procure  his  arrest  on  false  charges 
for  the  purpose  of  alienating  his  patrons. 

Somewhat  similar  methods  were  disclosed  in  Spaulding  v.  Even- 
son,^  where  the  Inland  Empire  Implement  &  Hardware  Dealers' 
Association  and  certain  of  its  representatives  were  temporarily 
enjoined  from — 

preceding  or  following  in  close  range  any  employee,  agent,  or  servant  of  the 
complainants  or  tlie  teams  used  by  them  or  any  of  them  in  such  manner  as  to 
hinder,  obstruct,  harass,  annoy,  or  intimidate  the  complainants  or  any  of  their 
employees  in  the  free  use  of  the  highway,  and  from  in  any  other  manner  occu- 
pying said  highway  in  such  a  manner  as  to  hinder,  obstruct,  harass,  annoy,  or 
intimidate  the  complainants  or  any  of  their  employees  in  the  free  use  thereof; 
also  from  approaching  or  speaking  to  any  actual  or  supposed  customer  or 
customers  of  the  complainants  so  long  as  complainants'  agents  or  servants  are 
personally  present  and  engaged  in  selling  or  negotiating  the  sale  of  any  buggy 
or  wagon,  for  the  purpose  of  defeating  such  sale  by  the  complainants ;  also 
from  resorting  to  any  species  of  intimidation,  force,  or  fraud,  or  any  conduct 
that  would  imply  intimidation,  force,  coercion,  or  fraud,  for  the  purpose  of 
preventing  complainants  from  selling  buggies  or  wagons  and  carrying  on  said 
business  of  selling  buggies  or  wagons. 

Although  in  this  case  it  vras  contended  that  if  any  damage  was 
sustained  by  the  complainants  it  was  the  unavoidable  result  of  com- 
petition, the  circuit  court  of  appeals  expressed  the  opinion  that  "  the 
right  of  competition  furnishes  no  justification  for  such  acts." 

Likewise  on  the  complaint  of  the  Economist  Furnace  Co.,  certain 
employees  of  the  Wrought-Iron  Range  Co.  were  enjoined  from 
molesting,  interrupting,  hindering,  disturbing  or  otherwise  interfer- 
ing with,  or  threatening  or  intimidating  the  plaintiff  or  its  agents, 
and  were  adjudged  guilty  of  contempt  for  violating  the  order  of  the 
court.-  Subsequently  in  a  suit  brought  by  the  Drake  Hardware  Co. 
in  Xew  York,  the  Wrought-Iron  Range  Co.  and  its  employees  were 
again  enjoined  from  engaging  in  similar  practices,^  and  more  re- 
cently in  North  Carolina  a  number  of  its  agents  were  indicted  and 
charged  with  a  conspiracy  to  break  up  the  business  of  the  St.  Louis 
Steel  Range  Co.  by  like  methods.*  In  Louisiana  a  merchant  and  his 
employees  were  enjoined  from  "inducing,  rushing,  or  crowding" 
persons  from  in  front  of  the  windows  of  a  competitor  into  his  own 
store,  from  representing  that  plaintiff's  store  was  a  portion  of  the  de- 

1149  Fed.,  913  (C.  C,  1906),  a£f.  150  Fed..  520.  522  (C.  C.  A.,  1907). 

2Economi.st  Furnace  Co.  v.  Wrought-Iron  Range  Co.  et  al.,  86  Fed.,  1010,  1011  (C.  C, 
1898). 

3  Drake  Hardware  Co.  v.  Wrought-Iron  Range  Co.,  78  N.  Y.  Supp.,  1114  (Sup.  Ct.,  App. 
Div.,  1902). 

*  State  V.  Dalton  et  al.,  83  S.  E.,  693  (N.  C.  Sup.  Ct.,  1914). 


408  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS, 

fendant's  shop,  or  in  any  manner  interfering  with  the  plaintiff's  em- 
ployees and  customers.^ 

A  different  method  of  obstructing  the  business  of  a  competitor  is  dis- 
closed in  People  v.  Everest  et  al.,-  where  the  defendants  were  in- 
dicted and  charged  with  a  conspiracy,  among  other  things,  to  destroy 
the  business  and  property  of  the  Buffalo  Lubricating  Oil  Co.  The 
evidence  tended  to  show  that  a  conspiracy  was  formed  of  the  char- 
acter charged  in  the  indictment,  and  that  the  defendants  had  in- 
duced one  of  the  skilled  workmen  employed  by  said  corporation  pur- 
posely to  mismanage  the  stills  so  as  to  injure  them  and  lessen  their 
value  and  to  make  the  process  of  refining  crude  petroleum  a  failure, 
and  had  also  induced  said  workman  to  leave  the  service  of  his  em- 
ployers.   The  defendants  were  found  guilty  and  fined. 

Another  unlawful  practice  appears  in  Warren  Mills  v.  The  New 
Orleans  Seed  Co.,='  where  it  was  alleged  that  the  latter  company,  while 
conducting  its  business  of  buying  and  crushing  cotton  seed,  dis- 
tributed several  hundred  thousand  sacks  along  the  railroads  and  river 
banks  for  producers  to  fill  with  seed  and  return,  and  that  the  Warren 
Mills,  a  competitor,  knowingly  and  continuously  used  the  complain- 
ant's sacks  notwithstanding  its  remonstrances,  with  the  result  that 
the  complainant  failed  to  obtain  as  much  seed  as  it  would  have  done 
but  for  such  improper  use  of  its  sacks. 

ENGLISH  DECISIONS. 

A  number  of  English  cases  disclose  similar  unlawful  practices. 
Thus,  as  early  as  1020  judgment  was  entered  for  a  quarryman  who 
complained  that  the  defendant,  to  discredit  and  deprive  him  of  the 
benefit  of  the  quarry,  threatened  his  workmen,  and  by  threats  of  vio- 
lence and  of  litigation  induced  or  coerced  his  customers  to  cease  buy- 
ing.'* Intimidation  of  customers  was  disclosed  in  another  early  case, 
where  it  appeared  that  the  plaintiffs  were  the  owners  of  a  vessel  trad- 
ing on  the  coast  of  Africa,  and  that  for  the  purpose  of  preventing 
natives  from  trading  with  the  plaintiffs'  ship,  the  defendant  fired  a 
cannon  from  his  vessel,  killing  one  of  the  natives,  whereby  the  plain- 
tiffs lost  their  trade.    There  was  a  verdict  for  the  plaintiffs.^ 

It  was  likewise  held  actionable  for  the  competitors  of  an  omnibus 
proprietor  to  precede  and  follow  his  vehicles  so  as  to  prevent  persons 

1  Gilly  V.  Hirsh,  122  La.,  966,  9T0  (1909). 

2  People  V.  Evprest  ct  al.,  51  Hun,  19  (N.  Y.  Sup.  Ct.,  1889).  See  full  record  of  this 
case  in  H.  Rept.  3112,  50th  Cong.,  1st  sess.,  pp.  801-948. 

3  Warren  Mills  v.  New  Orleans  Seed  Co.,  65  Miss.,  391  (1888).  As  it  appeared  that  the 
injury  was  continuous  in  its  nature  and  that  the  separate  remedy  at  law  for  each  tres- 
pass would  not  1)0  adequate  to  relieve  the  injured  party  from  the  oxponse,  vexation,  and 
oppression  of  numerous  suits  against  the  same  wrongdoer  in  regard  to  the  same  subject 
matter,  it  was  held,  on  demurrer,  that  the  complainant  was  entitled  to  an  injunction. 
Cf.  U.  S.  V.  Central-West  Publishing  Co.  et  al.,  p.  495. 

*  Garret  v.  Taylor,  Cro.  .Tac,  567  (1620). 
^Tarleton  v.  McGawley,  Peake's  N.  P.,  205  (1793). 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  409 

from  entering  them,  to  drive  vehicles  so  as  to  injure  his  horses  and 
omnibuses  and  prevent  the  doors  from  being  opened,  to  otherwise 
interfere  with  persons  about  to  enter  his  conveyances,  and  to  insult 
and  assault  his  employees  while  conducting  his  business.^ 

In  another  case  it  was  held  actionable  for  the  proprietor  of  a 
colliery  to  place  several  cartloads  of  sticks  and  a  tree  across  the 
highway  for  the  purpose  of  obstructing  the  entrance  to  an  adjoining 
colliery  and  diverting  its  customers." 

Similarly  it  has  been  held  actionable  for  a  railway  company  to 
obstruct  a  siding  connecting  its  line  with  another's  wharf,  for  the 
purpose  of  diverting  trade  to  its  own,^  or  for  a  like  purpose  to 
obstruct  one  of  the  entrances  to  a  station  belonging  to  a  rival  line.* 

A  different  method  of  interfering  with  the  business  of  a  com- 
petitor was  before  the  court  in  1719,  when  several  persons  concerned 
in  the  making  of  cards  were  indicted  for  a  conspiracy  to  ruin  the 
trade  of  the  King's  card  maker,  and  it  was  shown  that  they  had  on 
several  occasions  paid  his  apprentices  to  put  grease  into  the  paste, 
thus  spoiling  the  cards.  Chief  Justice  Pratt,  being  of  the  opinion 
that  there  was  evidence  of  a  conspiracy,  directed  the  jury  accord- 
ingly.^ 

Section  13.  Exclusive  dealing. 

Contracts  for  exclusive  dealing,  though  at  the  present  time  re- 
garded by  many  as  being  in  restraint  of  trade,  are  uniformly  upheld 
at  common  law,  unless  unreasonably  restrictive  in  character,  the  same 
test  being  used  in  determining  their  validity  as  is  applied  to  other 
contracts  in  restraint  of  trade.  Accordingly,  contracts  of  this 
nature  which  afford  only  a  fair  measure  of  protection  to  the  interests 
of  the  party  for  whose  benefit  they  are  made  without  being  so  ex- 
tensive in  their  operation  as  to  interfere  with  the  interests  of  the 
public,  are  valid  and  enforceable.  The  prevailing  view  of  the  courts 
appears  to  be  that  the  chief  effect  of  such  a  contract  is  to  increase 
the  trade  of  the  parties  thereto  and  that  any  resulting  restriction  of 
competition  is  merely  incidental. 

1  Green  v.  The  London  General  Omnibus  Co.,  7  C.  P..   (N.  S.),  290  (1859). 

alveson  r.  Mo(tre,  1  Ld.  Raymond,  486  (1G99)  ;  1  comyns,  58;  12  Mod.,  262;  Cf.  Rose 
et  al.  V.  Miles,  4  M.  &  Selw.,  101  (1815). 

sRoll  V.  Midland  Rv.  Co.,  10  C.  P..  287   (1861). 

*  London  &  North  Western  Railway  Co.  v.  Lancashire  &  Yorkshire  Railway  Co.,  L.  R. 
(1867),  4  Eq.,  174. 

''Rex.  V.  Cope  et  al.,  1  Strange,  144  (1719).  See  also  Kinkead,  Reid  &  Co.  v.  The 
Johannesburfj;  Chamber  of  Minos,  Official  Reports,  High  Court,  South  African  Republic, 
139  (1894),  whore  the  plaintiff,  who  supplied  lal)orcrs  to  mining  companies,  complained 
that  an  agent  of  the  Johannesburg  Chamber  of  Mines,  who  desired  to  secure  for  himself 
the  exclusive  business  of  supplying  the  mines  with  laborers,  took  a  body  of  Kafirs  from 
the  plaintiff's  agent  and  lodged  them  under  the  charge  of  the  police.  It  appearing  that 
the  plaintiff  had  been  informed  that  such  acts  would  be  continued  so  long  as  he  continued 
to  import  natives,  tlie  court  restrained  the  defendant  from  further  interference  with  the 
plaintiff's  business. 


410  REPOET  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

While  the  view  is  held  by  some  that  contracts  for  exclusive  patron- 
age necessarily  eliminate  or  prevent  competition  in  that  all  of  the 
dealers  in  a  given  line  may  be  thus  bound  to  handle  the  goods  of 
a  single  manufacturer,  few  actions  for  damages  appear  to  have  been 
brought  against  those  practicing  this  policy  of  exclusion.  Whether 
such  contracts  are  regarded  by  the  courts  as  in  restraint  of  trade,  or 
as  otherwise  unlawful,  must  therefore  be  chiefly  determined  from 
cases  arising  between  the  parties  to  such  contracts. 

AMEmCAN  DECISIONS. 

Contracts  to  buy  from  or  deal  exclusively  in  the  goods  of  one 
PERSON. — The  validity  of  contracts  by  which  one  of  the  parties  agrees 
to  buy  exclusively  from  or  to  deal  only  in  the  goods  of  the  other 
has  been  questioned  in  many  cases.  The  weight  of  authority  appears 
to  be  that  contracts  of  this  character  are  valid  at  the  common 
law.  In  one  of  the  earliest  American  cases  on  the  subject,  decided  by 
the  Supreme  Court  of  Massachusetts  in  1825,  a  contract  was  held 
valid  where  one  of  the  parties  agreed,  in  connection  with  the  sale 
of  his  business,  to  give  the  other  all  of  his  freighting  up  and  down 
the  Connecticut  River  in  consideration  of  a  covenant  by  the  latter 
to  handle  such  freight  at  the  usual  rates.^  And  where  one  of  the 
parties  to  a  contract  agreed  to  purchase  certain  building  materials 
exclusively  from  the  other  for  a  period  of  five  years,  the  agreement 
was  held  valid  and  damages  awarded  for  a  failure  to  observe  its 
terms.^  Similarly  the  Supreme  Court  of  Oklahoma  recently  held  that 
an  agreement  of  a  retail  dealer  to  purchase  his  entire  supply  of  wall 
paper  from  a  certain  wholesaler  was  valid,  and  that  the  latter  could 
recover  for  the  goods  sold  pursuant  to  the  contract.^  So  also  a  con- 
tract by  which  one  of  the  parties  agreed  to  deal  exclusively  in  sewing 
machines  and  accessories  made  by  the  other  was  held  valid  and  en- 
forceable by  the  Illinois  Supreme  Court  in  1875.*  And  where  a  manu- 
facturer of  paper  patterns  agreed  to  furnish  them  to  a  dealer  for  two 
years,  upon  condition  that  the  latter  would  not  sell  nor  allow  to  be 

1  Palmer  v.  Stebbins  et  al.,  3  Pick.,  188  (1825). 

^Trentman  et  al.  v.  Wahrenburg  et  al.,  05  N.  E.,  1057   (Ind.  App.  Ctf,  1903). 

3  J.  W.  Ripy  &  Son  v.  Art  Wall  Paper  Mills,  13G  Pac,  1080  (Oklahoma  Sup.  Ct,  1913 j. 
Per  Brewer,  Commissioner  :  "  It  seems  to  us  that  the  effect  of  this  agreement,  when  all  of 
its  terms  are  considered,  is  to  promote  and  foster  the  trade  of  both  parties  rather  than 
otherwise.  The  contract  does  not  undertake  to  fix  the  price  at  which  defendants  might  sell 
the  goods.  It  does  not  restrict  the  plaintiff  from  selling  its  goods  to  others,  nor  does 
it  restrict  either  party  from  selling  goods  to  any  other  person  or  class  of  persons.  The 
parties  themselves  are  not  competitors,  nor  does  the  contract  affect  the  competitors  of  the 
defendants,  nor  can  we  see  wherein  it  could  injuriously  affect  the  public.  *  *  *  ^ 
contract  between  individuals  the  main  purpose  and  effect  of  which  is  to  promote,  advance, 
and  increase  the  business  of  those  making  it  will  not  be  held  to  be  in  restraint  of  trade 
and  commerce  merely  because  its  operations  might  possibly,  in  some  slight  or  theoretical 
way,  incidentally  and  indirectly  restrict  such  trade  and  commerce." 

^ Brown  v.  Rounsavell,  78  111.,  589  (1875). 


TBUST   LAWS  AND  UNFAIR  COMPETITION.  411 

sold  in  his  store,  any  other  make  of  paper  patterns,  an  injunction  was 
granted  restraining  the  dealer  from  selling  patterns  of  any  other 
make  during  the  life  of  the  contract.^  Substantially  similar  contracts 
for  exclusive  purchasing  or  dealing  have  been  upheld  in  many  other 
cases.-  Upon  like  principles  covenants  or  conditions  in  leases  to  the 
effect  that  the  lessee  shall  sell  only  beer  of  the  lessor's  manufacture  on 
the  leased  premises  have  been  generally  upheld.  Thus  the  Supreme 
Court  of  Indiana  has  held  that  such  a  covenant  was  not  void  as 
being  against  public  policy  and  granted  an  injunction  restraining 
the  lessee  from  violating  the  agreement.^ 

In  the  same  way  contracts  to  sell  exclusively  to  one  person  are 
upheld.  For  example,  where  one  of  the  parties  to  a  contract,  in  con- 
sideration of  a  covenant  by  another  to  purchase  a  given  amount  of 
peppermint  oil  from  him,  agreed  not  to  sell  such  oil  to  an3^one  else 
and  not  to  distill  any  such  oil  for  anyone  not  under  contract  to  sell 
to  the  other  contracting  party,  the  court  held  the  agreement  to  be 
only  in  partial  restraint  of  trade  and  therefore  valid.*  And  a  con- 
tract whereby  one  of  the  parties  agreed  to  purchase  all  sash  weights 
manufactured  by  the  other  was  held  valid.^  So,  also,  a  contract  b}^ 
a  manufacturer  to  sell  garments  of  a  certain  design  or  pattern  ex- 
clusively to  one  firm  has  been  held  to  be  only  in  partial  restraint  of 
trade  and  valid.*'  Similarly,  the  California  Supreme  Court  held  that 
a  contract  whereby  one  party  bound  himself  to  manufacture  a  sj)eci- 
fied  number  of  barrels  of  lime  for  the  other  within  a  given  time,  and 
agreed  that  during  the  life  of  the  contract  he  would  not  sell  lime  to 
any  other  person,  was  not  illegal  as  being  in  restraint  of  trade.''  And 
a  contract  by  the  terms  of  which  one  of  the  parties  agreed  to  buy  elec- 
tric current  exclusively  from  the  other  for  a  period  of  five  years  has 
been  upheld  by  the  Appellate  Court  of  Indiana.^  Contracts  of  this 
general  character  have  been  held  valid  in  a  number  of  other  cases.^ 

1  standard  Fashion  Co.  r.  Sicgel-Cooper  Co.,  157  N.  Y.,  60  (1898).  Seo  also  Butterick 
rub.  Co.  V.  Rose,  p.  IT-S;  Butteriek  Bub.  Co.   r.  Fisher,  203  Mass.,  122   (1009). 

2IIeimbuecher  v.  Goff,  Horner  &  Co.,  119  111.  App.,  373  (1905)  ;  Southern  Fire  Brick 
&  Clay  Co.  r.  -Garden  City  Sand  Co.  et  al.,  223  111.,  616  (1906)  ;  Fuller  v.  Hope,  163 
Pa.  St.,  62  (1894)  ;  George  &  Chapman  r.  East  Tennessee  Coal  Co.,  15  Lea,  455  (Tenn. 
Sup.  Ct.,  1885). 

3  Ferris  r.  American  Brewing  Co.,  155  Ind.,  539  (1900).  To  the  same  effect  see  Joseph 
Schlitz  Brewing  Co.  v.  Nielsen,  77  Nebr.,  808  (1906)  ;  Schlitz  Brewing  Co.  v.  Travi  & 
Corstorta,  179  lU.  App.,  269  (1913)  ;  Christian  Fcigenspan  v.  Xizolek,  65  Atl.,  703 
(X.  J.  Ch.,  1907).     But  see  Muller  v.  Bohringer,  3  Pa.  Co.  Ct.,  144  (1SS7). 

M'an  Marti-r   r.  Babcock,  23  Barb.,  033   (N.   V.   Sup.   Ct.,   1857). 

sOver  V.  Byram  Foundry  Co.,  .37  Ind.  App.,  452  (1906). 

»Blauner  et  al.  v.  The  Williams  Co.,  36  Misc.,  173  (N.  Y.  Sup.  Ct.,  1901). 

'Schwalm  v.  Holmes  &  Co.,  49  Cal.,  665   (1875). 

SBoek  etal.  v.  Indianapolis  Light  &  Power  Co.,  30  Ind.  App.,  600  (1905). 

»  State  ex  rel.  Berryhill  r.  St.  Paul  (Jas  Light  Co.,  92  Minn.,  467  (1904)  ;  Long  v.  Towl, 
42  Mo.,  545  (18681  ;  Clark  r.  Crosby,  37  Vt.,  188  (1JS(;4»  ;  Saddlrry  Hardware  Mfg.  Co.  v. 
Ilillsborougli  Mills,  68  N.  H.,  216  (1894).  But  see  Reeves  r.  Deeorah  Farmers'  Cooper- 
ative Society,  IGO  la.,  194  (1913)  ;  Ludewese  v.  Farmers'  Mutual  Cooperative  Co.,  164 
la.,  197  (1914). 


412  KEPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

In  like  manner  where  a  corporation,  with  the  consent  and  approval 
of  its  stockholders,  entered  into  a  contract  with  an  association  of  sheep 
brokers  whereby  it  was  agreed  that  the  stockholders  of  the  corpora- 
tion should  for  a  period  of  three  years  buy  their  sheep  and  lambs 
exclusively  from  the  association,  and  that  members  of  the  associa- 
tion should  during  the  same  period  sell  sheep  and  lambs  for  the  New 
York  market  to  the  stockholders  of  the  plaintiff  only,  and  where  the 
stockholders  of  the  corporation  subsequently  agreed  among  them- 
selves and  with  the  corporation  that  each  of  them  should  pay  to  the 
latter  a  penalty  for  each  carload  of  sheep  and  lambs  purchased  from 
a  member  of  the  brokers'  association  as  distinguished  from  the  asso- 
ciation itself,  it  w^as  held  that  the  corporation  could  lawfully  collect 
the  penalty  from  a  stockholder  wdio  bought  from  a  member  of  the 
association  in  violation  of  his  agreement.^  But  in  a  more  recent  case 
where  there  was  an  arrangement  of  a  similar  character,  coupled  with 
an  agreement  by  the  controlling  parties  to  pool  their  commissions 
as  a  means  of  protecting  their  business  from  loss  "by  unreasonable 
competition,"  it  was  condemned  by  the  New  York  Court  of  Appeals 
as  being  unlawful.^ 

While  contracts  between  individuals  or  private  corporations  for 
exclusive  dealing  or  patronage  are  very  generally  upheld,  a  different 
rule  is  sometimes  applied  to  contracts  of  certain  classes  by  public- 
service  corporations  binding  the  patrons  of  such  corporations  to 
deal  only  with  them,  and  to  contracts  between  such  corporations 
for  exclusive  dealing  with  each  other,  though  the  courts  are  not 
agreed  as  to  the  validity  of  these  contracts.  Where  a  telephone 
company  contracted  to  install  a  telephone  exchange  in  a  hotel,  the 
proprietor  of  the  hotel  agreeing,  among  other  things,  to  give  the 
company  the  exclusive  right  to  place  instruments  in  the  hotel,  the 
New  York  Court  of  Appeals  held  the  contract  void,  and  denied 
an  injunction  restraining  the  installation  of  another  system  in  the 
hotel.^     A  similar  contract  between   a   telephone   company   and   a 

1  Live  Stock  Association  v.  Levy,  54  N.  Y.  Superior  Ct.  Reps.,  32  (1886). 

2Judd  V.  Harrington,  139  N.  Y.,  105  (1893),  Per  O'Brien,  .L  :  "  *  *  *  they  (the 
articles  of  agreement)  manifestly  were  intended  for  the  purpose  of  creating  a  combination 
between  the  butchers  engaged  in  buying  and  the  brolvers  engaged  in  selling  sheep  and 
lambs,  in  order  to  control  the  market,  fix  the  price,  and  destroy  competition.  The  brokers 
were  to  sell  only  to  the  butchers,  and  the  butchers  to  buy  only  from  the  brokers.  The 
owners  of  sheep,  or  the  drovers  or  consignees  who  had  them  for  sale,  and  the  public  who 
were  interested  in  the  price  of  meat,  as  an  article  of  food,  might  have  been  prejudiced  by 
the  agreement.     Whether  they  were  in  fact  is  not  material." 

3  Central  New  York  Telephone  &  Telegraph  Co.  v.  Averill  et  al.,  199  N.  Y.,  128,  138 
(1910).  Per  Bartlett,  J.:  "While  it  may,  of  course,  adopt  every  proper  expedient  to 
enlarge  its  own  business,  this  does  not  include  the  right  to  pursue  a  policy  of  exclusion 
which  is  distinctly  injurious  to  the  public  by  restricting  their  circle  of  communication 
by  telephone.  It  matters  not  that  the  customer  may  be  willing  to  agree  to  exclude  others 
or  that  the  contract  to  do  so  is  supported  by  a  sufficient  consideration  as  between  the 
parties.  The  evil  in  such  an  agreement  is  its  antagonism  to  the  interests  of  the  public. 
If  a  telephone  company  may  make  a  contract  of  exclusion  with  one  of  its  customers  it 
may  make  such  a  contract  with  all — and  thus  preclude  all  from  any  telephonic  com- 


TEUST    LAWS   AND   UNFAIR   COMPETITION.  413 

private  subscriber  was  held  invalid  by  the  Supreme  Court  of  South 
Carolina.^  The  same  rule  appears  to  be  applied  by  some  of  the 
courts  to  contracts  between  telephone  companies  whereby  one  com- 
pany agrees  to  transmit  messages  only  for  or  over  lines  of  the  other 
party  to  the  contract.-  For  example,  where  a  long-distance  tele- 
phone company  which  had  just  entered  the  field,  made  contracts 
with  local  telephone  companies  whereby  the  latter,  which  had  pre- 
viously been  refused  long-distance  connection  by  the  company 
formerly  monopolizing  the  field,  agreed  to  transmit  its  long-distance 
messages  only  over  and  to  receive  such  messages  only  from  the  other 
party  to  the  contract  for  a  period  of  99  years,  the  contracts  were 
held  void  as  tending  to  create  a  monopoly.  The  fact  that  as  a 
result  of  these  contracts  the  public  had  for  the  first  time  been  given 
the  benefit  of  competition  in  long-distance  telephone  service  was  not, 
in  the  opinion  of  the  court,  sufficient  to  justify  the  making  of  con- 
tracts of  this  character  covering  such  a  long  period.^  And  in  a 
similar  case  where  a  long-distance  telephone  company  entered  into 
a  contract  with  a  local  company  whereby  it  was  agreed  that  the 
latter  should  send  its  long-distance  messages  only  over  the  lines  of 
the  former  and  that  the  long-distance  company  would  give  the  local 
company  all  messages  destined  for  points  in  a  given  county,  the 
Supreme  Court  of  Illinois  held  the  contract  void.*  In  contrast  with 
the  above  decision,  the  Supreme  Court  of  JNIissouri  held  that  a 
contract  whereby  a  local  telephone  company  undertook  to  build  an 
extension  of  its  lines  to  connect  with  those  of  another  local  line,  and 
under  the  terms  of  which  each  company  agreed  to  transmit  over  the 
lines  of  the  other  all  messages  destined  to  points  on  such  lines,  was 
valid  and  enforceable,  the  object  of  the  contract  not  being  to  stifle 
competition  but  to  build  up  competition  against  a  long-distance  line.^ 
So  also  the  Supreme  Court  of  Pennsylvania  held  in  1895  that  an 

municatlon  with  persons  who  happen  to  be  served  by  a  rival  company  *  *  *  It  is 
on  this  broad  ground  that  I  think  we  puiu'ht  to  condemn  the  exclusive  clause  of  this  con- 
tract as  against  public  policy  and,  therefore,  void.  It  tends  to  nullify  the  consideration 
moving  to  the  public  for  the  grant  of  the  franchise,  by  lessening  the  sphere  of  telephonic 
service ;  and  it  is  impossible  to  regard  a  contract  as  consistent  with  public  policy  which 
would  defeat  the  very  policy  that  induced  the  State  to  bring  one  of  the  parties  to  the 
contract  into  existence  as  a  public-service  corporation."  But  see  Lough  v.  Outerbridge, 
143  N.  Y.,  271   (1894). 

iGwynn  v.  Citizens'  Telephone  Co.,  69  S.  C,  434   (1904). 

2  Contracts  binding  public-service  comi)anies  to  serve  one  person  exclusively,  being 
opposed  to  the  fundamental  obligations  of  such  companies  to  serve  all  impartially,  are 
clearly  Invalid.  Sammons  v.  Kearney  Power  &  Irrigation  Co.,  77  Nebr.,  580  (1900).  The 
validity  of  grants  of  certain  classes  of  exclusive  privileges  by  these  companies,  however, 
in  connection  with  the  conduct  of  their  business,  has  been  frequently  upheld.  For  the 
leading  cases  in  the  Federal  courts  see  Express  Cases,  117  U.  S.,  1  (1886)  ;  Chicago, 
St.  Louis  &  Northern  R.  R.  Co.  v.  Pullman  Southern  Car*  Co.,  139  U.  S.,  79  (1891)  ; 
Donovan  r.  Pa.  Co.,  109  U.   S..  279   (190.5). 

3  U.  S.  Telephone  Co.  v.  Central  Union  Telephone  Co.,  202  Fed.,  06  (C.  C.  A.,  1913). 

*  Union  Trust  &  Savings  Bank  of  East  St.  Louis  et  al.  v.  Kinloch  Long  Distance  Tele- 
phone Co.,  258  111.,  202    (191.!). 

■i  Home  Telephone  Co.  r.  Sarcoxle  Light  &  Telephone  Co.,  2.30  Mo.,  114  (1911).  See 
also  Cumberland  Telephone  &  Telegraph  Co.  v.  State  ex  rel.  Attorney  General,  100  Miss., 
102  (1911). 


414  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

agreement  by  one  railroad  company  to  ship  all  its  freight  over 
another's  lines  was  valid  and  should  be  enforced  by  injunction.^ 

Another  class  of  contracts  of  public-service  corporations  which 
has  been  held  invalid  in  a  number  of  cases  is  that  by  which  such 
corporations  seek  to  secure  exclusive  privileges,  such  as  rights  of  way, 
which  will  protect  them  from  the  competition  of  similar  companies. 
Thus  where  eminent  domain  proceedings  were  instituted  to  condemn 
a  right  of  way  across  a  farm  for  laying  gas  pipes,  and  the  owner 
of  the  land,  in  defense,  claimed  that  he  had  given  another  gas  com- 
pany the  exclusive  right  of  laying  pipes  across  his  land,  it  was  held 
that  such  contract  was  void  since  it  restricted  competition  and  tended 
to  create  a  monopoly.^  In  like  manner  a  contract  whereby  the  owner 
of  a  large  tract  of  land  granted  to  an  oil  pipe-line  company  an 
exclusive  right  of  way  and  privilege  of  constructing  oil  pipe  lines 
over  said  land,  was  held  void  as  an  attempt  to  impose  a  restraint 
upon  a  particular  form  of  trade  which  the  public  interests  required 
should  not  be  restrained  even  partially.^  A  similar  ruling  was  made 
by  the  Supreme  Court  of  Minnesota  respecting  the  validity  of  a 
contract  by  the  terms  of  which  a  landowner  gave  to  a  railroad  com- 
pany the  exclusive  right  of  way  over  his  property  for  railway  pur- 
poses.* 

Contracts  for  exclusive  agency  or  for  exclusive  territory. — 
Contracts  by  which  a  manufacturer  agrees  to  do  business  in  a  certain 
territory  exclusively  through  one  dealer  have  been  upheld  in  numer- 
ous decisions.  Thus  where  a  company  sold  goods  upon  condition 
that  the  purchaser  should  have  an  exclusive  right  to  handle  its  goods 
in  a  particular  town,  but  immediately  violated  the  condition  by 
selling  the  same  class  of  goods  to  two  other  dealers  in  the  same  town, 
it  was  held  that  the  contract  was  valid,  and  that  the  manufacturer 
could  not  recover  the  contract  price  of  the  goods  sold.^  Similarly, 
where  a  coal  mining  company  sold  coal  to  a  dealer  under  an  agree- 
ment not  to  sell  at  wholesale  prices  to  any  other  dealer  in  the  same 
town,  the  Illinois  Supreme  Court  held  that  the  contract  was  valid 
and  that  the  company  could  recover  the  purchase  price  of  coal  sold 
under  it.^  Similar  contracts  have  been  sustained  by  the  Federal 
courts,'^  and  the  courts  of  Kansas,^  Massachusetts,®  California,^" 
Nebraska, ^^  New  Jersey,^-  and  the  District  of  Columbia.^^ 

iRald  Easle  Valley  Ry.  Co.  et  al.  v.  Nittany  Valley  Ry.  Co.  et  al.,  171  Pa.,  284  (1895). 

2Calor  OU  &  Gas  Co.  r.  Franzell,  128  Ky.,  715   (1008). 

3  West  Va.  Transportation  Co.  v.  Ohio  River  Pipe  Line  Co.,  22  W.  Va.,  600  (1883). 

*  Kettle  River  Ry.  Co.  v.  Eastern  Ry.  Co.,  41  Minn.,  461    (1889). 

5  Keith  V.  Herchberg  Optical  Co.,  48  Ark.,  138   (1886). 

«  Superior  Coal  Co.  v.  Darlington  Lumber  Co.,  236  111.,  83   (1908). 

■^  Singer  Sewing  Machine  Co.  v.  Union,  etc.,  Co.,  Holmes  (Fed.),  253  (1873). 

«  Roller  V.  Ott,  14  Kans.,  609   (1875). 

»  Central  Shade  Roller  Co.  r.  Cushman,  143  Mass.,  353  (1887). 

"Pac.  Factor  Co.  r.  Adler,  90  Cal.,  110  (1891). 

"Woods  V.  Hart,  50  Nebr.,  497   (1897). 

^New  York  Trap  Rock  Co.  r.  Brown  et  al..  61  N.  J.  Law,  536   (Sup.  Ct.,  1898). 

i^WMtson  V.  Col.  Phonograph  Co.,  18  App.  D.  C,  565  (1901). 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  415 

Contracts  for  exclusive  territory  which  contain  a  corresponding 
obligation  on  the  part  of  dealer  or  agent  to  sell  only  the  goods  of  a 
particular  manufacturer  have  likewise  been  upheld  by  the  courts. 
For  example,  the  supreme  court  of  Montana  held  that  a  contract  for 
the  sale  of  cigars  by  the  terms  of  which  the  purchaser  was  granted 
the  exclusive  right  to  handle  a  certain  brand  of  cigars  in  specified 
territory  upon  condition  that  he  would  cease  to  advertise  or  sell  other 
brands  was  held  valid.^  And  the  supreme  court  of  South  Carolina 
has  upheld  a  contract  containing  similar  provisions.^ 

Contracts  for  rebates  in  consideration  of  exclusht:  dealing. — 
A  form  of  contract  frequently  employed  for  the  purpose  of  inducing 
exclusive  patronage  is  that  v,-hereby  one  of  the  parties  offers  the  other 
a  specified  rebate  on  the  purchase  price  of  goods  if  at  the  end  of  a 
certain  period  he  shall  not  have  dealt  in  or  sold  the  goods  of  any 
other.  Under  such  contracts  no  obligation  rests  upon  the  dealer  not 
to  handle  the  goods  of  other  manufacturers,  but  if  he  refrains  from 
doing  so  he  is  entitled  to  the  stipulated  rebate.  In  some  instances, 
however,  where  one  of  the  parties  occupies  a  strong  position  in  an 
industry  or  a  particular  line  of  business,  no  rebate  is  offered,  but  he 
simply  refuses  to  sell  to  those  who  will  not  agree  to  handle  his  goods 
exclusively.  Contracts  of  this  character  have  been  very  generally 
upheld  at  the  common  law.  For  example,  where  a  manufacturer  sold 
goods  to  the  dealer  and  offered  to  rebate  a  certain  proportion  of  the 
purchase  price  if  he  did  not  handle  similar  goods  of  others,  it  was 
held  that  the  sales  were  valid  and  that  the  purchase  price  could  be 
recovered.^  Similarly,  where  a  manufacturing  company  at  the  close 
of  the  year  offered  a  dealer  a  rebate  on  his  purchases  for  that  year  if 
his  requirements  for  the  ensuing  year  should  be  purchased  from  it 
and  the  dealer  forthwith  deducted  the  amount  of  the  rebate  from  the 
last  payment  for  the  current  year,  it  was  held  that  defendant  could 
recover  the  amount  deducted,  as  the  right  to  the  rebate  did  not  arise 
until  all  of  the  conditions  had  been  complied  with.  The  court  in 
discussing  the  offer  of  the  rebate  declared  that  such  a  contract  was 
not  in  restraint  of  trade,  and  Avould  not  have  been  had  it  been  accepted 
and  performed  on  the  part  of  the  manufacturer.*    It  has  also  been  held 

1  Newell  ct  al.  r.  Meyendorff,  9  Mont.,  254   (1890). 

-  Walter  A.  Wood  Mowins  &  Reapins;  Co.  v.  Greenwood  Hardware  Co.,  75  S.  C,  .^78 
(19061.  See  also  Weiboldt  r.  Standard  Fashion  Co.,  80  III.  App.,  67  (1898)  ;  Pick- 
Williamson  Heating  &  Ventilating  Co.  r.  Miller  &  Harris,  118  S.  W.,  376  (Ky.  Ct.  of 
App.   1909). 

3  National  Distilling  Co.  v.  Cream  City  Importing  Co.,  86  Wis.,  352  (1893). 

*  Corn  Products  Refining  Co.  v.  Oriental  Candy  Co.,  168  111.  App.,  585,  590,  591  (1912). 
I'er  Duncan,  J. :  "  Tlie  proposition  of  the  defendant  in  error  of  December  9,  1908,  was 
not  illegal.  It  was  made  to  phuntiff  in  error  after  its  contract  for  purcliases  for  the 
year  1908,  which  is  also  legal  and  binding  ;  and  it  appears  to  have  been  a  mere  voluntary 
proposition  on  the  part  of  defendant  in  error,  without  imposing  any  obligation  whatever 
upon  plaintiff  in  error.  It  was  a  mere  statement  or  proposition  to  give  plaintiff  in  error 
certain  profits  on  its  purchases  of  1908,  on  condition  tliat  it  do  certain  tilings  therein 
named,  which  plaintiff  in  error  never  did  do,  and  which  it  never  was  obligated  to  do,  and 


416  REPORT   OF    THE    COMMISSIONER    OP    CORPORATIONS. 

that  where  a  company  demands  exclusive  patronage  as  a  condition  of 
doing  business  with  its  customers,  competitors  who  as  a  result  of 
such  demands  are  excluded  from  any  share  of  the  business  can  not 
recover  damages,  though  their  financial  ruin  may  result  therefrom. 
Thus,  where  a  number  of  theater  owners  in  various  cities  organized 
a  corporation  to  take  over  their  houses,  and  thereafter  the  corpora- 
tion notified  the  owners  of  all  burlesque  shoAvs,  suitable  to  be  played 
at  its  theaters,  that  it  would  not  book  any  show  except  on  condition 
that  it  would  not  play  in  any  theater  not  owned  by  the  corporation, 
it  was  held  that  a  rival  theater,  which  as  a  result  of  the  action  of  the 
new  corporation,  was  unable  to  book  shows  and  went  into  the  hands 
of  a  receiver,  could  not  recover  damages,  the  court  being  of  the  opin- 
ion that  the  theater  owners  were  not  actuated  by  malice  against  the 
rival  theater  owner,  but  that  their  chief  purpose  was  to  advance 
their  own  financial  interests.^  A  by-law  of  a  press  association,  how- 
ever, which  required  its  members  not  to  purchase  news  from  any 
other  association  declared  by  the  board  of  directors  of  the  former 
to  be  antagonistic  to  it,  was  held  void  by  the  Illinois  Supreme  Court 
as  tending  to  restrict  competition  and  to  create  a  monopoly.^  A 
contrary  result  respecting  the  validity  of  a  similar  by-law  has  been 
reached  by  the  New  York  and  Missouri  courts.^ 

ENGLISH  DECISIONS. 

\^Tiile  at  the  early  common  law  all  contractual  restrictions  upon 
one's  right  to  do  business  were  held  to  be  against  public  policy  and 
unenforceable,*  the  rule  has  been  relaxed  and  modern  English  deci- 
sions uniformly  declare  contracts  by  which  a  person  agrees  to  deal 
exclusively  with  another  to  be  valid.  Moreover,  it  appears  to  be  set- 
tled by  a  comparatively  recent  decision  of  the  House  of  Lords  that 

was  never  in  any  way  compelled  or  urged  to  do.  It  was  simply  a  proposition  that  might 
have  become  an  obligation  on  the  part  of  the  defendant  in  error  hud  plaintiff  in  error 
seen  fit  to  have  accepted  its  terms  and  to  have  performed  the  conditions  upon  which  it 
was  informed  it  could  have  the  profits  therein  named.  It  is  not  an  illegal  contract  or 
contract  in  restraint  of  trade,  and  would  not  have  been,  if  it  had  been  accepted  and  per- 
formed on  the  part  of  plaintiff  in  error.  It  was  not  in  any  sense  a  part  of  the  contract 
for  the  purchase  by  plaintiff  in  error  for  the  year  1908,  and  in  no  way  affected  the 
validity  of  that  contract.  This  same  proposition,  in  substance,  or  so-called  contract,  was 
in  every  way  upheld  by  the  Appellate  Court  of  Indiana,  in  the  case  of  Bessire  &  Co.  v. 
Corn  Products  Manufacturing  Co.,  94  N.  E.,  353."' 

iRoseneau  v.  Empire  Circuit  Co.  et  al.,  131  N.  Y.  App.  Div.,  429   (1909). 

2  Inter-Ocean  Publishing  Co.  v.  Associated  Press,  184  111.,  438  (1900).  See  also  Minn. 
Tribune  Co.  v.  Associated  Press,  83  Fed.,  350  (C.  C.  A.,  1897).  In  a  letter  from 
the  Attorney  General  of  the  United  States,  dated  Mar.  12,  191.5,  to  James  M.  Beck, 
counsel  for  the  Sun  Printing  &  Publishing  Association  of  New  York,  the  view  is  taken 
that  a  similar  by-law  of  the  Associated  Press  in  so  far  as  it  prevents  or  seriously  hinders 
the  members  of  that  association  from  purchasing  or  otherwise  obtaining  news  from  a 
rival  agency,  is  in  violation  of  the  Sherman  law,  and  should  be  abrogated. 

3  Matthews  v.  The  Associated  Press,  136  N.  Y.,  333  (1893)  ;  Bleistein  v.  The  Associated 
Press,  136  N.  Y.,  662  (1893)  ;  State  v.  Associated  Press,  159  Mo.,  410  (1901)  ;  Dunlop's 
Cable  News  Co.  v.  Stone,  15  N.  Y.,  Supp.  2  (Sup.  Ct.,  1891).  See  also  Lloyd  Sabaudo  v. 
Cubicciotti,    159   Fed.,    191    (C.   C,   1908). 

*  Standard  Oil  Co,  v.  United  States,  221  U.  S.,  1,  51  (1011). 


TRUST   LAWS   AND    UNFAIR    COMPETITION.  417 

third  parties,  whose  field  of  operation  may  be  restricted  as  a  residt  of 
such  contracts  entered  into  by  other  competitors,  can  not  recover 
damages  where  the  object  of  the  contracting  parties  is  to  increase 
their  business,  and  there  appears  to  be  no  express  intent  to  injure  the 
business  of  another. 

Contracts  to  but  from  or  deal,  exclusively  in  the  goods  of  one 
PERSON. — Among  the  contracts  for  exclusive  dealing  which  have  come 
before  the  English  courts  were  those  by  which  the  lessors  of  property 
to  be  used  for  public  houses  require  the  lessees  to  sell  beer  and  other 
beverages  of  the  lessors'  manufacture  to  the  exclusion  of  all  others. 
While  in  several  early  cases  the  courts  appear  to  have  regarded  these 
covenants  for  exclusive  dealing  with  disfavor,^  they  apparently  were 
not  held  invalid,  and  subsequent  cases  clearly  hold  them  to  be  lawful 
and  enforceable.^  The  same  principle  has  been  applied  to  sales  of 
lands  with  similar  covenants  by  the  purchaser.  Thus,  where 
land  was  sold  to  a  freehold  society  which  covenanted  with  the  vendor 
that  he  should  have  the  exclusive  right  to  supply  beer  to  any  public 
house  erected  on  the  land,  and  one  of  the  members  of  the  society, 
himself  a  brewer,  acquired  a  portion  of  the  land  on  which  he  erected 
a  public  house  which  he  supplied  with  his  own  beer,  it  was  held  that 
an  injunction  should  issue  to  restrain  the  breach  of  the  covenant.^ 
The  court  was  of  opinion  in  this  case  that  the  covenant  was  not 
void  for  uncertainty  or  want  of  mutuality,  or  as  being  in  unreason- 
able restraint  of  trade,  or  because  it  purported  to  be  perpetual. 
Similarly,  where  a  lease  of  a  public  house  contained  a  covenant  that 
the  lessee  and  his  assigns  would,  during  the  continuance  of  the  lease, 
purchase  all  beer,  porter,  etc.,  sold  or  consumed  on  the  premises  from 
the  lessor,  and  contained  also  a  provision  that  so  long  as  the  lessee 
sliould  purchase  all  beer  from  the  lessor  the  latter  would  accept  one- 
half  of  the  yearly  rental  specified  in  the  lease  as  full  satisfaction  of 
the  rent,  it  was  held  that  the  lessee  must  purchase  all  beer  from  the 
lessor  and  that  he  did  not  have  the  alternative  of  purchasing  else- 
where and  paying  the  full  rental.* 

In  the  same  way,  contracts  to  purchase  exclusively  from  one  person 
or  to  sell  all  of  one's  supply  of  an  article  to  another  are  upheld.  For 
example,  it  has  been  held  that  a  contract  to  take  all  the  electrical 
energy  required  on  one's  premises  from'  a  given  company  for  a  period 
of  not  less  than  five  years  is  valid  and  enforceable,  and  an  injunction 
issued  which  restrained  the  party  "  from  taking  electrical  energy 

1  Cooper  V.  Twibill,  3  Camp.,  285  n.  (1808);  Thornton  v.  Shcrratt,  8  Taunt,  529 
(1818). 

2  18  Halsbury's  Laws  of  England,  573. 

sCatt  V.  Tourle,  L.  R.  (1869),  4  Ch.  App.,  654. 

*  Ilanbury  r.  Cundy,  58  Law  Times  Reps.,  155  (1887).  See  also  Courage  &  Co.  v. 
Carpenter.  L.  R.  (1910),  1  Ch.  Div.,  202  (decided  in  1909)  ;  Noakcs  &  Co.  (Ltd.)  v.  Day, 
L.    R.    (1910),   1   Ch.   Div.,   270    (decided   in    1907). 

3(X)35°— 1(5 27 


418  REPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

required  for  his  premises  from  any  person  other  than  the  plaintiff."  ^ 
Similarly,  where  the  owner  of  a  biiildino:  rented  a  stall  to  another 
and  agreed  that  the  tenant  should  have  the  exchisiA^e  right  to  exhibit 
and  sell  certain  specified  classes  of  goods  in  the  building,  but  failed 
to  prevent  others  from  so  doing,. an  injunction  was  granted  restrain- 
ing the  owner  from  violating  tlie  agreement.-  In  a  recent  opinion  of 
the  Privy  Council  it  appears,  though  the  point  was  not  decided,  that 
the  court  regarded  contracts  by  which  one  of  the  parties  agrees  to 
purchase  only  from  the  other  and  the  latter  covenants  to  sell  only  to 
the  former  for  resale  in  specified  territory  as  not  invalid  at  the  com- 
mon law.  In  that  case  certain  colliery  proprietors  agreed  to  sell  certain 
steamship  companies  all  the  coal  that  they  might  require  to  supply 
the  trade  of  several  Australian  States,  and  not  to  sell  coal  for  con- 
sumption in  those  States  except  to  the  shipping  company  or  their 
nominees,  and  the  latter  agreed  to  buy  from  the  collieries  all  the  coal 
they  might  require  for  their  interstate  trade  and  not  carry  any  other 
coal.  The  court  was  of  opinion  that  such  an  agreement  was  not 
necessarily  unreasonable  or  injurious  to'  the  public." 

Contracts  or  leases  binding  the  purchaser  or  lessee  to  use  only  arti- 
cles of  the  vendor's  or  lessor's  manufacture  in  connection  with  the 
articles  sold  or  leased  have  also  been  upheld  by  the  English  courts. 
A  striking  example  is  afforded  by  the  case  of  United  Shoe  Machinery 
Co.  of  Canada  v.  Brunet,  decided  by  the  English  Privy  Council  in 
IDQO.  In  that  case  the  company  making  machinery  used  in  the  manu- 
facture of  shoes  leased  certain  machines  to  a  company,  the  lease 
containing  a  clause  to  the  effect  that  the  lessee  should  not  use,  in 
connection  with  the  lessor's  machines,  any  machines  obtained  from 
other  manufacturers.  Upon  the  lessee  installing  machines  of  another 
manufacturer  suit  for  an  injunction  and  damages  was  instituted,  and 
it  was  held  that  the  lessor  was  entitled  to  an  injunction  restraining 
the  lessee  from  using  the  machines  in  conjunction  with  the  machines 
obtained  from  others  and  to  damages,  the  view  being  taken  that  the 

1  Metropolitan  Electric  Supply  Co.   r.  Cinder,  L.  R.   (1901),  2  Ch.,  799. 

^Altman  v.  Royal  Aquarium  Society,  L.  R.,  3  Ch.  Div.,  228   (1876). 

3  Attorney  General  of  Australia  v.  Adelaide  Steamship  Co.  (Ltd.)  et  al.,  L.  R.  (1913), 
A.  C.  (Privy  Council),  781,  812.  Fer  Lord  Parker  of  Waddington  :  "Similar  provisions 
are  quite  common  in  contracts  of  exclusive  agency,  and,  in  their  Lordships'  opinion,  are  not 
necessarily  unreasonable  or  injurious  to  the  public.  There  is  no  evidence  that  the  tonnage 
of  the  shipping  companies  was  more  than  sufficient  for  their  inter-State  trade  in  coal, 
or  that  the  effect  of  the  agreement  was  to  render  their  vessels  idle.  Of  course  the  agree- 
ment precluded  colliery  proprietors  not  parties  thereto  from  being  able  to  avail  them- 
selves of  these  vessels.  But  a  similar  result  follows  whenever  vessels  are  chartered  by  a 
single  person  or  by  a  group  of  persons.  The  shipping  companies  were  not  the  only 
persons  engaged  in  the  shipping  trade  in  coal ;  they  owned  only  about  the  same  proportion 
of  the  total  tonnage  engaged  in  the  Newcastle  inter-state  coal  trade  as  the  proportion 
of  such  trade  represented  by  the  parties  to  the  vend  agreement.  So  far  as  other  colliery 
proprietors  were  concerned  they  were  not  by  reason  of  the  shipping  agreement  in  any 
worse  position  than  they  would  have  been  had  the  parties  to  the  vend  chartered  all  the 
vessels  of  the  shipping  companies,  and,  having  regard  to  the  exigencies  of  the  inter-State 
trade,  such  action  on  the  part  of  the  parties  to  the  vend  would  have  been  quite  reason- 
able." 


TRUST    LAWS    AND    UNFAIE    COMPETITION.  419 

plaintiff  had  the  right  to  refuse  to  lease  its  machines  altogether 
or  to  lease  them  on  whatever  terms  best  promoted  its  own  interests.^ 

The  same  principles  have  been  applied  to  licenses  of  patented  arti- 
cles. Thus,  where  the  patentee  of  an  invention  for  improvements  in 
slubbing  machines  granted  to  another  a  license  to  use  the  invention 
during  the  life  of  the  patent,  the  licensee  agreeing  not  to  make  or 
sell  an}^  machines  without  the  invention  attached  to  them,  it  was  held 
that  the  agreement  was  valid,  notwithstanding  the  licensee's  iDlea 
that  the  invention  had  become  worthless.^ 

Contracts  for  rebates  in  coNsmERATiON  of  exclusive  dealing. — 
The  practice  of  giving  rebates  to  customers  as  an  inducement  for  ex- 
clusive patronage  was  declared  a  lawful  and  legitimate  form  of 
competition  by  the  House  of  Lords  in  Mogul  Steamship  Co.  y. 
McGregor,  Gow  &  Co.^  In  that  case  the  members  of  a  so-called  con- 
ference of  shipowners  offered  a  rebate  of  5  per  cent  to  all  shippers 
who  confined  their  shipments  of  tea  and  general  cargo  from  China 
to  Europe  to  members  of  the  conference.  A  rival  line  which  had 
been  excluded  from  the  conference  sought  damages  and  an  injunction 
to  restrain  the  continuance  of  this  practice,  but  the  House  of  Lords 
held,  affirming  the  decision  of  the  court  of  appeal,  that  since  the 
action  of  the  members  of  the  conference  was  taken  with  the  lawful 
object  of  protecting  and  extending  their  trade  and  increasing  their 
profits  and  since  no  unlawful  means  had  been  employed  the  plaintiff 
had  no  right  of  action.*  xVnd  where  a  tobacco  company  offered  a 
rebate  of  6  per  cent  to  all  dealers  who  handled  defendant's  cigarettes 
exclusively  it  was  held  that  the  making  of  such  contracts  was  not 


1  United  Shoe  Machinery  Co.  of  Canada  r.  Bnmet,  L.  R.  (1909),  A.  C,  330,  342,  343. 
I'er  Lord  Atkinson  :  "  By  virtue  of  the  privilege  which  the  law  secures  to  all  traders, 
namely,  that  they  shall  be  left  free  to  have  their  own  trade  in  the  manner  which  they 
deem  best  for  their  own  interests,  so  long  as  that  manner  is  not  in  itself  illegal,  the 
respondents  are  at  liberty  to  hire  or  not  to  hire  the  appellants'  machines,  as  they  choose, 
irrespective  altogether  of  the  injury  their  refusal  to  deal  may  inflict  on  others.  The  same 
privilege  entitles  the  appellants  to  dispose  of  the  products  they  manufacture  on  any  terms 
not  in  themselves  illegal,  or  not  to  dispose  of  their  products  at  all,  as  they  may  deem  best 
in  their  own  interest,  irrespective  of  the  like  consequences.  This  privilege  is,  indeed,  the 
very  essence  of  that  freedom  of  trade  in  the  name  and  in  the  interest  of  which  the 
respondents  claim  to  escape  from  the  obligations  of  their  contracts." 

See  p.  339  for  English  and  Colonial  statutes  expressly  declaring  agreements  of  this 
character  to  be  in  restraint  of  trade. 

2  Jones  V.  Lees,  1.  H.  &  N.,  189  (1856).  See  also  Trinling  &  Numerical  Registering  Co. 
V.  Sampson,  L.  R.  (1875),  19  Equity,  462. 

3L.  R.   (18921,   1  A.  C,  25. 

*  Per  Ilalsbury,  L.  C.  :  "I  have  been  unable  to  discover  anything  done  by  the  members 
of  the  associated  body  of  traders  other  than  an  offer  of  reduced  freights  to  persons  who 
would  deal  exclusively  with  them  ;  and  if  this  is  unlawful  it  seems  to  me  that  the  greater 
part  of  commercial  dealings,  where  there  is  rivalry  in  trade,  must  be  equally  unlawful." 

Per  Lord  Watson  :  "  There  is  nothing  in  the  evidence  to  suggest  that  the  parties  to  the 
agreement  had  any  other  object  in  view  than  that  of  defending  their  carrying-trade  during 
the  tea  season  against  the  encroachments  of  the  appellants  and  other  competitors,  and  of 
attracting  to  themselves  custom  which  might  otherwise  have  been  carried  off  by  these 
competitors.  That  is  an  object  which  is  strenuously  pursued  by  merchants  great  and 
small  in  every  branch  of  commerce;  and  it  is  in  the  eye  of  the  law,  perfectly  legitimate." 

I'or  Lord  Ilaimen  :  "  The  objects  sought  and  the  means  used  by  the  defendants  did  not 
exceed  the  limits  of  allowable  trade  competition,  and  I  know  of  no  restriction  imposed  by 
law  on  competition  by  one  trader  with  another,  with  the  sole  object  of  beneliting  himself." 


420  REPOKT    OF    THE    COMMISSIONER    OF    CORPOEATIONS. 

unlawful  at  the  common  law,  the  court  being  of  opinion  that  con- 
tracts of  this  character  amounted  to  no  more  than  ordinary  compe- 
tition.^ 

Contracts  for  exclusive  agency. — Contracts  for  exclusive  agency 
appear  to  have  been  upheld  by  the  English  House  of  Lords  in  Mogul 
Steamship  Co,  v.  McGregor,  Gow  &  Co.,^  where  it  was  alleged,  among 
other  things,  that  the  defendant  companies,  as  members  of  a  con- 
ference of  steamship  owners,  had,  in  pursuance  of  their  purpose  to 
secure  a  monopoly  of  the  tea-carrying  trade  between  China  and 
England,  prohibited  their  agents  from  being  interested  in  competitive 
steamers  or  from  loading  sailing  vessels  for  others  than  members  of 
the  conference.  Three  of  the  lords  writing  opinions  in  this  case  de- 
clared it  lawful  for  the  steamship  companies  to  thus  prohibit  their 
agents  from  serving  others  in  a  like  capacity. 

Section  14.  Bribery  of  employees. 

A  common  method  of  competition  is  the  giving  of  secret  commis- 
sions to  another's  employees  for  the  purpose  of  securing  preferential 
treatment  in  the  distribution  of  the  employer's  patronage.  It  is 
fair  to  assume  that  in  many  cases  the  commission  is  demanded  by 
the  employee  himself,  who  thus  obliges  the  dealer  to  become  a  party 
to  an  illegal  transaction  or  to  abandon  the  business  to  a  less  scrupu- 
lous competitor.  The  practice  of  giving  and  demanding  bribes  has 
been  described  as  "  unfair,  unjust  and  improper,"  and  "  a  particu- 
larly hateful  and  demoralizing  phase  of  unfair  competition,"^  and 
it  has  been  denounced  alike  by  the  courts,  legislative  bodies,  and  com- 
mercial organizations.  Notwithstanding  the  fact  that  the  courts 
have  permitted  the  principal  to  recover  the  amount  of  the  commis- 
sions so  received,*  to  discharge  an  employee  receiving  them,^  and  to 
repudiate  contracts  made  under  such  circumstances,^  it  has  been  con- 
sidered necessary  in  several  States,''  as  well  as  in  England  and  a 
number  of  the  English  colonies,^  to  further  discourage  this  practice 
by  making  it  a  criminal  offense. 

AMERICAN  DECISIONS. 

In  a  comparatively  recent  case  the  Supreme  Court  held  that  the 
United  States  was  entitled  to  a  decree  against  an  Army  officer  for 

1  Queen  v.  American  Tobacco  Co.  of  Canada,  3  La  Revue  de  Jurisprudence,  453  (1897). 
See  also  Graham  v.  J.  I.  Case  Threshing  Machine  Co.,  19  Man.,  27  (1909). 

2L.  R.   (1892),  A.  C,  25,  43,  50. 

3  Australian   (Commonwealth)   Debates,  1905,  Vol.  XXV,  p.  495. 

<>  United  States  v.  Carter,  217  U.  S.,  286   (1910). 

^  Swale  V.  Ipswich  Tannery,  11  Commercial  Cases  (Mathew),  88  (1900);  Wade  v. 
William  Barr  Dry  Goods  Co.,  155  Mo.  App.,  405  (1911). 

"City  of  Findlay  v.  Pertz  et  al.,  66  Fed.,  427  (C.  C.  A.,  1895)  ;  Alger  v.  Keith  et  al., 
105  Fed.,  105  (C.  C.  A.,  1900 »  ;  Panama  &  South  Pacific  Telegraph  Co.  v.  ludiarubber, 
G.  P.,  &  T.  Works  Co.,  32  Law  Times  Reps.,  517    (1875). 

'  See  p.  504. 

8  See  p.  534. 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  421 

a  sum  of  money  representing  secret  profits  resulting  from  contracts 
over  which  he  had  control,  and  to  enforce  such  decree  against  any  of 
his  property,  including  property  in  the  hands  of  third  parties  hav- 
ing knowledge  of  how  the  money  was  obtained,  and  this,  irrespective 
of  whether  the  Government  was  able  to  show  any  specific  abuse  of 
discretion,  or  that  it  had  suffered  any  actual  loss.^  In  another  case 
the  circuit  court  of  appeals  held  that  a  municipality  was  entitled  to 
rescind  a  contract  for  separators  used  on  natural-gas  wells,  where  it 
was  shown  that  the  manufacturers  agreed  to  allow  the  superintendent 
of  the  gas  works  a  commission  on  each  separator  purchased.-  And 
in  a  suit  by  an  employee  against  his  emplo3^er,  based  on  an  alleged 
wrongful  dismissal,  where  it  appeared  that  while  acting  as  buyer 
for  his  employer's  toy  department  he  had  regularly  received  secret 
gifts  and  gratuities  from  a  firm  from  which  he  purchased  toys,  it 
was  held  that  such  conduct  justified  his  discharge.^ 

ENGLISH  DECISIONS. 

There  are  a  number  of  English  cases  involving  the  payment  of 
secret  commissions  or  bribes  to  the  agents  and  employees  of  another, 
as  a  reward  for  having  done  some  act  in  relation  to  their  principal's 
business,  in  most  cases  for  favoring  the  briber  in  the  purchase  of 
goods  for  their  employer.  The  courts  have  vigorously  condemned 
the  practice  and  in  all  such  cases  have  permitted  a  recovery  of  the 
amount  so  paid.  Thus  where  a  merchant  who  supplied  coal  to  a 
municipal  gas  works  paid  a  secret  commission  of  Is.  per  ton  to  the 
manager  of  the  plant,  the  city  was  held  entitled  to  recover  from  the 
merchant  the  amount  of  the  loss  sustained  by  reason  of  having  paid 
an  increased  price  for  the  coal ;  *  and  in  another  case  where  it  ap- 
peared that  a  firm  of  wholesale  tobacconists  had,  during  a  period 
of  years,  paid  the  plaintiffs"  buyers  the  sum  of  £700  in  secret  com- 
missions, the  court  permited  the  recovery  of  that  amount  from  the 
wholesalers,  although  the  jury  had  found  that  the  prices  at  which 

1  United  States  v.  Carter.  217  U.  S.,  286  (1910). 

2  City  of  Findlay  c.  Pertz  et  al.,  66  Fed.,  427,  435  (C.  C.  A.,  1895).  Per  Lurton,  Cir. 
cuit  .Tudge  :  "  Such  arrangements  are  a  fruitful  source  of  public  extravagance  and  pecula- 
tion. The  conflict  created  between  duty  and  interest  is  utterly  vicious,  unspeakably  per- 
nicious, and  an  unmixed  evil.  Justice,  morality,  and  public  policy  unite  in  condemning 
such  contracts,  and  no  court  will  tolerate  any  suit  for  their  enforcement." 

3  Wade  V.  William  Barr  Dry  Goods  Co.,  155  Mo.  App.,  405  (1911).  Per  Caulfield,  J.: 
"Any  conduct  upon  plaintiff's  part  involving  lack  of  fidelity  or  reasonably  calculated  to 
destroy  the  conlidence  of  a  reasonable  employer  under  such  an  employment  would  be  in- 
consistent with  plaintiff's  continuing  as  buyer  for  the  defendant  and  justify  his  discharge, 
whether  tlie  misconduct  caused  defendant  to  suffer  actual  loss  or  not." 

*The  Mayor,  Aldermen,  and  Burgesses  of  the  Borough  of  Salford  v.  Lever,  L.  R.  (1891), 
1  Q.  B.,  108  (Ct.  of  App.). 


422  REPOKT    OF    THE    COMMISSIONER    OF    CORPOEATIONS. 

the  tobacco  had  been  sold  were  not  in  fact  excessive.^  A  similar 
method  of  selling  tobacco  was  disclosed  in  an  action  brought  against 
a  firm  which  had  paid  a  secret  commission,  and  against  the  buj^er 
who  had  accepted  the  bribe.  There  it  was  held  that  the  plaintiff 
was  entitled  to  recoA^er  the  amount  from  either  of  the  defendants, 
and  this,  regardless  of  whether  a  different  price  would  have  been 
obtained  if  there  had  been  no  bargain  for  a  commission.- 

In  another  case  it  appeared  that  the  buyer  of  a  large  cutlery  firm 
was  paid  commissions  regularly  by  a  manufacturer  from  whom  he 
purchased.^  The  commissions  were  recovered  from  the  manufacturer 
in  an  action  brought  before  the  lord  chief  justice,  who  expressed  the 
opinion  that  the  practice  was  "dishonest  to  the  fair  trader,"  and 
"dishonest  to  the  fair  employer;"  that  "  it  was  unnecessary  to  point 
out  how  the  evils  worked;  they  operated  to  the  detriment  of  the 
honest  trader  who  was  above  such  nefarious  practices."  * 

iHovenden  &  Sons  v.  Millhoff,  83  Law  Timos  Reps.,  41,  43  (Ct.  of  App.,  1900).  Per 
Romer,  L.  J. :  "  If  a  gift  be  made  to  a  confidential  agent  with  the  view  of  inducing  the 
agent  to  act  in  favor  of  the  donor  in  relation  to  transactions  between  the  donor  and  the 
agent's  principal  and  that  gift  is  secret  as  between  the  donor  and  the  agent — that  is  to 
say,  without  the  knowledge  and  consent  of  the  principal — then  the  gift  is  a  bribe  in  the 
view  of  the  law.  If  a  bribe  be  once  established  to  the  court's  satisfaction,  then  certain 
rules  apply.  Amongst  them  the  following  are  now  established,  and,  in  my  opinion,  rightly 
established,  in  the  interests  of  morality  with  the  view  of  discouraging  the  practice  of 
bribery.  First,  the  court  will  not  inquire  into  the  donor's  motive  in  giving  the  bribe,  nor 
allow  evidence  to  be  gone  into  as  to  the  motive.  Secondly,  the  court  will  presume  in 
favor  of  the  principal  and  as  against  the  briber  and  the  agent  bribed,  that  the  agent  was 
influenced  by  the  bribe ;  and  this  presumption  is  irrebuttable.  Thirdly,  if  the  agent  be  a 
confidential  buyer  of  goods  for  his  principal  from  the  briber,  the  court  will  assume  as 
against  the  briber  that  the  true  price  of  the  goods  as  between  him  and  the  purchaser 
must  be  taken  to  be  less  than  the  price  paid  to,  or  charged  by,  the  vendor  by,  at  any  rate, 
the  amount  or  value  of  the  bribe.  If  the  purchaser  alleges  loss  or  damage  beyond  this, 
he  must  prove  it.  As  to  the  above  assumption,  we  need  not  determine  now  whether  it 
could  in  any  case  be  rebutted.  As  at  present  advised,  I  think  in  the  interests  of  morality, 
the  assumption  should  be  held  an  irrebuttable  one  ;  but  we  need  not  finally  decide  this, 
because  in  the  present  case  there  is  nothing  to  rebut  the  presumption." 

2  Cohen  v.  Kuschke  &  Co.  and  Koenig,  16  Times  Law  Reps.,  489  (Q.  B.  Div.,  1900). 

3  Statement  of  Lord  Russell  of  Killowen,  Parliamentary  Debates,  Apr.  20,  1899,  p.  20. 
And  see  llippislcy  v.  Knee  Bros.,  L.  R.  (1905),  1  K.  B.,  1,  7,  where  Lord  Chief  Justice 
Alverstone  observed :  "  Unfortunately  there  appears  to  prevail  in  commercial  circles  in 
which  perfectly  honourable  men  desire  to  play  an  honourable  part  an  extraordinary  laxity 
in  the  view  taken  of  the  earning  of  secret  profits  by  agents.  The  sooner  it  is  recognized 
that  such  secret  profits  ought  to  be  disapproved  of  by  men  in  an  honourable  profession, 
the  better  it  will  be  for  commerce  in  all  its  branches." 

*  Oetzmann  &  Co.  v.  Long  &  Co.,  London  Times,  July  7,  1896,  pp.  2-3.  The  benefits 
derived  from  suits  of  this  character  are  indicated  by  the  following  excerpt  from  a  state- 
ment made  by  Mr.  Oetzmann,  plaintiff  in  the  above  case :  "  My  firm  have  had  some  ex- 
perience in  recovering  sums  of  money  from  manufacturers  and  others.  The  most  notorious 
case  we  had  was  Oetzmann  v.  Long.  We  had,  however,  found  out  others  before  that  case. 
We  compromised  one  case  in  which  we  recovered  about  £15,  sums  paid  to  our  then  late 
buyer.  In  Long's  case  we  recovered  about  £120  and  a  considerable  sum  more  as  damages 
and  costs.  After  Long's  case  we  took  up  one  or  two  others,  in  one  of  which  we  got  £120 
before  the  issue  of  the  writ,  and  in  the  other  case  we  recovered  £300  after  the  issue  of 
the  writ  with  full  costs,  but  that  does  not  represent  anything  like  the  benefit  we  have 
received.  We  have  benefited  immensely  by  being  al)le  to  buy  cheaper.  Immediately  after 
Long's  case  we  had  many  manufacturers  calling  upon  us,  some  of  whom  we  knew  before, 
others  of  whom  were  more  or  less  unknown,  but  who  all  said,  now  there  is  a  chance  of 
their  doing  business  with  us."  (Report  from  the  special  committee  on  secret  commissions 
to  the  council  of  the  London  Chamber  of  Commerce  (July,  1898),  p.  5.) 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  423 

In  another  case,  where  the  manager  of  a  tannery  received  secret 
commissions  from  an  insurance  company  on  insurance  placed  on  his 
employer's  property,  it  Avas  held  that  they  were  entitled  to  discharge 
him  without  notice  although  his  contract  of  service  had  not  expired.^ 

Although  it  has  been  held  actionable  to  receive  secret  commis- 
sions, the  court  of  appeal  has  ruled  that  the  injured  party  can  not 
follow  money  so  paid  into  the  investmeiits  thereof  nor  restrain  the 
party  from  dealing  with  such  investments.- 

It  has  likewise  been  held  actionable  to  bribe  another's  employee 
to  divulge  confidential  information  respecting  his  employer's  busi- 
ness. Thus  a  grain  merchant  recovered  damages  from  a  competitor 
who  had  bribed  a  clerk  to  give  him  information  respecting  the  names 
of  the  plaintiff's  customers  and  his  contracts.^ 

Section  15.  Competing  with  purchaser  after  sale  of  business  and  goodwill. 

Not  infrequently  purchases  have  been  made  of  an  established  busi- 
ness, including  the  good  will,*  without  any  express  agreement  by  the 
vendor  not  to  compete  in  the  same  line  of  business  with  the  pur- 
chaser. The  same  situation  sometimes  arises  in  connection  with  the 
sale  of  the  practice  of  a  professional  man.  In  such  cases  the  vendor 
has  sometimes  reentered  the  business  or  profession  in  competition 
with  the  purchaser,  and  the  courts  have  been  called  upon  to  deter- 
mine how  far,  if  at  all,  the  purchaser  is  entitled  to  be  protected  from 
the  competition  thus  thrust  upon  him.  The  American  courts  are  not 
in  accord  regarding  the  relief  which  should  be  afforded  in  such  cases. 

1  Swale  V.  Ipswich  Tannery,  11  Commercial  Cases   fMathew),  88  (1906). 

2  Lister  &  Co.  v.  Stabbs,  L.  R.  (1890),  45  Cli.  Dlv.,  1,  and  see  Powell  &  'niomas  v. 
Evan  Jones  &  Co.,  L.  R.  (1905),  1  K.  B.,  11.     Cf.  U.  S.  v.  Carter,  P.  421. 

sHamlyn  v.  John  Houston  &  Co.,  L.  R.  (1903),  1  K.  B.,  81.  Since  1900  the  bribery 
of  another's  employees  has  been  a  crimin.nl  offense  in  Enjrland.  See  p.  5"4.  See  also 
Rex  V.  Whitaker,  L.  R.  (1914),  3  K.  B.,  1283.  where  the  commanding  officer  of  a  regiment 
was  found  guilty  of  bribery  and  of  conspiracy  to  bribe.  It  appeared  that  representatives 
of  Lipton  (Ltd.)  had  paid  the  appellant  to  induce  him  to  show  them  favor  in  relation  to 
certain  canteen  contracts.  In  the  House  of  Lords  it  was  stated  on  behalf  of  the  Govern- 
ment that  "  on  June  15  the  War  Office  addressed  a  letter  to  the  General  Officers  Com- 
manding-in-Chief  of  all  the  districts,  intimating  that  no  contracts  were  under  any  cir- 
cumstances to  be  entered  into  with  the  firm  of  Lipton's,  Limited,  and  stops  were  to  be 
taken  for  all  contracts  now  held  by  this  firm  to  be  terminated  as  soon  as  possible 
*  *  *."  On  November  26,  1914,  an  inquiry  was  made  whether  there  was  any  present 
intention  of  reinstating  their  name  upon  the  list  of  firms  eligible  for  army  contracts.  The 
reply  was  in  the  negative.  (Great  Britain  Parliamentary  Debates,  H.  L.,  July  27,  and 
Nov.  20,  1914.) 

*  Good  will  was  early  defined  by  Lord  Eldon  as  follows  :  "  The  good  will  which  has  been 
the  subject  of  sale  is  nothing  more  than  the  probability  that  the  old  customers  will  resort 
to  the  old  place."  Cruttwell  r.  Lye,  17  Vosey,  335,  340  (1810).  The  English  courts  have 
recognized  in  late  years  that  tliis  definition  is  entirely  too  narrow  to  cover  good  will 
under  changed  commercial  conditions.  Lord  Ilerschell  said  of  this  definition  :  "  If  the 
language  of  Lord  Eldon  is  to  be  taken  as  a  definition  of  good  will  of  general  application, 
I  think  it  is  far  too  narrow,  and  I  am  not  satisfied  that  it  was  intended  by  Lord  Eldon  as 
an  exhaustive  definiti(m."  Trego  v.  Hunt.  L.  R.  ( ISOti),  A.  C,  7,  17.  And  Lord  Macnaghten 
said:  "Generally  speaking,  it  [good  will]  means  much  more  than  what  Lord  Eldon  took 
it  to  mean  in  tlie  particular  case  actually  before  him  in  Cruttwell  r.  Lye.  *  *  »  often 
it  happens  that  the  good  will  is  the  very  sap  and  life  of  the  business,  without  which  the 


424  EEPORT   OF    THE    COMMISSIONER    OF    CORPOEATIONS. 

AMERICAN  DECISIONS. 

The  general  rule  with  respect  to  reentering  the  business. — 
The  general  rule  is  that  the  vendor  of  a  business,  including  the  good 
will  thereof,  may,  in  the  absence  of  express  contract  to  the  con- 
trary, reenter  the  same  line  of  business,  in  the  same  locality,  in 
competition  with  the  purchaser.  Thus,  where  one  of  the  mem- 
bers of  a  partnership  engaged  in  the  manufacture  of  printing 
presses  purchased  his  partner's  interest  in  the  assets  and  good  will 
of  the  business  it  was  held  that  he  could  not  restrain  the  vendor 
from  setting  up  a  competing  business.^  Similarly,  it  has  been  held 
that  one  who  purchased  his  partner's  interest  in  a  confectionery 
factory  was  not  entitled  to  an  injunction  restraining  the  vendor 
from  engaging  in  a  similar  business  in  the  same  town.-  And  where 
the  manager  of  the  New  York  branch  of  a  Paris  house  bought 
the  business  and  good  will  and  frequently  thereafter  referred  to 
his  business  by  the  name  of  the  Paris  firm  only,  it  was  held  that  he 
could  not  prevent  the  successors  of  the  latter  concern  from  open- 
ing a  branch  in  New  York  and  using  the  name  of  the  old  firm  in 
connection  with  their  business.^  A  number  of  other  opinions  are  in 
accord  with  those  set  forth  above  regarding  the  right  of  a  vendor 
merely  to  establish  himself  in  business  in  competition  with  the 
purchaser.* 

business  would  yield  little  or  no  fruit.  It  is  the  whole  advantage,  whatever  it  may  be, 
of  the  reputation  and  connection  of  the  firm,  which  may  have  been  built  up  by  years  of 
honest  work  or  gained  by  lavish  expenditure  of  money."  Trego  r.  Hunt  L.  R.  (1806), 
A.  C,  7,  23,  24.  Wood,  vice  chancellor,  in  Churton  v.  Douglas,  1  Johnson's  Chancery  Reps., 
174,  188  (High  Court  of  Chancery,  IS.'jO),  said:  "Good  will,  I  apprehend,  must  mean 
every  advantage — every  positive  advantage,  if  I  may  so  express  it,  as  contrasted  with  the 
negative  advantage  of  the  late  partner  not  carrying  on  the  business  himself — that  has 
been  acquired  by  the  old  firm  in  carrying  on  its  business,  whether  connected  with  the 
premises  in  which  the  business  was  previously  carried  on,  or  with  the  name  of  the  late 
firm,  or  with  any  other  matter  carrying  with  it  the  benefit  of  the  business."  The  Su- 
preme Court  of  Wisconsin,  in  Rowell  v.  Rowoll,  122  Wis.,  1,  17-18  (1904),  observed: 
"  .Tust  what  '  good  will '  includes  is  not  easy  of  definition.  Nay,  it  varies  with  the  cus- 
toms of  the  general  trade  and  the  character  or  methods  of  the  particular  business.  An 
early  definition  by  Lord  Eldon  is  '  the  probability  that  the  old  customers  will  resort  to 
the  old  place.'  This  involved  the  ancient  idea  that  good  will  Inhered  in  the  premises 
where  the  business  was  conducted,  which  had  some  justification  when  considering  an  inn, 
tavern,  or  theater,  as  in  most  of  the  early  cases.  This,  however,  is  too  limited  for  modern 
kinds  or  methods  of  business.  The  habit  of  people  to  purchase  from  a  certain  dealer  or 
manufacturer,  which  is  the  foundation  for  any  expectation  that  purchases  will  continue, 
may  depend  on  many  things  besides  place.  Confidence  in  the  quality  of  the  goods,  in  the 
facilities  of  the  establishment  to  fill  orders  promptly,  or  in  the  personal  integrity  or  skill 
of  a  dealer  or  manufacturer,  familiarity  of  the  public  with  a  designating  name  for  the 
product,  and  probably  many  other  circumstances,  might  bo  mentioned  as  illustrative.  The 
good  will  is  a  sort  of  beaten  pathway  from  the  seller  to  the  buyer,  usually  established 
and  made  easy  of  passage  by  years  of  effort  and  expense  in  advertising,  solicitation,  and 
recommendation  by  traveling  agents,  exhibition  tests  or  displays  of  goods,  often  by 
acquaintance  with  local  dealers  who  enjoy  confidence  of  their  own  neighbors,  and  the 
like." 

iCottrell  V.  Babcock  Printing  Press  Mfg.  Co.,  54  Conn.,  122  (1886). 

2  White  V.  Trowbridge,  216  Pa.  St.,  11  (1906). 

sKnoedler  et  al.  v.  Broussod  et  al.,  47  Fed.,  465  (C.  C,  1891)  ;  affd.,  55  Fed.,  895 
(C.  C.  A.,  1893). 

^Ranft  V.  Reimers,  200  111.,  886  (1902)  ;  Williams  v.  Farrand,  88  Mich.,  473  (1891)  ; 
Von  Bremen  v.  MacMonnies,- 200  N.  Y.,  41  (1910)  ;  Snyder  Pasteurized  Milk  Co.  v.  Bur- 
ton, 80  N.  J.  Eq.,  185  (Ct.  of  Err.  and  App.,  1912)  ;  Faust  v.  Rohr,  81  S.  E.,  1096  (N.  C. 
Sup.  Ct.,  1914)  ;  Wessell  et  al.  v.  Havens  et  al.,  91  Nebr.,  426  (1912). 


TEUST    LAWS   AND    UNFAIR   COMPETITION.  425 

The  Massachusetts  rule. — A  clifFerent  doctrine  is  announced 
by  the  Massachusetts  courts,  however,  which  hold  that  the  vendor 
of  a  business,  together  with  its  good  will,  may  not  set  up  in  com- 
petition with  the  purchaser  if  by  so  doing  he  depreciates  the  good 
will  which  he  sold,  or,  in  the  language  of  the  courts,  if  to  permit 
him  to  do  so  will  be  in  derogation  of  his  grant  of  the  good  will. 
Under  this  rule  it  must  be  determined  on  the  facts  of  each  par- 
ticular case  whether  the  new  business  established  by  the  vendor 
does  lessen  the  value  of  the  good  will  for  which  he  has  received  a 
valuable  consideration.  The  rule  is  thus  stated  in  a  recent  decision 
of  the  Supreme  Court  of  Massachusetts: 

In  each  case  where  the  good  will  of  a  business  is  sold  and  the  vendor  sets 
up  a  competing  business  it  is  a  question  of  fact  whether,  having  regard  to 
the  character  of  the  business  sold  and  that  set  up,  the  new  business  does 
or  does  not  derogate  from  the  grant  made  by  that  sale.' 

And  the  same  court  in  a  subsequent  case  says : 

In  Massachusetts  no  competing  business  can  be  set  up  if  it  derogates  from 
the  grant  of  the  good  will  of  the  old  business.^ 

Thus,  where  one  of  the  partners  in  a  bookstore,  one  department 
of  which  was  devoted  to  books  used  by  or  in  connection  with  the 
Episcopal  Church,  sold  his  interest  to  the  other  and  three  years 
later,  in  association  with  others  of  the  Episcopal  faith,  some  of 
tliem  customers  of  the  old  establishment,  opened  a  rival  store,  an 
injunction  was  granted  at  the  instance  of  the  purchaser  of  the  old 
business  restraining  the  vendor  from  working  for,  holding  stock  in, 
or  otherwise  being  connected,  directly  or  indirectly,  with  the  com- 
peting business.^  So  also  it  has  been  held  that  a  company  which 
purchased  the  business  of  manufacturing  engines  used  in  the  manu- 
facture of  paper,  together  with  a  patent  and  the  good  will  and 
trade  names  connected  Avith  the  business,  could  restrain  the  vendor 
from  manufacturing,  selling,  or  repairing  engines  similar  to  those 

lOld  Corner  Book  Store  r.  Upham  et  al.,  104  Mass.,  101,  105  (1907). 

2  Marshall  Engine  Co.  r.  New  Marshall  Engine  Co.  et  al.,  203  Mass.,  410,  422  (1909). 

sold  Corner  Book  Store  v.  Upham  et  al.,  194  Mass.,  101,  105  (1907).  Per  Loring,  J.: 
"  The  good  will  sold  included  the  good  will  of  a  department  carried  on  for  at  least  36 
years,  and  for  the  last  30  years  under  the  immediate  personal  direction  and  control  of 
the  defendant  Upham  ;  and  that  departmont  was  a  department  for  the  sale  of  hooks  used 
in  and  in  connection  with  the  Episcopal  church  and  was  the  most  prominent  department 
or  store  for  the  sale  of  such  books  in  Boston  during  that  period.  The  business  it  should 
be  remarked  had  a  limited  class  of  customers,  for  the  customers  are  of  necessity  limited 
to  those  belonging  to  or  interested  in  the  Episcopal  church.  The  defendant  under  whose 
direction  this  department  in  the  old  business  was  conducted  was  and  is  prominent  in  and 
among  I>]plseopalians.  It  Vas  under  these  circumstances  that  this  defendant  sold  the  good 
will  of  the  business  which  included  that  department.      *      »      * 

"  The  new  business  is  primarily  to  sell  church  books  to  Episcopal  church  people.  It 
was  started  at  the  solicitation  of  the  defendant  Upham,  who  is  prominent  in  Episcopal 
church  circles.  Its  stockholders  are  all  of  them  men  of  the  Episcopal  church,  and  its 
store  is  within  five  minutes'  walk  of  the  plaintiff's  store." 


426  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

made  by  the  purchaser  of  the  okl  business.^  And  where  a  dealer 
in  rubber  goods  in  London,  Enghmd,  sold  his  business,  including 
the  leasehold  and  the  good  will,  to  a  Boston  company,  and  the 
purchaser  accounted  to  the  vendor  for  everything  but  the  good  wall, 
for  which  it  refused  to  pay,  it  was  held  that  the  personal  knowledge 
of  the  vendor,  his  experience  in  the  business,  and  his  acquaintance 
Avith  the  probable  purchasers,  amounted  to  a  good  Avill  which  might 
have  been  used  effectively  in  competition  with  the  purchaser  and 
that  having  sold  it  to  the  purchaser  the  vendor  could  not  continue 
to  use  it,  and  therefore  must  be  compensated  for  it.-  But  where 
an  insurance  broker  sold  her  business  to  another,  without,  how^- 
ever,  conveying  a  right  to  use  the  names  under  which  it  had  been 
conducted,  it  was  held  that  the  vendor  could  engage  in  the  insurance 
business  in  competition  with  the  purchaser.^ 

Exceptions  to  the  rule  that  the  vendor  may  reenter  the  business. — 
While,  as  stated  above,  the  rule  in  States  other  than  Massachusetts 
is  that  the  vendor  may,  in  the  absence  of  express  contract  to  the 
contrary,  reenter  the  field  in  competition  with  the  purchaser,  there 
appears  to  be  an  exception  made  to  this  rule  in  the  case  of  the  sale 
of  the  practice  of  a  professional  man.  The  courts  appear  to  regard 
the  good  will  of  an  established  professional  practice  as  based  almost 
entirely  on  the  ability,  character,  and  personality  of  the  practi- 
tioner, and  it  has  been  held  in  several  jurisdictions  that  the  vendor 
of  such  a  practice  will  not  be  permitted  to  follow  his  profession  in 
the  same  community  in  competition  with  the  purchaser.  Thus 
where  a  partner  in  a  dental  business  in  Boston  sold  his  interest  to 
another,  but  subsequently  opened  an  office  there  and  sent  out  cir- 
culars to  his  former  customers  announcing  the  fact,  it  was  held  that 
an  injunction  should  issue  restraining  him  from  practicing  den- 
tistry in  Boston.  It  was  also  held  that  the  purchaser  of  the  old 
business  was  entitled  to  damages,  since  it  w^as  proved  that  the  larger 
part  of  the  former  partner's  new  practice  was  derived  from  patients 

1  Marshall  Engine  Co.  v.  New  Marshall  Enjnne  Co.,  203  Mass.,  410,  420,  423,  424 
(1909).  Per  Loring,  J.:  "If  the  decree  below  is  to  stand  it  must  stand  on  the  ground 
that  the  business  set  up  by  Marshall  under  the  name  of  the  New  Marshall  Engine  Co. 
does  in  fact  derogate  from  the  grant  made  by  him  in  the  sale  to  the  plaintiff  of  the 
good  will  of  the  business  sold  by  him  to  it.     *      *     * 

"  The  good  will  of  the  business  of  selling  engines  to  reduce  pulp  to  paper  is  manifestly 
one  not  dependent  on  the  place  where  it  is  carried  on.  A  paper  manufacturer  is  not 
concerned  where  he  buys  his  machinery.  What  he  wants  is  the  best-made  machine  at  the 
cheapest  price.  *  *  *  w^q  cannot  doubt  that  the  business  set  up  by  the  defendant 
is  a  competing  business  which  injures  the  rights  bought  by  the  plaintiff  when  it  bought 
the  good  will  of  MarshnlTs  business." 

2  Gordon  v.  Knott  et  al.,  199  Mass.,  173  (1908).  See  also  Bachelder  &  Co.  v.  Bachelder, 
220  Mass.,  42. 

3  Fairfield  v.  Lowry  and  another,  207  Mass.,  352  (1911). 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  427 

of  the  old  firm.^  And  where  a  physician  purchased  the  dwelling 
and  medicines  of  another,  who  represented  that  it  w^as  a  good  com- 
munity for  a  physician  and  that  he  was  removing  from  the  State, 
it  was  held  that  the  purchaser  was  entitled  to  rescind  the  contract 
when  the  vendor  returned  shortly  afterwards  and  resumed  the  prac- 
tice of  medicine  in  competition  with  him.-  Similarly  the  Maryland 
Court  of  Appeals  enjoined  a  surgeon-chiropodist  who  sold  her 
business  in  Baltimore  under  the  representation  that  she  intended 
to  leave  the  city  and  give  up  the  business,  from  practicing  in  the 
locality  over  which  the  purchaser's  business  extended,  although  this 
might  not  cover  the  entire  cit^^^  In  like  manner,  wdiere  a  physician 
purchased  a  residence  from  another  who  contracted  to  retire  from 
the  practice,  it  was  held  that  the  purchaser  could  restrain  the  re- 
tiring physician,  who  resumed  the  practice  after  the  lapse  of  a  year 
and  a  half,  from  following  his  profession  in  the  county  where  the 
property  was  located.*  Expressions  are  to  be  found  in  other  deci- 
sions which  appear  to  support  the  doctrine  that  the  sale  of  the  good 
will  of  a  professional  man's  practice  precludes  his  resuming  the 
practice  in  competition  with  the  vendee.^ 

Right  of  the  vendor  to  solicit  his  former  customers. — While, 
with  the  exceptions  already  noted,  the  vendor  may  set  up  a  similar 
business  in  the  same  commimity,  the  courts  will  enjoin  him  from 
soliciting  the  patronage  of  customers  of  the  old  business.  Thus, 
where  one  of  the  partners  conducting  an  impoiting  and  commis- 
sion business  in  fancy  groceries  purchased  the  interest  of  the  other 
partners,  including  the  good  w^ill,  the  New  York  Court  of  Ap- 
peals held  that  an  injunction  should  issue  restraining  the  vendors, 
when  they  opened  a  similar  business,  from  soliciting  the  trade  of 
the  customers  of  the  old  firm.*'  And  the  Supreme  Court  of  Illinois 
has  held  that  the  vendor  of  a  business  of  manufacturing  soft  drinks 


1  Foss  V.  Roby,  195  Mass.,  292  (1907).  Per  Braley,  J.:  "In  a  mercantile  partnership 
the  sale  of  the  good  will  conveys  an  interest  in  a  commercial  business,  the  trade  of  which 
may  bo  largely,  if  not  wholly,  dependent  upon  locality,  and  the  right  which  the  vendee 
acquires  under  such  a  purchase  is  the  chance  of  being  able  to  retain  the  trade  connected 
with  the  business  where  it  has  been  conducted.  *  *  *  But  in  a  partnership  for  the 
practice  of  dentistry,  the  personal  qualities  o'f  integrity,  professional  skill  and  ability 
attach  to  and  follow  the  person  not  the  place." 

2Townsend  v.  Hurst,  37  Miss..  G79   (1859). 

3  Brown  v.  Benzinger,  118  Md.,  29,  36  (1912).  Per  Pattison,  J.:  "In  some  jurisdic- 
tions, however,  a  distinction  is  made,  in  the  application  of  the  law,  between  the  sale 
of  the  good  will  of  a  trade  or  business  of  a  commercial  character  where  the  location  is  an 
important  feature  of  the  business,  and  the  sale  of  an  established  practice  and  good  will 
of  a  person  engaged  in  a  profession  or  calling  where  the  income  therefrom  is  the  imme- 
diate or  direct  result  of  his  labor  and  skill  and  where  integrity,  skill,  ability,  and  other 
desirable  personal  qualities  follow  the  person  and  not  the  place.  In  the  first  of  these 
sales  the  principle  above  laid  down  [that  in  the  absence  of  an  express  covenant  the 
vendor  of  a  business  can  enter  a  similar  business  in  competition  with  the  vendee]  applies 
while  in  the  latter  it  does  not." 

*Beattv  V.  Coble,  142  Ind.,  329  (1895). 

sYeakley  r.  Gaston,  111  S.  W.,  708  (Te.xas  Ct.  of  Civil  Appeals,  1908);  Uwight  v. 
Hamilton.  113  Mass.,  175   (1873)  ;  Warfleld  v.  Booth,  33  Md.,  C3  (1870). 

«Von  Bremen  r.  MacMonnies  et  al.,  200  N.  Y.,  41   (1910). 


428  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

should  be  restrained,  on  reentering  tlie  business  in  competition  with 
the  purchaser,  from  soliciting  the  custom  of  those  who  patron- 
ized the  business  at  the  time  of  sale.^  Similarly,  where  a  grocery 
and  cigar  business  was  sold,  and  the  vendor,  together  with  several 
former  employees,  organized  a  competing  company,  the  Federal 
circuit  court  enjoined  the  new  company  from  soliciting  trade  from 
customers  of  the  business  which  had  been  sold ;  -  and  a  similar  rul- 
ing was  made  by  a  Federal  circuit  court  in  1910.^  In  like  manner 
where  the  vendor  of  a  business  and  good  will  agreed  not  to  engage 
in  a  similar  business  within  1,000  miles  of  the  city  in  which  the 
business  was  located,  without  the  written  consent  of  the  purchaser, 
the  court,  although  refusing  to  enforce  the  contract,  because  it  was 
not  shown  that  an  agreement  covering  such  a  wdde  area  was  neces- 
sary, enjoined  the  vendors  from  soliciting  the  trade  of  the  customers 
of  the  old  business.*  So,  also,  the  Court  of  Errors  and  Appeals  of 
New  Jersey  held  that  one  who  had  sold  the  good  will  of  a  milk  busi- 
ness, together  with  the  personal  property  used  in  connection  there- 
with, should  be  restrained,  when  he  subsequently  engaged  in  a  com- 
peting business  owned  either  by  himself  or  his  wife,  from  soliciting 
the  custom  of  those  who,  prior  to  the  sale  of  the  property,  had  been 
his  customers,  and  from  serving  any  such  customers  whose  business 
had  been  secured  by  solicitation.-^  Similarly,  the  Supreme  Court 
of  Pennsylvania  held  that  one  who  contracted  to  sell  all  of  his  right, 
title,  and  good  will  in  a  newspaper  route  violated  his  contract  by 
calling  on  subscribers  on  the  route  with  a  view  to  inducing  them  not 
to  buy  papers  from  the  purchaser  of  the  route,  but  to  patronize  him 
instead.®    Decisions  in  Maryland,'^  Massachusetts,^  New  Jersey,^  and 

iRanft  V.  Reimers,  200  lU.,  386  (1902). 

2  Acker,  Merrall  &  Condit  Co.  v.  McGaw  et  al.,  144  Fed.,  864,  865  (C.  C,  1906).  Per 
Morris,  J.  :  "  It  would  be  a  reproach  to  the  law  if  no  adequate  remedy  could  be  afforded 
for  the  protection  of  a  property  so  valuable  as  such  a  good  will  against  the  attacks  of 
tlie  vendor  who  had  sold  it,  and  who  afterwards  attempts  to  regain  it  to  the  damage  of 
his  vendee. 

"As  the  continued  patronage  of  the  customers  of  such  a  business  is  what  makes  the 
good  will  of  value,  and  as  it  is  utterly  repugnant  to  the  contract  by  which  it  was 
assigned  that  the  vendor  should  be  allowed  to  seek  to  regain  it  by  soliciting  the  cus- 
tomers to  come  back  to  him,  and  as  the  damage  thus  inflicted  is  irreparable  and  is  diffi- 
cult, if  not  impossible,  in  such  a  business  as  this  to  compute,  I  think  a  court  of  equity 
should  not  hesitate  to  grant  a  remedy  by  injunction." 

3  Myers  r.  Tuttle,  183  Fed.,  235   (1910). 

*Althen  v.  Vreeland,  36  Atl.,  479  (N.  J.  Ch.,  1897). 

5  Snyder  Pasteurized  Milk  Co.  v.  Burton,  80  N.  J.  Eq.,  185  (Ct.  of  Errors  and  Appeals, 
1912). 

ewentzel  v.  Barbin,  189  Pa.  St.,  502  (1899).  Per  Curiam:  "When  the  defendant 
agreed  to  sell  to  the  plaintiff  '  all  his  right,  title  and  good  will  to  the  Oakland  paper 
route,  until  now,  controlled  by  the  said  R.  M.  Barbin,'  he  became  bound  in  honor  and  in 
law  to  carry  out  his  contract  in  good  faith.  He  was  certainly  not  at  liberty,  especially 
after  receiving  a  large  part  of  the  purchase  money,  to  filch  away  from  the  plaintiff  the 
veritable  substance  of  that  which  he  had  sold.  It  was  not  like  the  setting  up  of  another 
business  of  the  same  kind,  but  it  was  the  taking  away  of  the  very  thing  he  had  sold  that 
was  complained  of  by  the  plaintiff.      *      *     *  " 

'Brown  v.  Benzinger,  118  Md.,  29  (1912). 

sFoss  V.  Roby,  195  Mass.,  292  (1907)  ;  Fairfield  v.  Lowry  et  al.,  207  Mass.,  352  (1911). 

»  Snyder  Pasteurized  Milk  Co.  v.  Biu-ton,  80  N.  J.  Eq.,  185  (Ct.  of  Errors  and  Appeals, 
1912). 


TEUST    LAWS   AND    UNFAIR    COMPJITITION.  429 

Rhode  Island  ^  are  also  to  the  effect  that  the  vendor  should  be  en- 
joined from  soliciting  the  patronage  of  those  who  were  customers  of 
the  old  business  at  the  time  of  sale.  On  the  contrary,  well-considered 
opinions  in  Connecticut,-  Michigan,^  and  Wisconsin*  hold  that  such 
solicitation  will  not  be  enjoined. 

In  those  jurisdictions  where  the  vendor  is  denied  the  right  to  solicit 
his  former  customers,  the  courts  have  also  restrained  certain  other 
acts  by  which  the  vendor  sought  to  secure  the  trade  of  such  cus- 
tomers. Thus  the  Illinois  Supreme  Court  affirmed  a  decree  enjoining 
the  vendor  of  a  business,  on  opening  a  competing  establishment,  from 
inducing  the  telephone  company  to  give  her  the  same  number  which 
was  used  by  the  old  establishment,  the  patrons  having  been  accus- 
tomed to  send  in  a  large  part  of  their  orders  over  the  telephone.^  A 
similar  ruling  was  made  by  the  Maryland  Court  of  Appeals,*^  and 
an  injunction  restraining  the  use  of  a  cable  address  of  the  old  firm 
was  recently  affirmed  by  the  New  York  Court  of  Appeals.^ 

ENGLISH  DECISIONS. 

It  appears  to  be  well  settled  in  England  that  the  vendor  of  a  busi- 
ness and  its  good  will  is  at  liberty,  in  the  absence  of  express  contract 
to  the  contrary,  to  set  up  a  competing  business.*  There  appears  to 
be  no  case  decided  contrary,  to  this  rule,  and  the  decisions  of  the 
Massachusetts  courts  enjoining  the  vendor  from  setting  up  a  compet- 
ing business  Avhere,  having  regard  to  the  facts  of  the  particular  case, 
it  would  derogate  from  the  grant,  have  apparently  no  support  in  the 
decisions  of  the  English  courts.  The  general  rule,  however,  that  the 
vendor  may  reenter  the  business  in  competition  with  the  purchaser 
is  apparentlv  qualified  by  the  further  rule  that,  while  he  may  do  this, 
he  will  not  be  allowed  privately  by  letter,  personally,  or  by  traveler 
to  solicit  any  person  who  was  prior  to  the  sale  of  the  good  will  a 
customer  of  the  old  firm.  This  limitation  w^as  clearly  established 
for  the  first  time  in  1872,  when  it  was  held  that  one  of  the  vendors 
of  a  brewery  business,  together  with  the  good  will  and  the  right  to 
use  the  old  company  name,  should  be  restrained,  on  establishing  a 
competing  business,  from  soliciting  the  patronage  of  those  who  were 

iZanttirjian  v.  Boornazian,  25  R.  I.,  151  (190.3). 

2Cottrcll  V.  Babcock  Printinfr  Press  Co.,  54  Conn.,  122   (1886). 

3  Williams  r.  Fariand,  S8  Mich.,  47."?  (1891).  But  see  Myers  v.  Kalamazoo  Buggy  Co., 
54  Mich.,  215   (1884). 

*Fish  Bros.  Wagon  Co.  r.  La  Belle  Wagon  Works,  82  Wis.,  540  (1892). 

=  Ranft  V.  Keimers,  200  Ul.,  386   (1902). 

» Brown  c.  Benzingor,  118  Md..  29   (1912i. 

7  Von  Bremen  r.  MacMonnies,  200  N.  Y.,  41    (1910). 

sLabouchere  v.  Dawson,  L.  R.  (1871),  13  Eq.,  322;  Trego  v.  Hunt,  L.  R.  (1896),  A.  C, 
7;  Jennings  v.  Jennings,  L.  R.  (1898),  1  Ch.,  378;  Gillingham  v.  Beddow,  69  L.  J.  Ch., 
527  (1900). 


430  KEPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

customers  of  the  firm  at  the  time  of  the  sale.^  This  case  was  appro^'^ed 
and  followed  by  the  English  courts  until  1884,-  when  it  was  overruled 
by  the  court  of  appeal  on  the  gi^ound  that  it  was  wrongly  decided 
and  went  much  beyond  any  previously  decided  case.^  The  question 
involved  in  this  case  did  not  reach  the  House  of  Lords  until  1895, 
when  that  tribunal  reestablished  the  old  doctrine  and  held  that  where, 
by  the  terms  of  the  articles  of  partnership,  a  retiring  partner  had  no 
interest  in  the  good  will  of  a  business,  he,  his  partners,  servants,  and 
agents  should  be  restrained  from  soliciting  the  trade  of  any  person 
who  was,  prior  to  the  dissolution  of  the  partnership,  a  customer  of 
the  old  firm.* 

The  decision  of  the  House  of  Lords  in  this  case  has  been  closely 
adhered  to  by  the  English  courts.^ 

1  Labourchere  v.  Dawson,  L.  R.  (1871),  13  Eq.,  322,  324,  325.  Per  Lord  Romilly,  M.  R. : 
"  The  sale  of  the  business  did  not  prevent  liim  from  carrying  on  the  same  business  in  the 
same  place  or  at  Burton,  which  is  a  considerable  distance  off.  But  the  question  is  this  : 
Was  he  entitled  to  solicit  personally  the  customers  of  the  old  firm  to  come  and  deal  with 
him?  *  *  *  I  am  of  opinion  that  the  principle  of  equity  must  prevail,  that  persons 
are  not  at  liberty  to  depreciate  the  thing  which  they  have  sold.  *  *  *  j  ^i\\  specify 
what  appears  to  me  to  be  the  rule  in  the  present  case,  so  far  as  it  can  be  laid  down. 
In  the  first  place  the  new  firm,  the  defendant  in  this  case,  is  entitled  to  publish  any 
advertisement  he  pleases  in  the  papers,  stating  that  he  is  carrying  on  such  business.  He 
is  entitled  to  publish  any  circulars  to  all  the  world  to  say  that  he  is  carrying  on  such 
a  business  ;  but  he  is  not  entitled,  either  by  private  letter  or  by  a  visit,  or  by  his  traveller 
or  agent,  to  go  to  any  person  who  was  a  customer  of  the  old  firm  and  solicit  him  not  to 
continue  his  business  with  the  old  firm,  but  to  transfer  It  to  him,  the  new  firm.  That  is 
not  a  fair  and  reasonable  thing  to  do  after  he  has  sold  the  good  will.  Customers,  it  is 
true,  may  be  affected  by  public  advertisements  and  public  circulars,  but  that  does  not  in 
the  slightest  degree  militate  against  the  principle  I  have  laid  down." 

^Ginesi  v.  Cooper  &  Co.,  L.  R.  (1880),  14  Ch.  Div.,  596;  Leggott  v.  Barrett,  L.  R. 
(1880),  15  Ch.  Div.,  306;  Mogford  v.  Courtenay,  45  Law  Times  Reps.,  303   (1881). 

s  Pearson  v.  Pearson,  L.  R.  (1884),  27  Ch.  Div.,  145. 

*  Trego  V.  Hunt,  L.  R.  (1896),  A.  C,  7,  20.  Per  Lord  Herschell :  "  I  quite  feel  the  force 
of  this  argument,  but  it  does  not  strike  me  as  conclusive.  It  is  often  impossible  to  draw 
the  line  and  yet  possible  to  be  perfectly  certain  that  particular  acts  are  on  one  side  of 
it  or  the  other.  It  does  not  seem  to  me  to  follow  that  because  a  man  may,  by  his  acts, 
invite  all  men  to  deal  with  him,  and  so,  amongst  the  rest  of  mankind,  invite  the  former 
customers  of  the  firm,  he  may  use  the  knowledge  which  he  has  acquired  of  what  persons 
were  customers  of  the  old  firm,  in  order,  by  an  appeal  to  them  to  seek  to  weaken  their 
habit  of  dealing  where  they  have  dealt  before,  or  whatever  else  binds  them  to  the  old 
business,  arid  so  to  secure  their  custom  for  himself.  This  seems  to  me  to  be  a  direct  and 
intentional  dealing  with  the  good  will  and  an  endeavor  to  destroy  it.  If  a  person  who 
has  previously  been  a  partner  in  the  firm  sets  up  in  business  on  his  own  account  and 
appeals  generally  for  custom,  he  only  does  that  which  any  member  of  the  public  may  do, 
and  which  those  carrying  on  the  same  trade  are  already  doing.  It  is  true  that  those  who 
were  former  customers  of  the  firm  to  which  he  belonged  may  of  their  own  accord  transfer 
their  custom  to  him ;  but  this  incidental  advantage  is  unavoidable,  and  does  not  result 
from  any  act  of  his.  He  only  conducts  his  business  in  precisely  the  same  way  as  he 
would  if  he  had  never  been  a  member  of  the  firm  to  which  he  previously  belonged.  But 
when  he  specifically  and  directly  appeals  to  those  who  were  customers  of  the  'previous 
firm  he  seeks  to  take  advantage  of  the  connection  previously  formed  by  his  old  firm,  and 
of  the  knowledge  of  that  connection  which  he  has  previously  acquired,  to  take  that  which 
constitutes  the  good  will  away  from  the  persons  to  whom  it  has  been  sold  and  restore  it 
to  himself." 

■^Jennings  r.  Jennings,  L.  R.  (1898),  1  Ch.  Div.,  378;  Gillingham  v.  Beddow,  69 
L.  J.  Ch.,  527  (1900)  ;  Curl  Bros.  v.  Webster,  L.  R.  (1904),  1  Ch.  Div.,  685.  See  also 
MacParlane  v.  Dumbarton  Steamboat  Co.  Ltd.,  36  Scottish  Law  Rep.,  771  (1899),  where 
the  Court  of  Session  held  that  the  vendor  of  a  business  should  be  enjoined  from  applying 
by  letter,  ch-cular,  or  other  written  communication,  or  personally,  or  by  traveler,  agent,  or 
servant,  to  any  former  customer,  asking  such  person  to  deal  with  the  defendant,  or  not  to 
deal   with   the   complainant. 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  431 

Section  16.  Passing  off  the  goods  of  one  manufacturer  or  dealer  as  those 
of  another. 

This  practice  is  commonly  termed  "  unfair  competition "  in  this 
country,  while  the  equivalent  term  used  by  the  English  courts  is 
"  passing  off."  The  subject  has  been  so  thoroughly  treated  in  text- 
books and  reference  books  that  only  a  brief  resume  of  the  leading 
cases  and  established  principles  will  be  undertaken  here. 

Although  the  term  "  unfair  competition  "  has  been  gradually  ex- 
tended so  as  to  include  other  unfair  methods  used  to  secure  the  trade 
of  a  rival,  as  generally  used  by  the  courts,  it  applies  especially  to  cases 
where  one  attempts  to  palm  off  his  merchandise  or  business  as  that  of 
another.  In  many  of  the  digests,  cases  of  this  character  are  classified 
under  the  general  head  of  trade-marks,  although  the  law  governing 
trade-marks  in  this  respect  is  really  a  branch  of  the  broader  doctrine 
of  unfair  competition.  The  principal  distinction  is  that  in  so-called 
unfair  competition  cases  no  exclusive  proprietary  interest  in  the 
names  or  marks  used  is  necessary  to  relief,  while  in  registered  trade- 
mark cases  an  exclusive  right  is  necessary. 

AMERICAN   DECISIONS. 

Trade-marks  are  not  defined  in  the  act  of  February  20,  1905,^ 
authoiizing  the  registration  of  trade-marks,  but  section  2  of  this  act 
provides  that  a  verified  declaration  stating  that  the  applicant  has  an 
exclusive  right  to  the  particular  mark  sought  to  be  registered,  must 
accompany  each  application.  That  to  entitle  a  name  to  equitable 
protection  as  a  trade-mark  the  right  to  its  use  must  be  exclusive  is 
clearly  shown  in  the  case  of  Canal  Co.  against  Clark  -  where  the  com- 
plainant sought  to  have  the  name  "  Lackawanna,"  as  applied  to  coal, 
protected  as  a  trade-mark  and  was  refused  on  the  ground  that  others 
might  use  the  name  with  as  much  truth  as  the  complainant.  And  in 
Lawrence  Manufacturing  Co.  against  Tennessee  Manufacturing  Co.^ 
the  Supreme  Court  of  the  United  States  refused  to  protect  the  mark 
"  L  L"  used  by  the  complainant  on  sheetings  as  a  trade-mark,  holding 
that  an  exclusive  right  to  the  use  of  Avords,  letters,  or  sj-mbols  to 
indicate  merely  the  quality  of  the  goods  could  not  be  acquired. 

In  order  to  obtain  protection  on  the  ground  of  unfair  competition, 
however,  both  the  Federal  and  State  courts  have  held  that  an  exclu- 
sive right  to  the  name,  mark,  etc.,  is  not  absolutely  necessary.  For 
example,  the  circuit  court  of  the  United  States  granted  an  injunction 
restraining  the  manager  of  a  company  from  using  the  name  "  Clark  " 
or,  "  Clark's,"  in  connection  with  the  manufacture  of  thread,  although 
William   Clark  was  the   principal   incorporator   of  the   company.* 

1  33  U.  S.  Stat.  L.,  p.  724,  and  am.ndmonts  thereto. 

2  13  Wall.,  311  (1871). 

3  13S  IT.  S.,  537  (1891). 

*  Clark  Thread  Co.  v.  Armitage,  G7  Fed.,  896  (1895). 


432  EEPOKT    OF    THE    COMMISSIONER    OF    COEPOKATIONS. 

And  certain  wholesale  and  retail  grocers  in  Chicago  were  enjoined 
from  using  the  word  "  Minnesota  "  in  connection  with  the  manufac- 
ture of  flour.i  There  the  court  observed  that  it  was  hardly  necessary 
to  cite  authority  for  the  doctrine  that  in  cases  where  the  question  is 
simply  one  of  unfair  competition  in  trade  it  is  not  essential  that  there 
should  be  an  exclusive  or  proprietary  right  in  the  word  or  labels 
used,  in  order  to  maintain  the  action. 

Another  distinction  is  that  in  order  to  establish  one's  right  to  a 
trade-mark  actual  use  with  the  intent  to  adopt  the  same  is  the  test, 
rather  than  the  length  of  time  used.  In  the  class  of  cases  under  dis- 
cussion it  is  necessary  to  prove  that  the  mark  or  name  has  acquired 
a  secondary  meaning,  which  generally  requires  a  showing  of  long- 
continued  use.  In  a  recent  case^  the  Supreme  Court  of  Iowa  held 
that  before  the  courts  will  afford  protection  to  the  use  of  a  name, 
symbol,  or  device  it  must  be  shown  that  as  to  the  party  complaining  it 
has  a  secondary  meaning  in  the  public  mind,  which  only  comes  from 
use,  and,  that  it  is  understood  to  represent  the  goods  of  the  party 
complaining,  so  that  one  using  it,  after  such  meaning  had  attached, 
would  be  in  a  position  to  practice  fraud  upon  the  complainant  and 
the  public. 

Another  distinction  frequently  drawn  by  the  courts  is  that,  while 
fraudulent  intent  need  not  be  proved  in  trade-mark  cases,  it  must 
be  proved  directly  or  by  inference  in  all  cases  of  "  unfair  competi- 
tion "  which  do  not  involve  a  registered  trade-mark.  However,  the 
courts  are  not  unanimous  in  holding  that  it  is  necessary  that  fraudu- 
lent intent  be  proved  in  order  to  obtain  an  injunction  against  unfair 
competition.  The  Federal  courts  apparently  adhere  to  the  rule  that 
fraudulent  intent  is  necessary.  In  1891,  although  denying  the  com- 
plainant relief,  the  Supreme  Court  held  that  unfair  and  fraudulent 
competition,  if  conducted  with  intent  on  the  part  of  the  defendant 
to  avail  itself  of  the  reputation  of  the  plaintiff  to  palm  off  its  goods  as 
plaintiff's,  would,  in  a  proper  case,  constitute  ground  for  relief.^ 
And  in  the  Elgin  Watch  Co.  case,  decided  in  1901,  the  same  conclu- 
sion was  reached.^    This  rule  has  been  adopted  and.  applied  by  the 

1  Pillsbury-Washburn  Flour  Mills  v.  Eagle,  86  Fed.,  608  (C.  C.  A.,  1898). 

2  Motor  Accessories  Manufacturing  Co.  v.  Marsballtown  Motor  Material  Manufacturing 
Co.,  149  N.  W.,  184   (1914). 

3  Lawrence  Manufacturing  Co.  r.  Tennessee  Manufacturing  Co..  1.S8  U.  S.,  537   (1891). 
*  Elgin  National  Watcli  Co.  v.  Ulinois  Watch  Case  Co.,  179  U.  S.,  665,  674  (1901).     The 

court  by  Chief  Justice  Fuller  said  :  "  If  a  plaintiff  has  the  absolute  right  to  the  use  of 
a  particular  word  or  words  as  a  trade-mark,  then  if  an  infringement  is  shown,  the  wrong- 
ful or  fraudulent  intent  is  presumed,  and  although  allowed  to  be  rebutted  in  exemption 
of  damages,  the  further  violation  of  the  right  of  property  will  nevertheless  be  restrained. 
But  where  an  alleged  trade-mark  is  not  in  itself  a  good  trade-mark,  yet  the  use  of  the 
word  has  come  to  denote  the  particular  manufacturer  or  vendor,  relief  against  unfair 
competition  or  perfidious  dealing  will  be  awarded  by  requiring  the  use  of  the  word  by 
another  to  be  confined  to  its  primary  sense  by  such  limitations  as  will  prevent  misappre- 
hension on  the  Cjueslion  of  origin.  In  the  latter  class  of  cases  such  circumstances  must 
be  made  out  as  will  show  wrongful  intent  in  fact  or  justify  that  inference  from  the  in- 
evitable consequences  of  the  act  complained  of." 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  433 

lower  Federal  courts  with  substantial  unanimity.  Thus,  for  example, 
where  the  defendant  sold  "  Hires  Root  Beer,"  which  had  been  manu- 
factured by  another  from  a  liquid  extract  laiown  as  "  Hires  Improved 
Root  Beer,"  relief  was  refused  on  the  ground  that  the  defendant  did 
not  know  that  the  manufacturers  of  the  extract  had  any  objection  to 
his  advertising  and  selling  the  same.^ 

A  contrary  view,  however,  prevails  in  a  number  of  the  State  courts. 
The  New  Jersey  coui-t  of  chancery  in  1892  enjoined  a  defendant  from 
using  labels  similar  to  those  used  by  the  complainant,  although  it 
appeared  that  in  designing  his  labels  he  had  no  purpose  or  design 
of  palming  off  his  goods  for  those  of  the  complainant.-  And  the 
Supreme  Court  of  IMassachusetts  in  a  recent  case  enjoined  the 
defendant  from  selling  toothpicks  in  a  box  or  package  in  imitation 
of  the  complainant's,  although  it  appeared  that  he  had  acted 
innocently.^ 

The  basis  of  relief  in  all  these  cases  is  fraud.  In  some  cases  equity 
prevents  such  fraud  on  the  ground  that  the  confusion  of  goods 
results  in  injury  to  the  plaintiff's  business,  and  in  others  on  the 
ground  that  the  public  should  be  protected  against  such  deception. 
A  case  based  on  the  ground  first  mentioned  is  McLean  v.  Fleming, 
decided  in  1887.^  In  this  case  a  decree  of  the  lower  court  restrain- 
ing the  defendant  from  using  a  similar  trade  name  was  affirmed,  the 
court  observing  that  a  party  has  a  valuable  interest  in  the  good  will 
of  his  trade  and  in  the  labels  and  trade-marks  which  he  adopts  to 
enlarge  and  perpetuate  it.  An  example  of  where  relief  was  granted 
partially  on  the  ground  that  the  public  should  be  protected  is 
Reynolds  Tobacco  Co.  v.  Allen  Bros.  Tobacco  Co.,  decided  in  1907.^ 
The  court,  in  restraining  the  defendant  from  using  a  tag  on  plug 
tobacco  similar  to  that  of  the  complainant,  said  :  "  The  public  as  well 
as  individuals  is  entitled  to  protection  from  those  who  by  unfair 
means  and  methods  seek  to  palm  off  an  article  which  is  not  what  it 
is  represented  to  be." 

While  it  is  not  necessary  to  show  that  the  defendant's  goods  have 
resulted  in  actual  deception,  it  must  be  shown  that  the  natural  and 

1  Hires  Co.  V.  Villcpiguc,  190  Fpd.,  890  (C.  C.  A..  1912).  Seo  also  Faher  r.  Faber,  124 
Fed.,  603  (C.  C,  1903)  ;  Fairbanks  Co.  v.  Windsor,  124  Fed.,  200  (C.  C.  A.,  1903)  ; 
Lamont,  Corliss  &  Co.  v.  Hershey,  140  Fed.,  763  (C.  C,  1905)  ;  Samson  Cordage  Works  v. 
Puritan  Cordage  Mills,  211  Fed.,  603  (C.  C.  A.,  1914)  ;  but  see  Bissell  Chilled  Plow  Works 
V.  T.  M.  Bissoll  Plow  Co.,  121  Fed.,  357   (C.  C,  1902). 

2Wirtz  r.  Kagle  Bottling  Co.,  50  N'.  J.  Eq.,  164   (1S92). 

»  Forster  Manufacturing  Co.  v.  Cutter  Tower  Co.,  97  N.  E.,  749  (1912).  To  the  same 
effect  are  Holmes,  Booth  &  Hajdons  v.  Holmes,  Booth  &  Atwood  Manufacturing  Co.,  37 
Conn.,  278  (1870)  ;  Pratt's  Appeal,  117  Pa.  St.,  401  (1888)  ;  Kansas  Milling  Co.  v. 
Kansas  Flour  Mills  Co.,  133  Pac,  542  (Kans.,  1913)  ;  Hartzler  v.  Goshen  Churn  &  Ladder 
Co.,  104  N.  E.,  34  (Ind.  App.,  1914). 

*  96  U.  S.,  245. 

0  151  Fed.,  819   (C.  C,  1907). 

30035°— 16 28 


434  EEPORT    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

probable  result  is  to  deceive.  In  a  recent  case^  a  manufacturer  of 
door  checks  was  enjoined  from  using  the  word  "  Blount"  in  a  certain 
manner,  although  the  evidence  was  conflicting  as  to  whether  the 
j)ublic  was  deceived.  The  court  held  that  proof  of  actual  deception 
was  not  necessary,  and  that  the  court  may  determine  without  it,  from 
the  exhibits  themselves,  whether  deception  would  be  the  natural  and 
probable  result.  And  an  injunction  has  been  granted  where  the 
goods  which  the  defendant  had  made  in  imitation  of  the  complain- 
ant's were  simply  offered  for  sale,  but  none  sold.^ 

It  is  interesting  to  note  in  this  connection  that  if  the  ultimate 
purchaser  will  probably  be  deceived  as  to  the  identity  of  an  article, 
it  is  no  defense  that  the  retailer  or  immediate  purchaser  is  not 
deceived  by  the  manufacturer.  Relief  will  be  granted  against  the 
latter  if  it  is  shown  that  his  purpose  in  selling  to  retailers  was  to 
defraud  the  public.  Thus  in  the  case  of  Royal  Baking  Powder 
Co.  V.  Royal  ^  the  defendant  was  enjoined  from  displaying  his  name 
on  the  front  label  of  his  cans  in  such  a  way  that  the  retailer  could 
easily  pass  off  his  goods  for  those  of  the  complainant.  And  in  a 
more  recent  case*  an  injunction  was  granted  where  it  appeared  that, 
although  the  defendant  manufacturer  made  no  attempt  to  deceive 
the  retailers  of  the  product,  it  did  intend  that  the  latter  should  sub- 
stitute "  Gay-Ola  "  for  "  Coca-Cola  "  in  selling  to  consumers.  Owing 
to  the  similarity  of  the  product,  it  w^as  claimed  that  the  consumers 
would  not  know  the  difference.  This  principle  has  been  announced 
in  many  other  cases.^ 

On  the  other  hand,  a  retailer  or  jobber  may  be  enjoined  from  sub- 
stituting the  goods  of  one  manufacturer  for  those  of  a  competing 
manufacturer,  and  it  is  immaterial  whether  the  substitution  is  made 
at  the  instigation  of  the  competitor  or  upon  the  initiative  of  the 
retailer.  Thus  in  a  case  decided  by  the  circuit  court  in  1903  "^  an 
injunction  was  issued  restraining  the  defendant  retailer  from  selling 
or  delivering  as  Gold  Dust  that  which  was  not  Gold  Dust.  It  ap- 
peared in  this  case  that  the  defendant  advertised  Gold  Dust  for  sale 
at  a  reduced  price,  and  on  several  occasions  handed  out  and  delivered 
to  his  customers  who  called  for  this  article  another  and  inferior 

1  Yale  &  Towne  Manufacturing  Co.  v.  Worcester  Manufacturing  Co.,  205  Fed.,  952 
(D.  C,  1913). 

2  Enterprise  Manufacturing  Co.  v.  Landers,  Frary  &  Clarlc,  131  Fed.,  240  (C.  C.  A., 
1904). 

S122  Fed.,  337   (C.  C.  A.,  1903). 

*Coca  Cola  Co.  v.  Gay-Ola  Co.,  20O  Fed.,  720  (C.  C.  A.,  1912). 

6N.  K.  Fairbank  Co.  r.  R.  W.  Bell  Manufacturing  Co.,  77  Fed.,  S69  (C.  C.  A.,  1896)  ; 
Hostetter  Co.  v.  Sommers,  84  Fed.,  333  (C.  C,  1897)  ;  N.  E.  Awl  Co.  v.  Marborough  Awl 
Co.,  168  Mass.,  154  (1897)  ;  Wolf  Bros.  &  Co.  v.  Hamilton-Brown  Shoe  Co.,  206  Fed.,  611 
(C.  C.  A.,  1913),  appeal  pending  in  TJ.  S.  Supreme  Court;  Samson  Cordage  Works  v. 
Puritan  Cordage  Mills,  211  Fed.,  603   (C.  C.  A.,  1914). 

«N.  K.  Fairbank  Co.  v.  Dunn,  126  Fed.,  227  (C.  C,  1903). 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  435 

article  known  as  "  Buffalo."  And  in  another  case  ^  it  was  shown  that 
customers  asking  for  "  Baker's  Cocoa  "  or  "  Baker's  Chocolate  "  were 
given  William  Henry  Baker's  goods  instead  of  the  product  manu- 
factured by  the  complainant,  the  Walter  Baker  &  Co.  (Ltd.),  an 
older  establishment.  The  defendant's  salesmen,  after  suit  was 
brought,  were  also  instructed,  when  such  goods  were  called  for,  to 
say :  "  We  have  two  Bakers.  Which  do  you  want,  W.  H.  or  Walter 
Baker?  "  Nine  out  of  ten  would  ask  for  the  best,  and  thereupon 
would  be  given  W.  H.  Baker's  goods.  An  injunction  was  issued 
restraining  the  defendant  from  advertising  any  product  other  than 
complainant's  imder  the  name  of  "  Baker,"  or  furnishing  it  in  re- 
sponse to  requests  for  "  Baker's  "  goods,  or  in  any  manner  using  such 
name  in  connection  with  other  goods  without  clearly  designating  by 
whom  such  goods  were  made.- 

Just  what  similarity  in  name,  label,  or  other  method  used  amounts 
to  unfair  competition  can  best  be  shown  by  illustrative  cases.^ 
The  cases  reviewed  have  been  classified  as  follows:  (1)  Geographic 
or  place  names ;  (2)  company  and  trade  names ;  (3)  personal  names; 
(4)  descriiDtive  and  generic  terms;  (5)  dress  of  goods;  (6)  dress  of 
store;  (7)  imitation  of  goods  themselves.  Many  of  the  cases  on 
this  subject  fall  into  more  than  one  of  the  above-mentioned  classes. 
For  example,  the  confusion  of  goods  may  have  resulted  from  the 
similarity  of  the  name  used  in  conjunction  with  labels  not  unlike 
those  used  by  the  plaintiff.  Relief  will  be  granted  even  though  some 
of  the  imitations,  if  practiced  singly,  might  not  constitute  unfair 
competition.^ 

Geographic  or  place  names. — Geographic  names  or  names  of 
places,  as  a  rule,  can  be  adopted  by  any  one  in  connection  with  his 
business.  This  rule,  however,  is  subject  to  the  qualification  that 
when  such  names  have  become  so  associated  with  the  articles  to 

1  r.aker  v.  Slack,  130  Fed.,  514  (C.  C.  A.,  1904). 

-  For  other  cases  in  which  retailers  or  jobbers  have  been  enjoined  from  substituting 
other  goods  for  those  of  a  certain  manufacturer,  see  American  Fibi'e  Chamois  Co.  v.  De 
Lee,  67  Fed.,  329  (C.  C,  1895)  ;  Lever  Bros.  Boston  Works  v.  Smith,  112  Fed.,  998  (C.  C, 
1902)  ;  Gaines  v.  Whyte  Wine  Co.,  81  S.  W.,  648  (Mo.,  1904)  ;  Barnes  v.  Pierce,  164  Fed., 
213  (C.  C,  1908)  ;  and  Mellwood  Distilling  Co.  v.  Harper,  167  Fed.,  389  (C.  C, 
1909).  But  in  Walter  Baker  &  Co.  r.  Gray,  192  Fed.,  921,  the  Circuit  Court  of  Appeals 
for  the  Eighth  Circuit  in  1911  apparently  makes  the  qualification  that  the  sut>stitution 
must  be  of  goods  so  similar  in  dress,  form,  and  pattern  that  the  ordinary  purchaser,  by 
the  exercise  of  reasonable  care  will  be  unable  to  distinguish  between  them.  In  this  case 
it  was  contended  that  the  defendants,  who  kept  the  products  of  the  plaintiff  and  of 
William  II.  P>akpr,  of  Syracuse,  X.  Y.,  for  sale  in  their  grocery  store  were  guilty  of  unfair 
compotition  in  handing  out  the  latter  company's  product  when  "  Baker's  Chocolate," 
was  called  for  by  customers.  The  court  held  that  inasmuch  as  the  labels  of  the  two 
products  were  so  dissimilar  in  appearance  that  one  could'not  be  mistaken  for  the  other 
by  a  purchaser  of  ordinary  prudence,  the  defendant's  acts  in  pushing  the  product  upon 
which  he  made  the  most  profit  were  not  unlawful.  The  Supreme  Court  of  the  United 
States  subsequently  denied  a  petition  for  a  writ  of  certiorari   (223  U.  S.,  732   (1912)). 

3  Decisions  affecting  registered  trade-marks  are  not  discussed  in  this  section. 

*  Sterling  Remedy  Co.  v.  Spermine  Medical  Co.,  112  Fed.,  1000  (C.  C.  A.,  1001). 


436  EEPOKT    OF    THE    COMMISSIONER    OP    CORPORATIONS. 

which  they  are  attached  that  their  use  by  a  competitor  in  connection 
AA^ith  his  articles  would  confuse  the  public  the  courts  will  protect  the 
first  user.  Such  was  the  ruling  of  the  court  in  a  case  where  the  word 
"  Waltham "  used  in  connection  with  the  manufacture  of  watches 
was  protected.^  The  complainant  had  for  nearly  50  years  manu- 
factured watches  at  Waltham,  Mass.  The  defendant  who  was  the 
sole  selling  agent  of  the  Columbia  Watch  Co.,  had,  by  the  use  of  the 
name  "  Waltham  "  and  a  system  of  numbering,  misled  the  public  into 
buying  its  watches  under  the  impression  that  they  were  buying  the 
watches  manufactured  by  the  older  firm.  An  injunction  and  an 
accounting  were  granted,  the  court  holding  that  such  conduct  is  in 
violation  of  the  law  against  unfair  trade  because  intended  to  deceive 
and  defraud  the  public  and  to  deprive  the  complainant  of  the  trade 
and  good  wall  to  which  it  is  entitled.  And  "Angostura"  the  name 
of  a  town  in  Venezuela,  was  protected  in  connection  wdth  the  sale  of 
bitters,  although  the  name  of  the  town  had  since  been  changed  and 
the  complainants  no  longer  manufactured  their  product  at  that 
place.-  Similarly  an  injunction  was  granted  restraining  the  de- 
fendant from  using  the  name  "  Boston  "  in  connection  with  the  sale 
of  wafers,  an  article  of  confectionery.^ 

The  question  often  arises  in  the  adoption  of  a  company  name,  a 
part  of  which  may  be  the  location  of  the  company.  Thus  the  use 
of  the  name  "Lock  City  Canning  Co."  was  enjoined  at  the  com- 
plaint of  the  "  Lockport  Canning  Co.,"  both  parties  being  engaged  in 
canning  tomatoes  at  Lockport,  N.  Y.*  It  appears  that  Lockport 
is  commonly  loiown  as  the  Lock  City,  and  the  court  held  that  this, 
together  with  the  fact  that  they  were  engaged  in  the  same  business, 
Avas  calculated  to  deceive  customers.  And  in  a  recent  case  the  cir- 
cuit court  of  appeals,  at  the  instance  of  the  British- American  To- 
bacco Co.,  restrained  the  British- American  Cigar  Stores  Co.  from 
using  the  words  "  British- American  "  in  its  corporate  name.^ 

Company  and  trade  names. — Where  the  name  of  a  company  has 
acquired  a  secondary  meaning  the  courts  will  enjoin  its  use  by  an- 
other company  if  confusion  would  otherwise  result.  In  one  of  the 
earliest  cases  decided  upon  the  ground  of  unfair  competition  the 
defendant  was  enjoined  from  using  the  name  "Irving  Hotel,"  the 
plaintiff's  hotel,  although  originally  designated  as  the  "Irving 
House,"  being  very  generally  known  as  the  "  Irving  Hotel."  ^  Simi- 
larly the  Supreme  Court  of  loAva  enjoined  the  Atlas  Insurance  Co. 

1  American  Waltham  Watch  Co.  v.  Sandman,  9G  Fed.,  330  (C.  C,  1899). 
^Siegert  v.  Gandolfl  et  al.,  149  Fed.,  100  (C.  C.  A.,  1907). 
3C.  A.  Briggs  Co.  v.  National  Wafer  Co.,  215  Mass.,  100  (1913). 

*  Lockport  Canning  Co.  v.  Pusateri,  139  N.  Y.  Supp.,  040   (Sup.  Ct,   1913),  afif'd ;  145 
N.  Y.  Supp.,  130  (App.  Div.,  1914). 
5  211  Fed.,  933  (C.  C.  A.,  1914). 
«  Howard  v.  Ilenrlques  et  al.,  5  N.  y'  Super,  Ct.  Reps.,  725  (1851). 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  437 

from  using  the  word  "Atlas  "  in  its  name  in  a  misleading  way,  there 
being  at  that  time  an  insurance  company  laiown  as  the  Atlas  Assur- 
ance Co.  (Ltd.).^  The  same  rule  applies  to  corporate  names,  and 
there  are  many  cases  in  which  the  use  of  confusing  names  has  been 
enjoined.  In  1887  the  circuit  court  issued  an  injunction  restraining 
the  defendant  from  using  the  name  "  Cellonite  Manufacturing  Co.," 
due  to  its  similarity  to  the  name  of  the  complainant,  the  Celluloid 
Manufacturing  Co.-  In  another  case  the  complainant  since  1891  had 
manufactured  and  advertised  a  numbering  machine  known  as  "the 
Bates  numbering  machine."  In  1895  Bates,  the  patentee,  severed  his 
connection  with  the  complainant  and  later  organized  the  Bates  ISIa- 
chine  Co.  In  1909  the  defendant  changed  its  name  to  the  Bates 
Numbering  Machine  Co.  and  referred  to  its  machines  in  its  adver- 
tisements as  Bates  numbering  machines.  The  court  affirmed  an 
order  of  the  circuit  court  which  restrained  the  defendant  from  using 
the  words  "  Bates  Numbering  Machine  Co."  as  its  corporate  name, 
or  any  other  words  resembling  the  trade  name  of  the  complainant 
which  would  mislead  the  public.^  In  another  case  *  the  complainant 
corporation,  which  was  the  first  user  of  the  name  "Hall"  in  con- 
nection with  the  manufacture  of  safes,  was  granted  an  injunction 
restraining  the  defendant,  a  corporation  engaged  in  the  same  line 
of  business,  from  using  the  name  "  Hall "  either  alone  or  any  combi- 
nation as  a  corporate  name,  unless  it  was  accompanied  by  a  state- 
ment clearly  indicating  that  tlie  defendant  was  a  separate  and  inde- 
pendent concern  from  the  complainant.  And  in  a  recent  case  the 
Court  of  Civil  Appeals  of  Texas  held  that  the  adoption  of  the  name 
"  Howe  Grain  Co."  by  a  former  manager  of  the  "  Howe  Grain  & 
Mercantile  Co."  upon  engaging  in  a  similar  business  at  the  same 
place,  under  the  circumstances,  was  a  fraud  and  deception  upon  the 
complainant  and  the  public.^ 

The  adoption  of  names  likely  to  be  confused  with  existing  corpo- 
rations is  regulated  to  some  extent  by  statute,*'  but  the  fact  that  the 
State  issues  a  charter  to  a  corporation  by  a  certain  name  does  not 
give  such  corporation  a  right  to  use  it  for  the  purpose  of  deceiving 
the  public.  Of  course,  the  right  to  a  particular  name  will  only  be 
protected  within  the  locality  where  the  name  is  known.  As  was  said 
by  the  Supreme  Court  of  Washington,  "There  can  not  be  unfair 
trade  competition  unless  there  is  competition."^     In  this  case  the 

'Atlas  Assurance  Co.   (Ltd.)  v.  Atlas  Insurance  Co.,  138  Iowa,  228  (1907). 

2  Celluloid  Manufacturing  Co.  t7.  Cellonite  Manufacturins  Co.,  32  Fed..  04   (C.  C,  1887). 

'  Bates  Numbering  Machine  Co.  v.  Bates  Manufacturing  Co.,  178  Fed.,  681  (C.  C.  A., 
1910). 

*  nerring-nall-Marvin  Safe  Co.  r.  Hall's  Safe  Co.,  208  U.  S.,  554  (1908). 

^  Hughes  V.  Howe  Grain  &  Mercantile  Co.,  162  S.  W.,  1187  (1914).  See  also  Crutcher  & 
Starks  et  al.  i'.  Starks  et  al.,  161  Ky.,  690  (1914)  ;  Buzby  v.  Keystone  Oil  &  Manufactur- 
ing Co.,  206  Fed.,  136  (D.  C,  1913). 

0  See  p.  505. 

'  Eastern  Outfitting  Co.  v.  Manheim  et  al.,  110  Pac,  23  (1910). 


438  EEPORT    OF    THE    COMMISSIOISrER    OP    COEPOEATIONS. 

plaintiff,  under  the  name  of  the  "  Eastern  Outfitting  Co.,  of  Seattle, 
Wash.,"  was  engaged  in  the  business  of  selling  clothing  in  the  city  of 
Seattle  and  vicinity.  It  did  no  business  in  the  eastern  part  of  the 
State  with  the  exception  of  one  transaction  with  a  customer  who 
had  moved  from  Seattle  to  Spokane.  The  defendant  was  engaged 
in  the  retail  mercantile  business  in  the  city  of  Spokane  under  the 
name  of  "  Eastern  Outfitting  Co."  Subsequently  the  plaintiff  under- 
took to  engage  in  business  in  Spokane,  claiming  to  have  an  exclusive 
right  to  the  above  name  by  reason  of  being  the  first  user  thereof. 
The  court  held,  however,  that  the  protection  a  party  is  entitled  to  in 
his  trade  name  is  only  coextensive  with  his  market,  and  instead  of 
granting  the  relief  prayed  for  by  the  plaintiff,  enjoined  the  latter 
from  using  the  name  "  Eastern  Outfitting  Co."  in  the  city  of  Spo- 
kane. In  like  manner,  it  has  been  held  that  there  can  be  no 
confusion  of  identity  between  two  tailoring  establishments  of  the 
same  name  located  in  the  cities  of  New  York  and  Chicago,^  although 
the  contrary  is  true  where  such  establishments  conduct  a  mail-order 
business.^ 

Personal  names. — As  a  general  rule,  equity  will  not  prevent  a 
person  from  using  his  own  name,  but  when  the  name  of  a  person  has 
become  closely  associated  with  his  goods  or  business  the  courts  often 
regulate  its  use  by  a  competitor  of  the  same  name  who  afterwards 
engages  in  business.  One  of  the  "  Baker  "  cases  illustrates  the  relief 
granted  in  such  instances.^  There  the  defendant  was  restrained  from 
using  the  words  "&  Co."  and  from  using  the  word  "Baker"  alone, 
and  was  required  to  use  the  name  in  some  distinctive  manner  when 
applied  to  the  manufacture  of  chocolate.  The  business  of  the  com- 
plainant had  been  established  about  the  year  1780,  while  that  of 
the  defendant  was  of  recent  origin.  This  is  only  one  of  the  many 
cases  in  which  Walter  Baker  &  Co.  (Ltd.)  have  been  complainants. 
In  1897  a  defendant  was  required  to  place  upon  his  packages  in 
j)rominent  type  the  words  "  W.  H.  Baker  is  distinct  from  and  has  no 
connection  with  the  old  chocolate  manufactory  of  Walter  Baker  & 
Co."  ■*  And  in  a  suit  by  the  same  firm  against  William  P.  Baker  the 
court  required  that  the  defendant  should  use  his  name  in  full,  "  Wil- 
liam P.  Baker  "  or  "  William  Phillips  Baker."  ^  And  in  1904  the 
defendant  was  restrained  from  advertising  the  goods  of  William  H. 
Baker,  of  Winchester,  Va.,  as  "  Baker's  "  goods.** 

A  similar  line  of  cases  illustrating  the  care  which  a  man  must 
exercise  in  using  his  own  name  when  entering  a  particular  business  in 

lArnheim  v.  Arnheim,  59  N,  Y.  Supp.,  948  (1899). 

2  Ball  V.  Best,  135  Fed.,  434   (1905)  ;  and  see  Grant  v.  Levitt,  18  R.  P.  C,  361   (1901). 

3  Walter  Baker  &  Co.  (Ltd.)  v.  Baker,  77  Fed.,  181   (C.  C,  1896). 

*  Walter  Baker  &  Co.  (Ltd.)  v.  Sanders,  80  Fed.,  889  (C.  C,  1897). 
s  Walter  Baker  &  Co.  (Ltd.)  v.  Baker,  87  Fed.,  209  (C.  C,  1898). 
6  Baker  &  Co.  v.  Slack,  130  Fed.,  514  (C.  C.  A.,  1904). 


TRUST    LAWS   AND   UNFAIR   COMPETITION.  439 

which  some  one  by  the  same  name  has  alreach^  an  established  trade 
is  found  in  the  Rogers  eases.  The  original  Rogers  firm  manufactur- 
ing silverware  was  the  William  Rogers  Manufacturing  Co.,  which 
was  later  transferred  to  the  International  Silver  Co.  In  an  early 
case  the  defendant,  the  Rogers  Manufacturing  Co.,  was  enjoined 
from  using  the  name  "Rogers"  on  its  ware.^  And  in  a  later  case 
two  sons  of  the  original  Rogers  brothers  were  enjoined  from  using 
the  words  "  Rogers  "  or  "  Rogers  Bros."  and  from  stating  that  their 
goods  were  "the  real  Rogers  goods." ^  And  where  a  corporation 
used  the  name  "William  PI.  Rogers  Corporation"  fraudulently,  the 
use  of  the  name  "  Rogers  "  in  any  form  was  enjoined.^  Subsequently 
Rogers  started  in  business  on  his  own  account^  and  the  court  refused 
to  enjoin  him  from  using  his  own  name,  but  required  him  to  use  the 
words  "  not  the  original  Rogers  "  or  "  not  connected  with  the  original 
Rogers"  in  connection  with  his  name.* 

The  Supreme  Court  of  the  United  States  apparently  has  held  that 
the  court  will  not  interfere  where  the  only  confusion,  if  any,  results 
from  the  similarity  of  the  names  and  not  from  the  manner  of  the 
use.^ 

Subsequently,  however,  this  rule  appears  to  have  been  somewhat 
qualified,  as  is  shown  by  the  decision  in  the  Waterman  case.^  This 
was  a  suit  to  enjoin  the  defendant  from  using  in  connection  with 
the  manufacture  and  sale  of  fountain  pens  the  name  "A.  A.  Water- 
man "  or  any  name  containing  the  word  "  Waterman  "  in  any  form. 
The  lower  court  restrained  the  defendant  from  using  the  name 
A.  A.  Waterman  &  Co.,  and  required  that  the  words  "not  con- 
nected with  the  L.  E.  Waterman  Co."  be  placed  side  by  side,  in 
equally  large  and  conspicuous  letters,  with  the  permitted  name  of 
Arthur  A.  Waterman  &  Co.  Both  parties  appealed,  the  defendant 
on  the  ground  that  the  only  confusion  shown  to  exist  resulted  from 
a  similarity  of  names  and  not  from  the  manner  of  the  use/     The 

1  William  Rogers  Manufacturing  Co.  v.  Rogers  Manufacturing  Co.,  16  Phila.,  178  (1883K 

2  International  Silver  Co.  v.  Simeon  L.  &  George  H.  Rogers  Co.  et  al.,  110  Fed.,  955 
(C.  C,  1901). 

='  International  Silver  Co.  r.  William  PI.  Rogers  Corporation,  GO  Atlantic,  187  (N.  J. 
Ct.  of  Err.  and  App.,  1905). 

<  International  Silver  Co.  v.  William  H.  Rogers,  67  Atl.,  105  (N.  J.  Ct.  of  Err.  and  App., 
1907).  See  also  Kaufman  v.  Kaufman,  123  N.  Y.  Supp.,  699  (Sup.  Ct.,  1910)  ;  Guth 
Chocolate  Co.  r.  Guth,  215  Fed.,  750  (1914)  ;  and  Chickering  et  al.  v.  Chickering  &  Sons 
et  al.,  215  Fed.,  490    (C.  C.  A.,   1914). 

5  Howe  Scale  Co.  v.  Wyckoff.  Soamans  &  Benedict.  198  U.  S.,  118  (1905). 

8L.  E.  Waterman  Co.  v.  Modern  Pen  Co.,  235  U.  S.,  88  (1914). 

''  As  to  this  contention,  Mr.  Justice  Holmes  in  delivering  the  opinion  of  the  court  said 
(p.  94 »:  "But  whatever  generality  of  expression  there  may  have  been  in  the  earlier 
cases,  it  now  is  established  that  when  the  use  of  his  own  name  upon  his  goods  by  a  later 
competitor  will  and  does  lead  the  public  to  understand  that  those  goods  are  the  product 
of  a  concern  already  established  and  well  known  under  that  name,  and  when  the  profit 
of  the  confusion  is  known  to  and,  if  that  be  material,  is  intended  by  the  later  man,  the 
law  will  require  him  to  take  reasonable  precautions  to  prevent  the  mistake." 


440  REPORT    OP    THE    COMMISSIONER    OP    CORPORATIONS. 

plaintiff's  appeal  was  based  on  the  ground  that  the  agreement  of 
A.  A.  Waterman  with  the  defendant  was  a  mere  sham  to  allow  the 
latter  to  use  the  name  on  its  pens.  The  decree  of  the  Circuit  Court 
of  Appeals  was  affirmed,  holding  that  the  injunction  gTanted  was 
sufficient  to  protect  the  plaintiff^s  rights.  Mr.  Justice  Pitney,  how- 
ever, dissented,  being  of  the  opinion  that  the  defendant  should  be 
unqualifiedly  enjoined  from  using  the  name  Waterman  on  the  ground 
that  the  agreement  just  referred  to  was  a  mere  sham. 

But  where  it  clearly  appeared  that  a  personal  name  was  adopted  by 
a  firm  or  corporation  for  the  express  purpose  of  securing  the  good 
will  of  a  rival,  other  courts  have  granted  the  full  measure  of  relief. 
Thus  in  a  case  where  the  defendant  assumed  the  name  of  a  stock- 
holder with  the  evident  purpose  of  appropriating  the  trade  of 
a  well-known  snuff  concern  of  the  same  name,  the  use  of  the  name  in. 
the  defendant's  business  was  enjoined.^ 

Descriptive  and  generic  terms. — The  use  of  these  terms  is  gov- 
erned by  the  same  general  rules  which  apply  to  names.  Protection 
will  be  afforded,  even  though  the  right  to  the  term  is  not  exclusive, 
if  it  has  taken  on-  a  secondary  meaning.  For  example,  the  word 
"  Eubber-vulc  "  was  held  to  be  so  similar  to  the  word  "  Rubber-set " 
that  its  use  should  be  restrained  as  unfair  competition.-  The  de- 
fendant was  also  restrained  from  using  the  word  "  Rubber-Boimd  " 
in  its  corporate  name,  on  the  ground  that  the  name,  being  displayed 
on  the  goods,  it  would  mislead  the  public  as  to  whose  goods  they 
were  purchasing.  And  the  use  of  the  words  "  No-hole  "  in  connection 
with  the  advertisement  and  sale  of  socks  has  been  enjoined  at  the 
instance  of  another  manufacturer  of  such  goods  who  had  already 
made  use  of  the  word  "  Holeproof."  ^ 

As  a  rule  descriptive  words  can  not  be  appropriated  as  technical 
trade-marks.  The  name  "Turpentine  Shellac,"  as  applied  to  a 
preparation  used  as  a  priming  coat  upon  inside  wood  finish,  had  been 
registered  and  recorded  in  the  Patent  Office  by  the  complainant. 
Later  the  manufacturer  of  a  similar  preparation  adopted  the  same 
name.     The  court  held  that  while  the  term  could  not  be  adopted  for 

1  Garrett  et  al.  v.  T.  H.  Garrett  &  Co.,  78  Fed.,  472  (C.  C.  A.,  1896).  See  also  Inter- 
national Silver  Co.  v.  William  H.  Rogers  Corporation,  60  All.,  187  (N.  J.  Ct.  of  Err.  and 
App.,  1905). 

~  Rubber  &  Celluloid  Harness  Trimming  Co.  i».  Rubber-Bound  Brush  Co.  et  al.,  8S  Atl., 
210  (N.  J.  Ct.  of  Err.  and  App.,  1913;. 

3  Holeproof  Hosiery  Co.  v.  Fitts  et  al.,  167  Fed.,  378  (C.  C,  1908).  See  also  Florence 
Manufacturing  Co.  v.  J.  C.  Dowd  &  Co.,  178  Fed.,  73  (C.  C.  A.,  1910),  in  wbich  it  was 
held  that  the  use  of  the  word  "  Sta-Kleen  "  should  be  enjoined  at  suit  of  the  proprietor  of 
the  word  "  Koepclean."  And  see  Hartzler  et  al.  r.  Goshen  Churn  &  Ladder  Co.,  104  N.  E., 
34  (Ind.  App.,  1914).  The  court  in  Rubber  &  Celluloid  Harness  Trimming  Co.  v.  Rubber- 
Bound  Brush  Co.,  supra,  said  :  "  while  the  use  of  descriptive  words  cannot  be  defended 
upon  the  ground  that  they  constitute  a  trade-mark,  yet  *  *  *  where  a  descriptive  word 
has  been  before  the  public  so  long  and  to  such  an  extent  as  that  it  would  be  unjust  for 
any  one  to  simulate  it,  and  thus  enable  his  goods  to  pass  off  as  the  goods  of  another, 
equity,  which  looks  at  the  substance  and  not  the  mere  form  of  things,  will  prevent  the 
use  of  such  words  and  give  the  complainant  relief  by  way  of  injunction." 


TEUST    LAWS   AND    UNFAIR   COMPETITION.  441 

exclusive  use  as  a  trade-mark  the  complainant  was  entitled  to  pro- 
tection from  an  unfair  use  of  the  name  that  might  result  in  his  injury 
and  in  fraud  of  the  public.^ 

In  order  to  acquire  an  attractive  name  for  their  goods,  manufac- 
turers often  coin  new  words  which  sometimes,  from  continued  use, 
become  as  well  known  as  the  article  itself.    Competitors  do  not  as  a 
rule  adopt  the  same  word  or  phrase  used  by  their  successful  op- 
ponents, but  adopt  a  word  similar  in  sound  to  one  already  in  use. 
In  a  recent  ease^  unfair  competition  was  alleged  on  many  grounds, 
among  which  was  the  similarity  between  the  names  "  Uneeda  "  and 
"Abetta."    The  defendant's  trade  was  limited  to  the  Pacific  coast, 
while  that  of  the  complainant  was  nation  wide.     As  to  the  name 
"Abetta,"  the  defendant  was  restrained  from  putting  up  and  selling 
or  offering  for  sale  any  carton  of  bakery  products  having  thereon 
an  imitation  of  complainant's  "  Uneeda  Biscuit "  trade  name  calcu- 
lated to  mislead  or  deceive,  like  that  on  defendant's  carton,  "Abetta 
Biscuit."    It  has  been  said  that  a  trade  name,  unlike  a  trade-mark, 
appeals  to  the  ear  more  than  to  the  eye.^     In  that  case  the  com- 
plainant had  used  the  name  "Gold  Dust"  in  connection  with  the 
sale  of  washing  powder  for  some  years,  and  the  defendant  subse- 
quently beginning  the  manufacture  of  a  washing  powder  adopted 
the  name  "  Gold  Drop."    Although  care  was  taken  to  use  a  different 
style  of  labels  and  packages,  the  court  held  that  the  name  was  so 
similar  in  sound  as  to  mislead  or  deceive  customers.     As  a  rule, 
however,  the  use  of  similar  descriptive  or  generic  terms  is  not  of 
itself  sufficient  ground  for  injunctive  relief  where  it  appears  that 
the  article  to  which  the  names  are  attached  is  so  differently  dressed 
and  labeled  that  deception  is  not  likely  to  result.     Thus  in  a  case* 
decided  by  the  United  States  Supreme  Court  the  use  of  the  word 
"Rubbero"  was  held  not  unfair  in  competition  with  the  manufac- 
turers of  an  article  known  as  "  Ruberoid."     Both  the  complainant 
and  defendant  were  manufacturers  of  roofing  material,  but  it  ap- 
peared that  there  was  no  imitation  by  the  defendant  in  the  ai-range- 
ment,  color,  design,  or  general  appearance  of  the  wrappings  or  mark- 
ings on  the  package.     Similarly  the  use  of  the  name  "Baco-Curo" 
has  been  decided  not  to  be  luifair  in  competition  with  "  Xo-To-Bac."^ 
nor  "  Koke  "  in  competition  with  "  Coca-Cola,"  ^  nor  "  New  Idea  "  in 
competition  with  "New  Departure."^     It  should  be  borne  in  mind, 

1  standard  Varnish  Works  v.  lusher,  Tliorsen  &  Co.,  153  Fed.,  928  (C.  C,  1907). 

sNntionnl  F.iscnit  Co.  v.  Fafific  Coast  Biscuit  Co.  ot  al.,  91  Atl.,  126  (N.  J.  Ct.  of 
Chancery,  1914). 

"N.  K.  Fairbank  Co.  v.  Luckel.  King  &  Cake  Soap  Co..  102  Fed.,  .".27  (C.  C.  A..  1900>. 

*  Standard  Paint  Co.  v.  Trinidad  Asphalt  Manufacturinj,'  Co.,  220  U.  S.,  446  (1911). 

s  Sterling  Remedy  Co.  v.  Eureka  Chemical  &  Manufacturing  Co.,  70  Fed.,  704  (C.  C, 
1895). 

8  Coca-Cola  Co.  r.  Branhnm  et  nl.,  210  Fed..  264   (D.  C.  1914). 

''Hamilton  Manufacturing  Co.  f.  Tubbs  Manufacturing  Co.,  216  Fed.,  401  (C.  C,  1908). 


442  REPORT    OP    THE    COMMISSIONER    OF    CORPORATIONS. 

therefore,  that  the  similarity  in  name  is  usually  only  one  of  the  con- 
trolling elements  in  such  cases. 

Dress  of  goods. — Imitation  of  the  labels  or  packages  of  a  rival 
is  one  of  the  most  common  forms  of  technical  unfair  competition. 
The  use  of  labels  is  to  a  large  extent  protected  under  the  law  of 
trade-marks,  but  many  are  of  such  a  nature  that  they  can  not  be 
exclusively  appropriated.  As  previously  stated,^  in  unfair  competi- 
tion cases  it  is  not  necessary  that  the  plaintiff's  right  be  exclusive 
in  order  to  be  protected.  If  the  defendant's  label,  in  the  opinion  of 
the  court,  is  liable  to  result  in  confusion,  relief  will  be  "granted. 
A  case  in  which  only  the  similarity  of  labels  was  involved  is  that  of 
Notaseme  Hosiery  Co.  v.  Straus  et  al.^  The  engraving  company 
which  prepared  the  complainant's  label  also  designed  that  of  the 
defendant,  each  being  a  rectangular  design  having  a  diagonal  black 
band  with  white  script  and  triangular  red  panels.  It  was  also 
shown  that  the  plaintiff  had  used  the  label  six  months  prior  to  its 
adoption  by  the  defendant. .  The  defendant  was  notified  of  the  simi- 
larity of  the  label,  but  continued  its  use.  An  injunction  was  granted 
and  the  complainant  was  awarded  the  profits  made  on  sales  of 
hosiery  by  the  defendants  from  the  time  they  were  notified  of  the 
similarity  of  the  labels  used. 

Mere  use  of  the  same  color  apart  from  any  other  feature  probably 
would  not  be  enjoined  as  unfair,  although  color  may  be  one  of  the 
elements  contributing  to  a  general  similarity  which  is  deceptive. 
It  is  the  effect  of  the  whole  which  is  the  controlling  element  in  such 
cases.  For  example,  a  competitor  of  the  Keynolds  Tobacco  Co. 
adopted  tin  tags  for  a  certain  brand  of  its  plug  tobacco,  similar  in 
size,  shape,  and  color  to  those  used  by  the  complainant  on  its 
"Schnapps"  brand  of  tobacco.  The  use  of  the  tag  was  enjoined, 
although  the  defendant  used  the  word  "Traveller"  instead  of  the 
word  "  Schnapps."^  And  in  Franck  et  al.  v.  Frank  Chicory  Co.  et 
al.,*  where  the  complainant  had  sold  chicory  in  packages  of  cylindri- 
cal form  inclosed  in  red  paper  for  25  years,  it  was  held  to  be  unfair 
competition  for  a  competitor  to  use  a  label  of  the  same  color  and 
general  design.     There  are  numerous  cases  decided  on  this  ground.'^ 

1  See  p.  431. 

2  201  Fed.,  99  (C.  C.  A.,  1912)  ;  209  Fed.,  495  (D.  C,  1913). 

8  Reynolds  Tobacco  Co.  v.   Allen  Bros.  Tobacco  Co.,  151  Fed.,  819  (C.  C,  1907). 

*95  Fed.,  818  (C.  C,  1899). 

5  Seeman  et  al.  v.  Zechnowitz,  121  N.  Y.  Supp.,  125  (App.  Div.,  1910)  ;  Wm.  Wrigley,  Jr., 
Co.,  V.  L.  P.  Larson,  Jr.,  Co.  et  al.,  195  Fed.,  568  (C.  C,  1911)  ;  American  Pin  Co.  v.  Berg 
Bros.,  188  Fed.,  683  (C.  C,  1911)  ;  Schwahn  et  al.  v.  Miele  et  al.,  203  Fed.,  176  (D.  C, 
1913)  ;  Lawrence  et  al.  v.  P.  B.  Sharpless  Co.,  208  Fed.,  886  (C.  C.  A.,  1913)  ;  Modesto 
Creamery  v.  Stanislaus  Creamery  Co.  et  al.,  142  Pac,  845  (Cal.  Sup.  Ct.,  1914)  ;  H.  E. 
Winterton  Gum  Co.  v.  Autosales  Gum  &  Chocolate  Co.,  211  Fed.,  612  (C.  C.  A.,  1914)  ; 
Tanqueray,  Gordon  &  Co.  v.  Gordon  D.  &  D.  Co.,  213  Fed.,  510  (D.  C,  1914). 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  443 

Similarly,  the  imitation  of  the  form  of  a  package  or  container 
alone  seldom  constitutes  unfair  competition.  One  of  the  few  ex- 
ceptions is  where  the  use  of  a  peculiarly  shaped  bottle  was  enjoined.^ 
In  this  case,  although  both  parties  bottled  whislry  made  by  the 
Hannis  Distilling  Co.,  known  as  "  Mount  Vernon  Pure  Rye  Whis- 
key," the  complainant  had  the  sole  privilege  of  attaching  the  dis- 
tiller's guaranty  of  purity.  The  complainant  had  adopted  a  peculiar, 
flat-shaped  bottle,  and  the  defendant  afterwards  began  using  a  bottle 
of  the  same  shape  and  appearance,  but  which  he  claimed  to  have 
purchased  in  open  market.  Although  the  labels  were  different,  a 
preliminary  injunction  was  issued  on  the  ground  that  whether  the 
whisky  was  the  unadulterated  Mount  Vernon  whisky  depended  on 
the  reputation  of  the  individual  bottler,  and  therefore  the  consumer 
was  or  might  be  deceived. 

It  is  also  unfair  competition  to  dispose  of  one's  goods  in  bottles 
or  packages  bearing  another's  marks,  labels,  or  names.  This  method, 
however,  is  not  often  employed.  In  a  recent  case-  where  the  bill 
charged  sales  by  defendant  of  an  article  resembling  in  color,  ap- 
pearance, and  flavor  the  plaintiffs'  brandy,  the  giving  therewith  of 
empty  genuine  Hennessey  bottles,  and  the  advising  and  assisting 
of  purchasers  to  place  defendant's  liquors  in  plaintiffs'  bottles  and 
to  sell  the  same  as  genuine  Hennessey  brandy,  it  was  held  that  an 
injunction  restraining  such  a  practice  should  issue. 

Dress  of  store. — The  deceptive  dress  of  a  store  or  the  use  of  a 
sign  which  will  cause  confusion  as  to  the  identity  of  the  store  will 
also  be  enjoined.  Misleading  names  are  usually  the  controlling  fea- 
ture of  such  cases.  A  case  in  which  the  similar  dress  of  a  store  was 
involved  was  decided  by  the  California  Supreme  Court  in  1895.^ 
The  plaintiff'  was  engaged  in  the  clothing  and  dry  goods  business, 
its  store  being  known  as  the  "  Mechanics'  Store."  The  defendant 
upon  engaging  in  business  of  the  same  general  character,  erected 
a  building  very  much  like  that  of  the  plaintiff  in  the  same  block, 
designating  his  store  as  the  "Mechanical  Store."  The  lower  court 
restrained  the  defendant  from  the  further  use  of  the  name  and  also 
decreed  that  the  defendant  maintain  and  place  in  a  conspicuous  part 
of  his  store  and  also  in  a  conspicuous  place  on  the  outside  or  front 
thereof,  a  sign  showing  the  proprietorship  of  said  store  in  letters  suffi- 
ciently large  to  be  plainly  cliscernable  by  customers.  On  appeal  the 
latter  part  of  the  injunction  was  modified  in  that  the  defendant  was 
only  required  to  distinguish  his  place  of  business  from  that  of  the 
plaintiff  in  some  mode  or  form  which  would  sufficiently  indicate  to 

iCook  &  Bernheimer  Co.  v.  Ross  et  al.,  73  Fed.,  203  (C.  C.  I896i. 

2  Hennessey  et  al.  r.  Wine  Growers'  Association,  212  Fed..  308   (D.  C,  1914).     See  also 
Samuel  Bros.  &  Co.  r.  Hostetter  Co.,  118  Fed..  257  (C.  C.  A.,  1902). 
*  Weinstock,  Lubin  &  Co.  v.  H.  Marks,  42  Pac,  142. 


444  REPORT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

the  public  that  it  was  a  different  phice  of  business.  And  in  Nokes  -?'. 
Mueller^  the  appelhmt  was  enjoined  from  using  milk  wagons  deco- 
rated in  a  certain  manner  which  was  practically  identical  with  the 
painting  on  those  of  the  appellee,  excepting  that  the  name  "  Walnut 
Park  Dairy  "  was  used  instead  of  "  Walnut  Grove  Dairy." 

The  use  of  signs  which  would  mislead  customers  as  to  the  identity 
of  the  place  of  business  has  also  been  enjoined.-  There  the  de- 
fendant moved  his  clothing  store  next  door  to  that  of  the  plaintiff 
which  was  known  as  "  The  Globe."  Globes  representing  the  earth, 
similar  in  appearance  to  those  used  by  the  plaintiff,  were  placed  in  the 
windows  and  other  conspicuous  places.  He  was  enjoined  among 
other  things  from  using  symbols,  devices,  paintings,  or  advertise- 
ments, or  any  combination  of  such  elements  as  to  give  to  his  store 
the  appearance  of  its  being  a  part  of,  or  used  in  connection  with, 
the  store  of  the  plaintiff.^ 

In  this  connection  it  is  interesting  to  note  that  while  one  has  a 
right  to  state  to  the  public  that  he  has  been  in  the  employ  or  formerly 
connected  with  another  firm  he  must  not  display  the  name  of  the 
latter  more  prominently  than  his  own  name  so  as  to  mislead  the 
public.  Thus  a  former  employee  of  the  Colton  Dental  Association 
who  had  opened  a  dental  ofRce  of  his  own  on  the  same  street  was 
enjoined  from  using  a  sign  and  cards  on  which  was  printed  his  own 
name  with  the  addition,  "  Formerly  operator  at  the  Colton  Dental 
Rooms,"  the  words  "  Formerly  operator  at "  being  in  much  smaller 
letters  than  "  Colton  Dental  Rooms."*  Similarly,  where  a  retiring 
partner  embarked  in  the  same  line  of  business,  only  a  short  distance 
from  the  old  store,  and  put  up  a  sign  bearing  his  own  name  and  the 
words  "  of  the  late  firm  of  "  followed  by  the  name  of  the  older  firm, 
it  was  held  that  an  injunction  should  issue  and  that  actual  fraudulent 
intention  need  not  be  established  in  such  cases.^  And  in  New  York 
it  has  been  held  unlaw^ful  for  one  to  misrepresent  to  the  public  the 
capacity  in  which  he  was  formerly  employed.  Thus  a  defendant 
who  had  acted  simply  as  a  business  manager  of  a  medicine  company, 
another  having  charge  of  the  medical  department,  was  enjoined  from 
advertising  himself  as  "  late  manager  "  of  such  company.® 

IiNiiTATioN  or  GOODS  THEiMSELVEs. — The  general  rule  is  that  in  the 
absence  of  patent  protection  the  general  get-up  of  an  article  may  be 
copied.  Under  certain  circumstances  it  may  be  unfair  for  one  to 
make  an  exact  copy  of  an  article  even  when  it  is  sold  under  his  own 

172  111.  App.,  431    (1807). 

sLippman  v.  Martin,  5  Ohio  N.  P.  Rep.,  120  (1808). 

»  See  also  Johnson  v.  Hitchcock,  8  N.  Y.  Siipp.,  680  (Sup.  Ct.,  1888),  and  Cady  v. 
Schultz,  19  R.  I.,  193  (1895). 

*  Colton  (-.  Thomas,  7  Phila.,  2.57  (1S09). 

«  Smith  V.  Cooper,  5  Abb.  N.  C,  274  (1877). 

«  Humphrey's  Homeopathic  Medicine  Co.  v.  Bell  et  al.,  2  N.  Y.  S.  R.,  78  (1888).  See 
also  Colton  v.  Deane,  7  N.  Y.  S.  R.,  78  (1887). 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  445 

name.  Copying  the  necessary  features  of  an  article  will  not  be  pro- 
hibited, but  copying  the  nonfunctional  parts  of  an  article  made  by  a 
rival  has  been  enjoined.  In  a  case  decided  in  1904/  the  court  said 
"  defendants  overlooked  the  fact  that  a  court  of  equity  will  not  allow 
a  man  to  palm  off  his  goods  as  those  of  another,  whether  his  misrepre- 
sentations are  made  by  word  of  mouth,  or,  more  subtly,  by  simulating 
the  collocation  of  details  of  appearance  by  which  the  consuming 
public  has  come  to  recognize  the  product  of  his  competitor."  The 
complainant  had  for  30  years  manufactured  a  line  of  mills  of  various 
sizes  for  gi'inding  coffee,  drugs,  etc.,  adopting  therefor  a  certain 
characteristic  shape,  design,  color,  and  ornamentation  which  had  be- 
come well  known  to  purchasers  and  associated  in  their  minds  with 
his  goods.  Later  the  defendants  began  the  manufacture  of  a  similar 
line  of  goods  imitating  all  of  the  distinguishing  features  of  the 
article  but  selling  them  under  their  own  name.  They  were  enjoined 
from  selling  the  different  styles  of  mills  which  had  already  been  imi- 
tated and  also  from  imitating  in  the  future  other  styles  which  defend- 
ant had  declared  his  intention  to  make. 

And  while  many  of  the  features  of  an  article  may  separately  be  a 
subject  of  appropriation  because  they  were  not  original  with  plain- 
tiff, the  appropriation  of  all  of  the  prominent  features  in  such  a  man- 
ner as  would  probably  deceive  the  ordinary  purchaser  constitutes 
unfair  competion.  Such  was  the  ruling  in  a  case^  where  padlocks, 
manufactured  by  the  defendant,  represented  the  plaintiff's  article  in 
form,  size,  color,  lettering,  and  in  details  of  finish.  The  chief  differ- 
ences were  that  the  complainants'  lock  bore  the  name  "  Yale,"  while 
the  defendant  used  the  name  "  Yap  "  on  its  product,  and  each  had 
its  respective  name,  with  the  place  of  manufacture,  on  its  product. 
The  court  held  that  although  dealers,  and  the  trade  generally,  would 
no  doubt  notice  the  differences,  ordinary  purchasers  would  be  de- 
ceived. 

It  has  been  held  that  the  manufacture  and  sale  of  repair  parts  is 
not  unlawful  if  there  is  no  deception  and  the  goods  are  not  repre- 
sented to  be  those  of  another.  Thus  where  a  manufacturer  of  farm 
machinery  and  the  separate  parts  thereof,  adopted  a  system  of  stamp- 
ing upon  the  different  parts  a  letter  designating  the  style  of  the  ma- 
chine, followed  by  a  numeral  designating  the  particular  part,  so  as- 
to  enable  the  users  of  the  machines  to  readily  obtain  repairs,  it  was 
held  not  to  be  unfair  competition  for  another  manufacturer  of  such 
repair  parts  to  use  such  markings  and  advertise  by  catalogue  that 
their  goods  were  adapted  to  the  complainant's  machines  and  inter- 

1  Enterprise  Manufacturing  Co.  v.  Landers,  Frary  &  Clark,  131  Fed.,  240  (C.  C.  A., 
1904). 

2  Yale  &  Towne  Manufacturing  Co.  v.  Adler,  154  Fed.,  37  (C.  C.  A.,  1907). 


446  REPOET    OP    THE    COMMISSIOlSrER   OF    COBPOEATIONS. 

changeable  with  the  corresponding  parts  furnished  by  the  original 
manufacturer  of  said  machines,  where  the  repair  parts  were  not 
covered  by  patents  and  it  was  stated  that  the  parts  so  offered  were  of 
their  own  manufacture.^  And  in  a  more  recent  case,-  a  Federal  cir- 
cuit court  of  appeals  reversed  a  decree  of  the  circuit  court  granting 
an  injunction,  although  it  was  contended  by  the  complainant  that  the 
fact  that  the  repair  parts  made  by  the  defendant  reached  the  con- 
sumer without  any  markings  to  indicate  their  origin  would  mislead 
purchasers  thereof  into  believing  that  they  were  made  by  the  com- 
jDhiinant,  the  well-known  maker  of  the  machines. 

Owners  of  patented  or  copyrighted  articles  have  an  exclusive  right 
to  make  and  sell  the  article  during  the  life  of  the  patent  or  copyright. 
At  the  expiration  of  the  patent  or  copyright  the  public  is  entitled 
to  copy  the  article  and  use  its  name,  but  is  not  entitled  to  palm  off 
such  goods  as  the  make  of  the  original  manufacturer  and  must  dis- 
tinguish them  in  such  a  manner  as  not  to  cause  confusion.  Such  an 
attempt  was  held  to  be  unfair  in  G.  &  C.  Merriam  Co.  v.  Ogilvie.^  In 
that  case  the  complainants'  copyright  on  the  name  "  "Webster,"  used 
in  connection  with  dictionaries,  having  expired,  the  defendant  adopted 
the  name,  accompanied  by  other  words  and  phrases  used  by  the  com- 
plainant, conveying  the  impression  that  his  dictionary  was  a  later 
edition  of  the  complainants'.  The  defendant  used  the  words  "  Im- 
perial "  and  "  Universal "  instead  of  the  word  "  International,"  used 
by  the  complainant.  The  complainant  was  denied  the  right  of  send- 
ing out  circulars  to  the  effect  that  it  had  the  exclusive  right  to  the 
name,  while  the  defendant  was  enjoined  from  sending  out  circulars 
and  advertisements  trespassing  on  the  reputation  of  the  plaintiff  or 
which  would  mislead  purchasers  into  buying  his  dictionary  for  one 
of  the  series  published  by  the  complainant.  The  injunction  as  to  the 
defendant  was  broadened  on  appeal  so  as  to  preclude  the  use  of  mis- 
leading words  on  the  title  pages  and  the  backs  of  the  dictionaries. 

ENGLISH   DECISIONS. 

The  legal  term  applied  by  the  English  courts  to  cases  where  one 
party  does  or  attempts  to  palm  off  his  goods  or  business  as  that  of 
another  is  "  passing  off."  In  the  American  courts  the  equivalent 
term  used  is  "  unfair  competition,"  although  that  term  has  gradually 
been  broadened  so  as  to  include  other  unfair  means  used  in  com- 
petition.   The  important  distinctions  in  the  United  States  decisions 

iDeering  Harvester  Co.  v.  Whitman  &  Barnes  Mfg.  Co.,  91  Fed.,  376  (C.  C.  A.,  1898). 

2  Bender  et  al.  v.  Enterprise  Mfg.  Co.,  156  Fed.,  641  (C.  C.  A.,  1907). 

■■'170  Fed.,  167  (C.  C.  A.,  1908).  See  also  Singer  Manufacturing  Co.  v.  .Tune  Manufac- 
turing Co.,  163  U.  S.,  169  (1896)  ;  Yale  &  Towne  Manufacturing  Co.  v.  Worcester  Manu- 
facturing Co.,  205  Fed.,  952  (D.  C,  1913)  ;  Jenkins  Bros.  v.  Kelley  &  Jones  Co.,  212 
Fed.,  328  (D.  C,  1914),  appeal  pending;  Prest-O-Lite  Co.  v.  Davis,  215  Fed.,  349  (C.  C.  A., 
1914). 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  447 

between  trade-mark  actions  and  actions  for  unfair  competition,  as 
shown  in  a  discussion  of  the  cases  under  this  heading,  are  (1)  that 
no  exchisive  right  is  necessary  in  cases  of  unfair  competition;  (2) 
that  to  obtain  relief  on  the  ground  of  unfair  competition  it  is  neces- 
sary to  show  that  the  name  or  mark  sought  to  be  protected  has  ac- 
quired a  secondary  meaning;  and  (3)  that  many  courts  refuse  relief 
on  the  ground  of  unfair  competition  unless  fraudulent  intent  is 
shown  or  is  clearly  inferable  from  the  circumstances.  The  first  and 
second  distinctions  noted  above  are  recognized  by  the  English  courts, 
but  it  is  well  settled  that  proof  to  the  effect  that  the  defendant  in- 
tended to  deceive  is  no  more  necessary  in  passing  off  actions  than  in 
cases  of  infringement  of  trade-marks,  and  as  Lord  Justice  Lindley 
said  in  the  case  where  the  words  "  Camel-Hair  Belting  "  were  pro- 
tected: "All  that  need  be  proved  is  that  the  defendants'  goods  are 
so  marked,  made  up,  or  described  by  them  as  to  be  calculated  to  mis- 
lead ordinary  purchasers  and  to  lead  them  to  mistake  the  defendants' 
goods  for  the  goods  of  the  plaintiffs."  ^  In  1899  the  House  of 
Lords,  although  denying  the  plaintiff  protection  in  the  use  of  the 
word  "  cellular,"  as  applied  to  cloth,  held  that  in  order  to  claim  the 
interference  of  the  court  it  was  not  necessary  to  show  fraudulent 
intention.^ 

Also  in  actions  for  passing  off,  it  is  sufficient  to  prove  that  retailers 
may  succeed  in  deceiving  the  public  as  to  whose  goods  they  are  pur- 
chasing. In  an  early  case,^  it  appeared  from  the  evidence  that  the 
retailers,  who  bought  the  goods  of  the  defendant,  knew  by  whom 
they  were  manufactured,  but  resold  them  as  and  for  goods  manu- 
factured by  the  plaintiff.  The  court  in  refusing  a  new  trial  held 
that,  although  the  defendants  did  not  themselves  sell  the  articles  as 
goods  of  the  plaintiff's  manufacture,  it  was  substantially  the  same 
thing  for  them  to  sell  to  retail  dealers  for  the  express  purpose  of  be- 
ing resold  as  such.  And  the  retailer,  jobber,  or  other  middleman 
might  be  enjoined  from  substituting  another's  goods  for  those  of 
the  plaintiff's  manufacture.  Thus,  in  a  case  decided  by  the  Superior 
Court  for  the  District  of  Montreal,*  the  defendants,  the  proprietors 
of  a  confectionery  store  in  Montreal,  were  perpetually  enjoined 
from  selling  or  offering  for  sale  under  the  name  "  Bovril "  any 
substance,  preparation,  or  extract  of  beef  as  being  the  product  of 
plaintiff's  manufacture  other  than  that  manufactured  and  sold  by 
the  plaintiff.  It  was  alleged  that  they  served  customers  who  asked 
for  "  Bovril  "  with  a  preparation  of  fluid  beef  known  as  "  Armour's 

iReddaway   c.  Banham  Hemp-Spinnins  Co..  I,.  R.   (1892).  2  Q.  B.,  G39. 
2  Cellular  Clothing  Co.  (Ltd.)  v.  Maxton  &  Murray,  L.  R.   (1899),  A.  C,  326. 
"Sykes  v.  Sykes,  3  B.  &  C.  Reports,  541   (1824). 
*  Bovril  (Ltd.)  v.  Metrakos  et  al.,  17  La  Revue  do  Jurisprudence,  32  (1909). 


448  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

Beef  Cordial "  and  "Armour's  Extract  of  Beef."  Similarly,  where 
wine  merchants  advertised  wine  furnished  by  Alexander  D.  Taylor 
as  "  Taylor's  "  wine,  it  was  held  that  the  plaintiff  had  a  cause  of 
action  against  the  defendants  for  offering  to  sell  to  the  trade  as 
"  Taylor's  "  wdne  that  wdiich  w^as  not  the  well-known  wine  manufac- 
tured by  the  plaintiff.^ 

Actions  for  infringement  are  frequently  joined  with  actions  for 
passing  off.  The  passing  off  feature  is  of  less  importance  since  the 
passage  of  the  trade-mark  act  of  1905,^  which  has  had  the  effect  of 
entitling  many  names  and  words  to  registration  as  valid  trade-marks 
which  w^ere  before  merely  trade  names  or  common-law  trade-marks. 
The  important  section  in  this  connection  provides  in  part  as  follows: 

A  registrable  trade-mark  must  contain  or  consist  of  at  least  one  of  the  fol- 
lowing essential  particulars: 

(1)  The  name  of  a  company,  individual,  or  firm  represented  in  a  special  or 
particular  manner. 

(2)  The  signature  of  the  applicant  for  registration  or  some  predecessor  in 
his  business. 

(3)  An  invented  word  or  invented  words. 

"  (4)  A  word  or  words  having  no  direct  reference  to  the  character  or  quality 
of  the  goods  and  not  being  according  to  its  ordinary  signification  a  geographical 
name  or  a  surname. 

(5)  Any  other  distinctive  mark  but  a  name,  signature,  or  word  or  words 
other  than  such  as  fall  within  the  description  in  the  above  paragraphs  (1),  (2), 
(3),  and  (4)  shall  not,  except  by  order  of  the  board  of  trade  or  the  court,  be 
deemed  a  distinctive  mark. 

^  ^  'fi  ^  ^  lii  ^ 

For  the  purposes  of  this  section  "  distinctive  "  shall  mean  adapted  to  distin- 
guish the  goods  of  the  proprietor  of  the  trade-mark  from  those  of  other  persons.^ 

*  He  *  :Ji  *  *  :}: 

Under  this  section,  for  example,  the  word  "  Oswego  "  has  been  held 
entitled  to  registration  as  a  trade-mark,*  whereas  prior  to  the  passage 
of  the  act  of  1905  such  words  could  only  have  been  protected  by  an 
action  for  passing  off.  Therefore  any  infringement  of  the  use  of 
such  words  can  now  be  prevented  by  a  statutory  trade-mark  action 
without  resorting  to  the  doctrine  of  passing  off.  Cases  of  this  sort 
have  been  omitted  from  the  present  discussion,  only  those  which 
were  decided  on  the  ground  of  passing  off  being  included.  The 
same  classifications  which  were  adopted  in  the  review  of  the  Ameri- 
can cases  have  been  followed. 

Geographic  or  place  names. — Use  of  such  names  prior  to  the 
enactment  of  the  trade-mark  act  was  only  protected  when  the  words 

1  Yeatman  v.  Homberger  &  Co.,  107  Law  Times  Reps.,  742  (Ct.  of  App.,  1912).  See  also 
Parazone  Co.  (Ltd.)  v.  Gibson,  21  R.  P.  C,  317  (1904),  and  Kinncll  &  Co.  (Ltd.)  v.  A. 
Ballantinp  &  Sons,  47  Scot.  Law  Reps.,  227  (1909). 

-5  Edw.,  7,  chap.  15. 

3  Id,,  sec.  9. 

Mn  re  National  Starch  Co.'s  Application,  25  R.  P.  C,  802  (1908). 


TKUST    LAWS   AND    UNFAIR    COMPETITION.  449 

had  acquired  a  secondary  meaning  and  their  use  by  another  would 
result  in  confusion.  Thus  in  the  well-known  "  Stone  Ale "'  case^ 
the  defendant  was  enjoined  from  carrying  on  the  business  of  a  brewer 
at  Stone  imder  the  title  "  Stone  Brewery  "  or  "  INIontgomery's  Stone 
Brewery  "  or  from  selling  any  ale  or  beer  not  of  the  plaintiffs  manu- 
facture under  the  term  "  Stone  Ales  "  or  "  Stone  Ale."  Lord  Han- 
nen,  in  answering  the  defendant's  contention  that  the  word  was 
merely  used  in  a  geographical  sense,  said : 

*  *  *  The  appellant  is,  undoubtedly,  entitled  to  brew  ale  at  Stone,  and 
to  indicate  that  it  was  manufactured  there,  but  there  are  various  means  of 
stating  that  fact  without  using  the  name  which  has  now  become  the  designa- 
tion of  the  respondent's  ale. 

Frequently  the  relief  granted  in  such  cases  is  merely  an  injunc- 
tion restraining  the  use  of  the  word  unless  it  is  accompanied  by  a 
statement  sufficient  to  distinguish  the  two  products.  Such  was  the 
holding  of  the  court  as  to  the  use  of  the  words  "  Yorkshire  Relish.''- 
In  this  case  the  respondent  had  for  many  years  manufactured  and 
sold  a  sauce  made  according  to  a  secret  recipe  under  the  above  name. 
The  appellants  were  engaged  in  manufacturing  and  selling  a  diflfer- 
ent  sauce  but  which  they  termed  "  Yorkshire  Relish."  The  House 
of  Lords  held  that  the  term  had  come  to  mean  the  particular  product 
of  the  respondent. 

Where  the  same  geographicul  name  is  given  to  two  natural  as 
distinguished  from  manufactured  products  of  a  particular  locality, 
it  appears  that  the  courts  are  less  inclined  to  interfere.  Thus,  in 
Braham  v.  Beachim,^  the  plaintiff  was  the  owner  of  and  operated  all 
the  collieries  in  the  parish  of  Eadstock,  carrying  on  the  business 
under  her  own  name,  adding  the  words  "  Eadstock  Collieries."  The 
defendants  operated  mines  but  none  in  this  parish.  They  adver- 
tised themselves  as  "The  Eadstock  Colliery  Proprietors  and  Fac- 
tors, etc.,"  offering  to  supply  coal  of  every  description  direct  from  the 
collieries.  An  injunction  was  issued  restraining  the  defendants  from 
using  the  trade  name  imless  they  acquired  a  coal  mine  Avithin  the 
parish  of  Eadstock  or  from  using  any  name  implying  that  they 
were  selling  coal  from  a  colliery  in  Eadstock  unless  and  until  they 
became  authorized  to  sell  coal  mined  within  that  parish.  And  in  a 
later  case,*  it  appeared  that  the  plaintiffs  were  owners  of  certain 
mineral  springs  in  the  township  of  Caledonia  and  marketed  the 
water  for  medicinal  and  table  purposes  under  the  name  "  Caledonia 
Water."  The  defendants  having  discovered  other  springs  in  the 
same  township  sold  water  therefrom  as  "  From  the  New  Springs  of 

1  Thomas  Montgomery  r.  Thompson  et  al..  L.  R.  (1S01).  A.  C.  217. 

=  BirminKham  \lnogar  Brewery  Co.  (Ltd.)  v.  I'owell.  I,.  K.   (1807),  A.  C,  710. 

3  38  Law  Times  Reps.,  C40  (1878>. 

*  Grand  Hotel  Co.  of  Caledonia  Springs  (Ltd.)  v.  Wilson  et  al.,  L.  R.  (1904),  A.  C,  103. 

30035°— 16 29 


450  EEPORT    OF    THE    COMMISSIOXER    OF    CORPOEATIONS. 

Caledonia  *'  but  under  a  different  brand.  Although  it  appeared  that 
the  defendants'  goods  were  sufficiently  differentiated  from  those  of 
the  plaintiff'  to  avoid  confusion,  Lord  Davey  chose  to  distinguish  the 
Stone  Ale  case^  on  the  ground  that  it  involved  manufactured  articles 
and  seems  to  have  considered  natural  products  as  being  governed 
by  a  different  rule  of  law. 

CoMPxVNY  AND  TRADE  NAMES. — Firm  and  trade  names  are  usually 
registered  under  the  companies'  act^  or  as  trade-marks  under  section 
9  of  the  act  of  1905.^  The  protection  thus  afforded  is  supplemental 
to  the  common  law  which  protects  the  owner  in  the  use  of  a  name 
regardless  of  whether  it  is  registered  or  constitutes  a  trade-mark  if 
the  use  of  a  similar  name  misleads  the  public.  So  in  an  action  by  a 
company  incorporated  in  1821  as  the  "  Guardian  Fire  &  Life  As- 
surance Co."  it  was  held  that  the  adoption  of  the  name  "  Guardian 
and  General  Insurance  Co.  (Ltd.),"  due  to  the  similarity  of  the 
names,  was  calculated  to  deceive  the  public.^  And  relief  is  sometimes 
granted,  e^en  though  the  injury  may  be  prospective.  Thus  in  an 
action  by  Lloyd's,  the  well-known  association  of  underwriters,  and 
their  agents  at  Southampton,  an  injunction  was  issued  against  Llo3^ds, 
Southampton  (Ltd.),  although  the  defendant  so  far  had  only  en- 
gaged in  purchasing  and  selling  yachts  and  acting  as  ship  brokei^s.^ 
The  defendant  had,  however,  under  its  memorandum  of  association 
very  extensive  powers  to  carry  on  business  of  all  kinds. 

However,  if  there  is  no  likelihood  of  competition,  the  action  will 
not  lie,  even  though  the  trade  names  used  are  identical.  Thus  where 
the  plaintiff',  publishers  of  Everybody's  Magazine,  sought  to  restrain 
the  defendants  from  using  the  word  "  Everybody's "  in  connection 
with  a  weekly  penny  paper  the  action  was  dismissed  on  the  ground 
that  the  two  things  were  perfectly  distinct  and  in  no  way  likely  to 
compete  with  one  another.*^ 

The  rule  in  regard  to  the  use  of  misleading  names  is  the  same  when 
corporate  names  are  involved.  A  corporate  charter  grants  no  im- 
munity in  the  use  of  a  deceptive  name.  In  a  case  decided  by  the 
House  of  Lords  in  1898  a  decree  enjoining  the  use  of  a  corporate 
name  was  affirmed.''     In  this  case  the  appellants  were  restrained 

1  Thomas  Montgomery  v.  Thomson  ot  nl.,  supra. 

=  Companies'   (consolidation)   Act,  1908   (S  Edw.,  7,  ch.  69,  sec.  8). 

35  Edw.,  7,  ch.  15,  supra. 

*  Guardian  Fire  &  Life  Assurance  Co.  v.  Guardian  &  General  Insurance  Co.  (Ltd.),  50 
L.  J.  Ch.,  253   (1880). 

s  Lloyd's  &  Dawson  Bros.  v.  Lloyds,  Southampton  (Ltd.),  28  Times  Law  Reps.,  338 
Ct.  of  Api).    (1912). 

oRidgway  Co.  v.  Amalgamated  Press  (Ltd.),  28  Times  Law  Reps.,  149  (1911).  See 
also  Dunlop  Pneumatic  Tyre  Co.  (Ltd.)  v.  Dunlop  Motor  Co.,  L.  R.  (1907),  A.  C.  430,  and 
Turner's  Motor  Mfg.  Co.  (Ltd.)  r.  Miesse  Petrol  Car  Syndicate  (Ltd.),  24  R.  P.  C,  531 
(1907).  Cf.  Eastman  Photographic  Materials  Co.  (Ltd.)  et  al.  v.  John  Griffiths  Cycle 
Corp'n  (Ltd.)  et  al.,  15  R.  P.  C,  105  (1898). 

'North  Cheshire  &  Manchester  Brewery  Co.  (Ltd.)  v.  Manchester  Brewery  Co.  (Ltd.) 
L.  R.  (1899),  A.  C,  83. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  451 

from  using  the  name  of  the  phiintilf  company,  the  court  hokling  that 
the  public  might  be  misled  into  believing  that  the  two  companies  hud 
been  consolidated. 

Personal  names. — xVpparently  the  view  taken  by  the  English 
courts  is  that  the  honest  use  of  a  personal  name  in  trade  can  not  be 
enjoined,  although  confusion  may  arise  due  to  the  fact  that  the 
names  are  the  same  or  so  similar  as  to  mislead  purchasers.  In  an 
early  case^  the  com-t  of  appeal  held  that  where  the  plaintLff  had  for 
many  years  sold  a  sauce  under  the  name  "  Burgess'  Essence  of  An- 
chovies" the  court  would  not  in  the  absence  of  fraud  restrain  the 
defendant,  his  son,  from  selling  a  similar  article  under  the  same 
name.  And  in  Turton  v.  Turton  -  the  plaintiffs,  who  for  many  years 
had  carried  on  the  business  of  steel  manufacturers  under  the  name 
"Thos.  Turton  &  Sons,"  Avere  denied  an  injunction  Avhere  the  de- 
fendant, who  had  for  a  slightly  shorter  period  of  time  carried  on  a 
similar  business  under  the  name  ""  John  Turton  "  and  upon  taking 
his  sons  into  the  partnership  as  "  John  Turton  &  Sons."  So  in  a  re- 
cent case  ^  the  court  of  appeal  decided  that  inasmuch  as  the  defendant 
had  not  attempted  to  imitate  the  mode  in  which  the  plaintiff's  name 
was  used,  and  as  he  had  not  acted  dishonestly,  an  injunction  would 
be  refused,  notwithstanding  that  he  knew  he  was  deriving  some  ad- 
vantage from  the  fact  that  his  name  was  the  same  as  the  well-known 
piano  manufacturer's. 

And  it  appears  that  the  courts  will  not  unqualifiedly  enjoin  the  use 
of  a  personal  name,  even  where  fraudulent  intention  is  established. 
Thus,  Avhere  it  appeared  that  the  defendants  adopted  the  name  of 
their  general  manager,  who  held  only  one  share  of  their  stock,  for 
the  express  purpose  of  securing  the  benefit  of  the  plaintiff's  business 
reputation,  and  in  other  ways  attempted  to  imitate  the  latter's  goods 
to  their  own  advantage,  the  court,  while  restraining  them  from  using 
the  name  in  a  manner  likely  to  deceive  customers,  said:  "  We  can  not 
prohibit  their  using  the  name  if  they  use  it  in  a  way  not  calculated 
to  mislead  the  public.""*  But  Avhere  an  Irishman  having  changed 
his  name  several  times,  ultimately  took  the  name  "  Pinet,"  the  name 
of  a  well  known  French  comj^anj'^  dealing  in  boots  and  shoes,  the 
incorporators  of  a  company  to  whom  he  transferred  the  use  of  the 
name  Avere  enjoined  from  using  it  in  a  similar  business  to  that  of  the 
plaintiff'.'' 

iBurgoss  V.  nurgcss,  3  De  G.  M.  &  G.,  SOG  (0.  A.,  Ch.  Div.,  1853^ 

2L.  R.  (1S80),  42  Ch.  Div.,  128.  Lord  Esher,  in  lioldlng  that  since  the  confusion  iv- 
sultod  from  tlio  mere  use  of  the  defendant's  own  name  without  more,  no  relief  should  be 
granted,  said  (p.  13G)  :  "  Therefore  upon  principle,  I  should  say  it  is  perfectly  clear  that 
if  all  that  a  man  does  is  to  carry  on  the  same  business,  and  to  state  how  he  is  carrying 
it  on — that  statement  being  the  simple  truth — and  he  does  nothing  more  with  regard,  to 
tlie  respective  names,  he  is  doing  no  wrong." 

3.Tohn  Brinsmead  &  Sons  (Ltd.)  v.  Brinsmead,  30  R.  T.  C,  403  (Ct.  of  Appeal,  Ch.  Div., 
1913). 

*Massam  v.  Thorley's  Cattle  Food  Co.,  L.  R.,  14  Ch.  Div.,  748  (1880). 

sp.  I'inet  et  cie.  v.  Maison  Louis  Tinet  (Ltd.),  15  R.  P.  C,  65  (Ch.  Div.,  1897). 


452  REPOET    OF    THE    COMMISSIOlSrER    OF    COEPOEATIONS. 

Descriptive  and  generic  terms. — "Words  merely  descriptive  of  the 
article  may  not  be  exclusively  appropriated  by  a  manufacturer,  but 
the  use  of  such  a  word  may  become  so  closely  identified  with  a  par- 
ticular manufacturer's  goods  that  its  use  by  a  rival  trader  will  be 
misleading.  In  a  case  ^  where  the  plaintiff  had  for  many  years  sold 
a  medicinal  preparation  in  the  form  of  a  powder  under  the  name  of 
"  Fruit  Salt,"  an  injunction  was  granted  restraining  a  competitor 
from  selling  a  similar  preparation  in  the  form  of  tablets  under  the 
name  of  "  Dunn's  Fruit  Salt  and  Potash  Lozenges  "  or  any  other  title 
in  which  the  words  "  fruit  salt "  should  form  a  part.  The  leading 
case  on  this  point  is  that  of  Eeddaway  v.  Banliam,^  decided  by  the 
House  of  Lords  in  1896.  In  this  case  the  plaintiff  for  many  years  had 
manufactured  belting  which  he  sold  as  "  Camel  Hair  Belting,"  and 
which  in  point  of  fact  was  made  largely  of  camel  hair,  although  this 
was  not  generally  known.  The  defendant,  a  former  employee  of  the 
plaintiff,  subsequently  began  the  manufacture  of  belting  on  liis  own 
account  stamping  the  same  "  Camel  Hair  Belting."  The  jury 
found  that  these  words  had  come  to  mean  the  plaintiff's  goods  as 
distinguished  from  those  of  any  other  manufacturer,  and  that  the 
use  of  these  words 'by  the  defendant  would  be  likely  to  cause  con- 
fusion. From  these  findings  the  court  held  that  the  plaintiff  was 
entitled  to  an  injunction  restraining  the  defendant  from  using  the 
words  "Camel  Hair  "  as  descriptive  of  or  in  connection  with  belting 
manufactured  by  them  without  clearly  distinguishing  such  belting 
from  the  plaintiff's  belting. 

Similarly,  invented  words  or  terms  used  in  connection  with  articles 
may  be  protected  even  though  they  may  not  be  the  subject  of  a  valid 
trade-mark.  Thus,  while  the  word  "  Silverpan  "  was  held  not  to  be  a 
valid  statutory  trade-mark,  a  competitor  was  not  allowed  to  use  the 
words  "  Silver  Pan,"  the  court  holding  that  the  words  had  come  to 
mean  the  plaintiff's  product.^ 

Dress  or  goods. — The  imitation  of  labels  and  packages  is  one  of  the 
most  common  methods  of  passing  off  one's  goods  for  those  of  another. 
By  appealing  to  the  eye  of  a  customer,  it  is  only  necessary  to  imitate 
the  striking  features  of  the  plantiff's  goods  in  order  to  cause  con- 
fusion. Thus,  where  the  defendant  sold  blacking  under  the  same 
name  as  that  of  the  plaintiffs  and  in  bottles  with  labels  of  the  same 
color,  size,  and  similar  arrangement  of  lettering  as  that  of  the  plain- 
tiffs, an  injunction  Avas  granted  restraining  the  defendant  from  using 
any  label  which  would  mislead  the  public  as  to  whose  goods  they 
were  buying.*  Name,  color,  or  size  may  be  a  prominent  feature  of 
the  label,  but  the  question  usually  to  be  decided  by  the  court  is 

lEno  V.  Dunn  &  Co.,  10  R.  P.  C,  261   (Ch.  Div.,  1893). 

-L.  R.   (1896),  A.  C,  199. 

apaulder  &  Co.   (Ltd.)  v.  Rushton  (Ltd.),  :.'0  R.  P.  C,  477  (Ct.  of  Appeal,  1903). 

^  Croft  V.  Day,  7  Beav.,  84  (1843). 


TBUST    LAWS    AND    UNFAIR    COMPETITION.  453 

whether  the  entire  dress  of  the  article  will  mislead  the  ordinarj''  pur- 
chaser.^ In  Lever  v.  Goodwin  the  defendants  sold  their  soap  in 
packets  of  the  same  size  and  shape,  wrapped  in  the  same  kind  of 
paper,  with  spaced  printing  of  the  same  color  as  that  of  the  plaintiffs, 
the  chief  difference  being  in  the  name  adopted,  the  defendants'  soap 
being  described  as  "  Goodwin's  Self -Washing  Soap "  instead  of 
"  Sunlight  Self- Washing."  The  term  "  Self- Washing  "  had  been  reg- 
istered by  the  plaintiffs  as  a  trade-mark.  The  court  held  that  these 
words  were  merely  descriptive,  but  issued  an  injunction  as  to  the  use 
of  the  wrappers.  It  was  also  held  that  while  retail  dealers  might  not 
be  deceived,  the  defendants  were,  nevertheless,  guilty  of  a  wrongful 
act  because  they  had  put  into  the  hands  of  the  middleman  the  means 
of  committing  a  fraud.  However,  a  manufacturer  can  not  be  held  re- 
sponsible for  deception  caused  by  the  deliberate  fraud  of  the  retailer 
to  which  he  is  not  a  party.  So  where  a  wholesaler  sold  "Eoyal 
Coffee"  in  tins,  enameled  in  bright  colors,  and  the  defendants 
adopted  the  same  manner  of  packing  their  "  Flag  Coffee,"  an  injunc- 
tion was  refused,  although  it  was  contended  that  a  retailer  might 
conceal  the  name  on  the  can  and  thus  substitute  the  defendant's 
goods  for  those  of  the  plaintiff.- 

Selling  one's  goods  in  refilled  packages  or  bottles  bearing  another's 
labels  is  fraud  of  such  a  gross  nature  that  it  is  seldom  attempted. 
The  chief  difficult}^  lies  in  detecting  the  offense.  Thus^  Avhere  it  was 
proved  that  a  defendant  sold  an  inferior  brandy  for  that  of  plain- 
tiff's "  Three  Star  Brandy,"  using  the  bottles  of  the  plaintiff  with  the 
labels  still  attached,  an  injunction  was  granted.^ 

Dress  of  store. — Mere  similarity  in  dress  of  establishments  appar- 
ently will  not  support  an  action  for  passing  off,  but  it  may,  however, 
be  part  of  a  general  scheme  to  pass  one's  business  or  goods  off  for 
those  of  another.  Thus  in  a.  case  where  the  rights  of  two  rival  cab 
companies  was  involved,*  it  was  charged  that  the  defendant  fraudu- 
lently secured  the  customers  of  the  plaintiff  by  the  adoption  of  a 
similar  name;  that  the  same  insignia  was  also  used  and  the  dress  of 
the  cabmen  and  conductors  was  imitated.  An  injunction  was  granted 
restraining  the  defendant  from  using  any  conveyance  bearing  the 
name  adopted,  or  any  other  names,  words,  or  de^^ces  used  in  such 
manner  as  to  form  a  coloi-able  imitation  of  those  used  by  the  plaintiff. 
An  injunction  was  also  issued  in  a  recent  case  in  which  the  facts  were 

1  Lever  t\  Goodwin,  36  Ch.  Dlv.,  1  (1887).  Lord  Justice  Cotton,  speaking  for  the 
court  of  appeal,  said  (p.  5)  :  "  There  may  be  no  monopoly  at  all  in  the  individual  things, 
but  if  they  are  so  combined  by  the  defendants  as  to  pass  off  the  defendants'  goods  as 
the  plaintiff's,  then  the  dpfendants  have  liroiight  themsolvos  within  the  old  fommon-law 
doctrine  in  respect  of  which  equity  will  give  to  the  aggrieved  party  an  injunction  in  order 
to  restrain  the  defendants  from  passing  off  their  goods  as  those  of  the  plaintiffs." 

^I'ayton  v.  Snelling,  Lampard  &  Co.   (Ltd.),  L.  R.   (1901),  A.  C,  308. 

3  Hennessey  &  Co.  v.  Neary.  1!)  R.  P.  C,  3G  (1901). 

M-Cnott   c.  Morgan,  2  Keen's  Ch.,  213  (1830). 


454  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

very  similar.^  The  painting  on  the  cabs  Avas  simihir,  and  on  tlie 
door  of  the  phiintiff's  cabs  there  was  a  panel  on  which  the  initials  of 
the  plaintiffs  appeared  in  a  A-ery  distincti^-e  form.  The  initials 
"  ^y.  &  G."  were  connected  by  the  sign  "  &."  To  imitate  more  nearly 
the  cabs  of  the  plaintiffs,  the  defendant  had  painted  on  his  cabs  his 
initials  "  M.  G."  in  the  same  form  and  script  as  the  plaintiffs,  with 
a  twist  or  curl  between  the  two  letters  that  could  easily  be  mistaken 
for  the  sign  "&."  Likewise,  the  use  of  signs  which  may  mislead 
customers  as  to  the  identity  of  the  store  may  be  enjoined.  So  in 
a  case  where  the  parties  had  been  partners  in  business  and  the 
defendant  subsequently  set  up  in  the  same  line  of  business  only  a 
few  doors  from  the  old  place,  he  was  not  allowed  to  use  the  name  of 
the  plaintiff  on  his  shop  sign  in  a  manner  deceptive  to  the  public. 
It  appeared  that  the  two  shops  were  similar  in  appearance,  and  that 
the  defendant  painted  over  his  door  "  S.  Pottage  from  Hookham  & 
Pottage,"  the  word  "  Hookham  "  being  placed  immediately  over  the 
door.  It  was  held  that  while  the  defendant  was  entitled  to  announce 
to  the  public  by  this  method  the  fact  that  he  was  formerly  a  member 
of  the  old  firm,  he  could  not  do  so  in  a  manner  calculated  to  cause 
the  belief  that  he  was  carrying  on  the  old  business.^ 

And  where  a  tradesman  who  had  been  in  the  employ  of  the  plain- 
tiffs started  in  business  on  his  own  account  and  put  his  own  name 
over  his  shop,  but  on  the  brass  plates  under  the  windows  he  had 
eno-raved  the  word  "  from "  in  small  letters  and  the  name  of  the 
plaintiffs'  firm  in  large  letters,  it  was  held  that  this  was  calculated 
to  mislead  the  incautious,  unwary,  and  heedless  portion  of  the  public, 
and  an  injunction  was  issued.^  It  was  shown  that  when  the  awning 
was  let  down  only  the  name  of  the  plaintiff's  firm  was  visible  from 
the  street. 

Imitation  or  goods  themselves. — As  stated  in  the  discussion  of 
the  American  cases  on  this  subject,  the  general  rule  is  that  there  can 
be  no  monopoly  in  the  form,  color,  or  construction  of  an  article  in 
the  absence  of  patent  protection.  There  are  cases,  however,  where 
the  shape  or  style  of  an  article  has  become  so  associated  with  it  that 
these  characteristics  may  not  be  copied.  Thus,  in  Ripley  r.  Bandey,* 
although  the  plaintiff  was  refused  relief  because  of  laches,  it  was 
held  that  the  defendant  was  guilty  of  passing  off  in  manufacturing 
laundry  blue  in  oval  blocks,  a  shape  Avhich  had  been  used  for  several 
years  by  the  plaintiff.  And  where  a  cigar  manufacturer  had  adopted 
a  distinctive  shape  for  his  cigars,  a  competitor  adopting  the  same 

iW.  &  G.  Du  Cros  v.  Gold,  20  Times  Lnw  Rops..  10?.  (1012). 
2  Hookham  v.  Pottage,  27  Law  Times  Rpps.,  595  (C.  A.,  Cli.  Div.,  1S72). 
sGIonny  v.  Smitli,  2  Drewry  &  Smale's  Ueps.,  476  (1865).     See  also  Boswoll  r.  Matliie. 
11  Session  Cases   (4th  series),  1072   (1884K 
<'14  R.  P.  C,  591   (Ch.  Div.,  1897). 


TRUST    LAWS    AXD    UNFAIR    COMPETITION.  455 

peculiar  shape  was  enjoined  on  the  ground  that  the  cigars  might  be 
sold  apart  from  the  boxes  so  as  to  mislead  purchasers.^ 

The  manufacture  and  sale  of  articles  on  which  the  patent  has  ex- 
pired might  be  mentioned  in  this  connection.  At  the  expiration  of 
the  patent  anyone  may  manufacture  the  patented  article  and  may  sell 
it  under  the  name  under  which  it  was  sold  by  the  patentee,  provided 
that  proper  precautions  are  taken  not  to  deceive  the  public  as  to 
the  manufacturer.  Thus,  where  a  manufacturer  made  filters  accord- 
ing to  the  plaintiff's  patent  which  had  expired,  the  court  of  appeal 
held  that  since  the  defendant  had  clearlj?^  designated  that  he  and  not 
the  plaintiff  was  the  manufacturer  of  the  article  which  he  had  offered 
for  sale,  the  plaintiff  was  not  entitled  to  relief.^  A  similar  result 
was  reached  in  Linoleum  Manufacturing  Co.  v.  Xairn,^  in  which  a 
right  to  the  exclusive  use  of  the  word  "  Linoleum  "  was  asserted,  the 
product  to  which  the  name  was  attached  having  been  covered  by 
patents  which  had  expired. 

Another  form  of  passing  off  which  has  been  held  actionable  is  the 
sale  by  a  dealer  of  a  manufacturer's  second-grade  product  in  such  a 
manner  as  to  cause  purchasers  to  believe  they  were  obtaining  the 
first-grade  goods  of  the  manufacturer.* 

Section  17.  Miscellaneous. 

AMERICAN  DECISIONS. 

In  New  York  it  has  been  held  lawful  for  a  steamship  com- 
pany, whose  regular  rates  were  reasonable,  to  offer  special  rates  to 
merchants  who  would  agree  to  ship  exclusively  by  its  vessels  at  such 
times  as  a  rival  vessel  Avas  engaged  in  obtaining  freight  or  taking  on 
cargo,  and  to  refuse  to  transport  freight  at  the  reduced  rates  uidess 
this  condition  was  complied  with.^ 

1  Elliott  &  Co.   (Ltd.)   V.  Hoderson.  If)  R.  P.  C,  518  (Ch.  Div..  10n2>. 

2Chpavin  v.  Walker,  L.  R.   (1877).  5  Ch.  Div.,  850. 

»L.  R.   (1S78).  7  Oh.  Div..  Sru. 

••Spalding  &  Bros.  i'.  Ganiase.  110  Law  Times  Reps..  5:'.0  (C.  A..  1014).  Per  Pliill- 
more,  L.  J. :  "  This  is  a  '  passing  off '  which  is  actionable.  It  is  not  the  usual  passing 
off  when  the  man  sells  his  own  goods  representing  them  to  be  those  of  another  trader. 
r>ul  it  is  a  more  subtle  and  possibly  a  more  injurious  passing  off  when  a  man  sells  the 
second-class  goods  of  a  trader  represent ing  them  as  the  first-olass  goods  of  that  trader." 
See  also  .John  .Tamcson  &  8«n  r.  Isaac  Clarke.  10  It.  I*.  C,  25.")  (lOOlM  ;  Teacher  r.  Levy, 
23  R.  P.  C,  117  (1005)  ;  and  Hunt.  Roopo,  Teague  &  Co.  r.  Ehrmann  Bros.,  27  R.  P.  C, 
512   (1910). 

0  Lough  et  al.  V.  Outerhridge  et  al..  14.*?  N.  V..  271.  282  (1804).  Per  O'Brien.  .1.: 
"  *  *  *  when  an  indiviilual  or  a  cori)oralion  has  establislied  a  business  of  a  siiecial 
and  limited  character,  such  as  the  defendants  in  this  case  had,  they  have  a  right  to  retain 
it  by  the  use  of  all  lawful  means.  That  was  what  the  defendants  attempted  to  do 
against  a  competitor  that  engaged  in  it,  not  regularly  and  permanently,  but  incidentally 
and  occasionally.  The  means  adopted  for  this  purpose  was  to  offer  the  service  to  the 
public  at  a  loss  to  themselves  whenever  the  competition  was  (o  be  met  and  when  it  dis- 
appeared to  resume  the  standard  rates,  wbicli,  upon  the  record,  did  not  at  any  time 
exceed  a  reasonable  and  fair  charge.  I  cannot  perceive  anything  unlawful  or  against 
the  public  good  in  seeking  by  such  means  to  retain  a  business  which  it  does  not  appear 
was  of  sufficient  magnitude  to  furnish  employment  for  both  lines."  Reargued  and 
anirmed.  14.'.  X.  V.,  f.(»l  (1805),  Andrews,  Ch.  ,T.,  and  Peckhain.  .1.,  dissenting.  See  also 
Investigation  of  Shipping  Combinations  under  House  Resolution  No.  587,  62d  Cong., 
2d  sess..  hearings,  vol.  2,  pp.  1301-1307. 


456  REPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

It  has  also  been  held  lawful  for  the  manufacturer  of  a  well-known 
article  to  offer  a  rebate  to  those  dealers  who  maintamed  specified 
prices  and  agreed  not  to  sell  the  product  of  any  competitor  at  less 
than  said  prices,  although  it  was  alleged  that  hy  reason  of  such  con- 
tracts the  business  of  a  competitor  was  destroyed.^ 

Likewise  it  has  been  held  lawful  for  a  jobber  to  reduce  the  price 
of  certain  dry  goods,  although  it  was  alleged  that  the  reduction  w^as 
the  result  of  a  conspiracy,  w^as  made  maliciously  and  with  the  intent 
to  injure  the  manufacturer,  and  had  resulted  in  the  cancellation  of 
orders  by  other  jobbers,  and  in  depressing  the  market  value  of  such 
goods.  ^ 

On  the  other  hand  the  Supreme  Court  of  Iowa  held  that  it  was 
actionable  for  a  merchant  to  advertise  sewing  machines  as  being  of 
the  "  latest  patterns,""  "  just  received  "  and  having  the  best  attach- 
ments, at  prices  approximately  one-half  of  that  at  which  such  ma- 
chines were  sold  by  a  rival  agent,  when  in  fact  the  machines  so  adver- 
tised were  not  new  and  did  not  otherwise  correspond  with  the  adver- 
tisements, and  it  clearly  appeared  that  the  acts  were  done  maliciously 
and  with  the  intent  to  injure  the  plaintiff.^ 

In  Louisiana,  where  it  appeared  that  a  foreman  having  power  to 
discharge  certain  employees  of  a  street  railway,  threatened  to  dismiss 
those  who  dealt  with  a  certain  grocer,  and,  for  the  same  reason  de- 

1  Walsh  et  al.  r.  Dwight  et  al.,  40  N.  Y.  App.  Div.,  513,  516  (1899).  Per  Ingraham,  J.: 
"  There  is  nothing  to  prevent  an  individual  from  selling  any  property  that  he  has  at  any 
price  which  he  can  get  for  it.  Nor  is  there  any  reason  why  an  individual  should  not 
agree  that  he  will  not  sell  property  which  he  owns  at  the  time  of  making  the  agreement, 
or  which  he  thereafter  acquires,  at  less  than  at  a  fixed  price ;  and  certainly  a  contract 
of  this  kind  is  not  one  which  exposes  the  parties  to  it  to  any  penalty,  or  subjects  them 
to  an  action  for  damages  by  those  whose  business  such  a  contract  has  interfered  with." 

3  Passaic  Print  Works  v.  Ely  &  Walker  Dry-Goods  Co.,  105  Fed.,  163,  167  (C.  C.  A.. 
1900).  Per  Thayer,  J.:  "No  one  can  dispute  the  right  of  the  defendant  company  to 
offer  for  sale  goods  that  it  owned,  and  which  were  in  its  possession,  whether  the  quan- 
tity was  great  or  small,  for  such  a  price  as  it  deemed  proper.  This  was  the  outward 
visible  act  of  which  complaint  is  made,  and,  being  lawful,  the  law  will  not  hold  it  to  be 
otherwise  because  of  a  secret  purpose  entertained  by  the  defendant  company  to  inflict 
loss  on  the  plaintiff  by  compelling  it  to  reduce  the  cost  of  a  certain  kind  of  its  prints 
or  calicoes. 

"  Nor  is  the  complaint  aided  in  any  respect  by  reference  to  the  law  of  conspiracy, 
since  the  only  object  that  the  defendants  had  in  view  which  the  law  will  consider  was 
the  disposition  or  sale  of  certain  goods  which  the  defendant  corporation  had  the  right 
to  sell ;  and  the  means  employed  to  accomplish  that  end,  namely,  placing  them  on  the 
market  at  a  reduced  cost,  were  also  lawful." 

Certiorari  denied  by  United  States  Supreme  Court,  181  U.  S.,  617  (1901).  Cf.  Ajello 
V.  Worsley,  p.  461. 

sBoggs  V.  Duncan-Schell  Furniture  Co.  et  al.,  163  Iowa,  106.  114  (1913).  Per  Gay- 
nor,  J.  :  "  Where  there  is  lawful  competition  for  gain,  for  supremacy  in  business,  for  the 
legitimate  control  of  business,  even  though  the  purpose  and  effect  of  the  competition  is 
to  drive  from  business  competitors,  yet,  if  the  competition  is  lawful  and  carried  on  in  a 
lawful  way,  no  action  will  lie.  There  is  a  difference  between  lawful  competition  and 
simulated  competition  carried  on  with  the  sole  purpose  and  intent,  not  of  profit  and 
gain,  but  of  maliciously  injuring  others  engaged  in  that  particular  business.  The  case 
before  us  does  not  present  a  case  of  lawful  competition,  but  a  case  of  simulated  or  pre- 
tenelcd  competition,  designed  and  carried  out  with  malice  for  the  purpose  of.  injury  to  the 
plaintiff  in  his  business."     Cf.  Spalding  &  Bros.  r.  Gamage,  p.  455. 


TEUST    LAWS   AXD    UXFAIR    COMPETITION.  457 

mandecl  higher  rent  from  one  of  his  tenants  and  gave  another  notice 
to  quit,  it  was  held  that  the  grocer  was  entitled  to  damages  resulting 
from  such  interference  with  his  business,  and  that  the  defendant's 
conduct  was  not  justified  by  the  fact  that  another  of  his  tenants  had 
a  grocery  likel}^  to  be  benefited  by  the  divei*sion  of  the  plaintiff's  cus- 
tomers.^ 

On  the  other  hand,  where  a  lumber  company  which  also  operated 
a  general  store  threatened  to  withdraw  its  patronage  from  whole- 
salers and  jobbers  who  sold  to  a  competitor  engaged  in  the  mercan- 
tile business,  and  threatened  to  discharge  its  employees  if  they  dealt 
with  him,  it  was  held  that  the  defendant  was  justified  in  attempting 
to  protect  and  safeguard  its  own  business  interests.^ 

So  in  Texas,  where  a  company  engaged  in  the  logging  business 
refused  to  honor  pay  checks  which  had  passed  through  the  hands 
of  the  plaintiff,  a  merchant,  and  had  threatened  to  discharge  any 
employee  who  dealt  with  him,  and  it  further  appeared  that  the  de- 
fendant company  was  also  engaged  in  the  mercantile  business,  it  was 
held  that  the  plaintiff  had  no  right  of  action.^ 

It  has  also  been  held  lawful  for  a  manufacturer  to  terminate  a 
jobbing  contract  at  a  time  when  the  jobber  had  a  stock  of  the  former's 
goods  on  handj  and  to  notify  retailers  with  whom  the  jobber  had 
been  doing  business  that  he  was  no  longer  a  distributor  of  its  goods 
and  that  they  must  thereafter  buy  from  other  jobbers  or  distributors.* 

In  another  case  it  was  held  lawful  for  the  members  of  an  associa- 
tion of  publishers  to  agree  to  cut  off  the  supply  of  newspapers  from 
a  news  dealer  unless  he  discontinued  the  distribution  of  handbills 
and  circulars  with  his  papers,  where  it  appeared  that  the  defend- 
ants were  not  seeking  to  in'jure  the  dealer  but  to  protect  themselves 

1  Peter  Graham  v.  St.  Charles  Street  R.  R.  Co.  et  al.,  47  La.  Ann.,  214,  16.56  (1895). 
And  see  International  &  Great  Northern  Ry.  Co.  v.  Greenwood,  2  Texas  Civ.  App.,  76 
(1893)  ;  Chiatovich  r.  Hanchett  et  al.,  88  Fed.,  873  (C.  C,  1898)  ;  Wesley  v.  Native 
Lumber  Co.  et  al.,  97  Miss.,  814   (1910K 

2  Lewis  V.  Huic-Hodge  Lumber  Co.   (Ltd.),  121  La.,  658   (1908). 

sRobison  v.  Texas  Pine  Land  Assn.,  40  S.  W.,  843,  844  (Texas  Ct.  Civ.  App..  1897). 
Per  .lames,  C.  .1. :  "According  to  plaintiff's  allegations,  competition  in  trade  existed  be- 
tween plaintiff  and  defendant  and  it  was  legitimate  for  defendant  to  appropriate  to  itself 
all  the  customers  it  couhl  command,  even  to  the  extent  of  driving  plaintiff  out  of  busi- 
ness, pi'ovided  the  means  used  for  that  purpose  did  not  contravene  any  law  or  violate 
a  definite  legal  right  of  the  plaintifif.  *  *  *  Had  the  defendant  no  proper  interest 
of  his  own  to  subserve  in  so  doing,  but  had  actefl  wantonly  in  causing  loss  to  plaintiff, 
the  rule  would  be  different.  *  *  *  A  system  whereby  such  checks  would  be  honored 
in  the  hands  of  anyone  except  plaintiff  was  calculated  to  insure  trade  at  defendant's 
store,  and  diminish  that  of  its  rival;  and.  as  plaintiff  has  no  definite  right  to  the  public 
trade,  he  has  no  legal  right  to  complain  that  defendant  absorbed  it  by  the  manner  of 
managing  its  business,  and  its  relation  with  its  employees." 

••Victor  Talking  Machine  Co.  v.  Lucker,  128  Minn.,  171  (1915).  Per  Hallam,  J.: 
"This  was  a  notice  by  one  competitor  telling  buyers  not  to  do  business  with  another. 
Such  conduct,  without  more,  is  not  actionable.  One  man  may  lawfully  si^k  the  business 
of  a  competitor  and  may  tell  the  'trade'  not  to  buy  of  his  competitor,  so  long  as  he 
indulges  in  no  throat,  coercion,  misrepresentation,  fraud  or  other  harrassing  methods." 


458  REPORT    OP    THE    COMMISSIONER    OF    CORPORATIONS. 

by  preventing  him  from  making  such  use  of  their  publications  as  to 
make  him  a  competitor  with  them  in  the  business  of  advertising.^ 

In  Utah  it  has  been  held  lawful  for  a  telephone  company  to  adopt 
the  same  number  for  its  "  trouble  department"  telephone  as  that  pre- 
viously used  by  a  rival  company,  thus  enabling  the  new  company 
through  the  mistakes  of  its  competitor's  subscribers,  to  learn  when 
their  telephones  were  out  of  order,  and  to  solicit  their  patronage.^ 

It  has  been  held  lawful  for  a  manufacturing  company  to  stipulate  in 
its  advertising  contracts  with  trade  journals  that  such  contracts  shall 
be  subject  to  immediate  cancellation  upon  the  publication  of  adver- 
tisements of  articles  which,  in  the  judgment  of  the  company,  infringe 
its  patents,  and  in  accordance  with  such  agreement  and  in  good  faith 
to  notify  the  publishers  that  the  plaintiif  s  article  is  an  infringement.^ 

In  Vermont  it  has  been  held  that  it  was  not  actionable  for  a  bank 
maliciously  to  buy  up  a  large  amount  of  the  bills  or  notes  issued  by 
a  banking  association,  and  from  time  to  time  to  refuse  to  exchange 
them  for  currency  but  to  present  them  for  payment  in  large  amounts 
in  order  to  drain  the  association's  vaults  and  keep  their  bills  out  of 
circulation.  The  court  was  of  the  opinion  that  the  case  was  the  ordi- 
nary one  of  a  creditor  calling  upon  a  debtor  for  his  pay,  at  a  time, 
and  at  a  place,  and  in  a  manner  to  which  the  debtor  has  no  right  to 
make  objection.* 

On  the  other  hand  it  has  been  held  that  an  agreement  by  a  corpora- 
tion publishing  a  directory,  to  purchase  the  worthless  notes  of  a  com- 
petitor for  the  purpose  of  embarrassing  his  business  and  injuring 
his  credit  by  a  lawsuit,  and  to  pay  a  bonus  to  induce  his  printers  to 
refuse  to  do  his  work,  is  ultra  vires  and  void,  and  that  the  trustees 
may,  at  the  suit  of  a  stockholder,  be  enjoined  from  using  corporate 
funds  for  such  purposes.^ 

1  Collins  V.  American  News  Co.  et  al.,  69  N.  Y.  Supp.,  638  (Sup.  Ct.,  1901),  afflrmerl, 
74  N.  Y.  Supp.,  1123.  The  placing  of  handbills,  circulars,  etc.,  in  newspapers  and  maga- 
zines without  the  consent  of  the  publisher  or  owner  has  recently  been  made  a  criminal 
offense  in  Now  York,  New  .Tersey,  and  Pennsylvania.     See  p.  528. 

"Rocky  Monnl.Tin  Bell  Teleplione  Co.  v.  Utah  Independent  Telephone  Co.  et  al.,  31 
Utah,  377,  385  (190G).  Per  Frick,  J.:  "But  suppose  it  is  true  that  respondent  does 
learn  of  trouble  in  respect  to  appellant's  telephones  by  the  means  alleged.  It  could 
not  profit  from  this  unless  it  can  convince  the  subscriber,  using  appellant's  telephone, 
that  respondents'  system  is  the  better  one,  and  is  lietter  calculated  to  serve  his  purpose, 
in  that  it  is  less  liable  to  cause  trouble.  This,  if  competition  is  permissible  in  the  tele- 
phone bu.siness,  would  seem  to  be  legitimate  competition."  Cf.  Ranft  i\  Reimers,  200  III., 
.386  (1902),  and  Street  v.  Union  Bank  of  Spain  and  England,  L.  R.  (1885),  30  Ch. 
Div.,  156. 

3  H.  W.  .Tohns-Manville  Co.  v.  Lovell-McConnell  Mfg.  Co.,  212  Fed.,  923  (C.  C.  A.,  1914). 

*  South  Royalton  Bank  r.  Suffolk  Bank,  27  Vt.,  505   (1854). 

BCollos  V.  Trow  City  Directoi-y  Co.  et  al.,  11  Hun,  397,  399  (N.  Y.  Sup.  Ct.,  1877). 
Per  Davis,  P.  J. :  "  It  was  no  part  of  the  corporate  business  to  buy  bad  debts  and  dis- 
honored notes,  and  still  less  to  pay  premiums  to  prevent  the  creditors  of  competitors 
from  giving  further  credit  or  doing  work  which  they  might  otherwise  be  willing  to  vmder- 
take.  It  is  no  answer  to  say  that  Goulding's  competition  was  unfair ;  that  he  was  sell- 
ing what  he  did  not  pay  for,  and  therefore  could  injure  defendant's  business  by  under- 
selling. '  To  fight  the  devil  with  fire '  is  sometimes  said  to  be  fair  in  theology  and 
politics ;  but  corporations  are  not  created  for  such  purposes  and  their  trustees  have  no 
power  to  use  their  funds  for  objects  of  that  nature." 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  459 

In  Standard  Oil  Co.  et  al.  v.  Dojde,  which  was  an  action  by  the 
latter  charging  a  conspiracy  to  drive  him  out  of  business,  the  proof 
ten'ded  to  show  that  a  representative  of  the  defendant  company 
offered  one  of  the  plaintift"s  customers  a  rebate  as  an  inducement  to 
return  certain  oil  purchased  from  the  plaintiff  and  threatened  to  ruin 
him  in  case  of  a  refusal,  and  that  this  customer  subsequentlj"  sold  out 
his  business  to  the  local  oil  inspector  who  became  a  competitor  of  the 
plaintiff  and  used  wagons  furnished  by  the  Standard  Oil  Co.  It 
further  appeared  that  Doyle's  drivers  were  obstructed,  annoyed,  and 
harassed,  and  that  oil  was  sometimes  offered  to  his  customers  with- 
out charge  in  order  to  prevent  his  drivers  from  making  sales;  that  his 
oil  was  condemned  by  the  oil  inspector  although  it  had  been  inspected 
and  reported  above  test  in  another  county ;  that  the  inspector  subse- 
quently notified  Doyle's  customers  that  his  oil  had  been  condemned 
and  that  they  would  be  prosecuted  if  they  bought  or  sold  it ;  and  that 
the  deputy  oil  inspector,  who  was  also  deputy  clerk,  issued  a  sum- 
mons against  Doyle  to  show  cause  why  he  should  not  be  punished 
for  selling  unsafe  oils,  but  that  after  a  trial  the  charge  was  dismissed. 
A  judgment  for  the  plaintiff  was  affirmed  on  appeal  although  it  was 
urged  by  the  defendants  that  the  acts  complained  of  were  legitimate, 
for  the  purpose  of  building  up  the  latter's  business.^ 

In  another  case  it  appeared  that  upon  the  refusal  of  the  Crystal 
Oil  Co.  to  purchase  supplies  exclusively  from  the  Standard  Oil  Co., 
the  latter  proceeded  to  equip  itself  Avith  tank  wagons  and  entered  into 
active  competition  in  the  retail  oil  business.  Its  drivers  were,  among 
other  things,  instructed  to  do  business  ostensibly  as  independent  deal- 
ers, and  to  "  go  after  the  Crystal  Oil  Company."  Cards  furnished  by 
the  latter  to  its  customers  to  be  displayed  by  them  when  oil  was 
required,  were  in  some  cases  carried  away  by  the  Standard's  drivers 
and  it  appeared  that  special  efforts  were  made  to  make  sales  wherever 
such  cards  were  displayed,  sometimes  permitting  the  buyers  to  sup- 
pose that  they  were  dealing  with  a  Crystal  agent.  When  the  Crystal 
Oil  Co.  was  finally  driven  out  of  business  the  Standard  withdrew 

iStandni-fl  Oil  Co.  et  al.  r.  Doyle,  lis  Ky..  002,  070,  OSl  (in04i.  Per  Nnnn,  ,T.  : 
"  Uudoubledly  one  man  may  by  fair  methods  compete  with  a  rival  until  by  sheer  force 
of  competition,  by  undersellins  or  outbidding  him,  his  own  business  is  built  up  to  the 
detriment  and  ruin  of  his  rival.  The  damage  in  such  case  is  in  the  eye  of  the  law 
damnum  alisque  injuria.  But  a  different  case  is  presented  where  one  seeks  not  only 
to  build  up  his  own  business  at  the  expense  of  a  rival's,  but  to  impair,  and  if  possible, 
destroy,  that  rival's  business  by  the  use  of  unlawful  means  by  saying  and  doing  that 
which  he  has  no  lawful  right  to  say  and  do,  in  so  far  as  it  works  loss  and  damage  to  bis 
rival.  *  *  *  If  it  be  true,  as  the  jury  seems  to  have  determined,  that  this  con- 
spiracy was  formed,  and  in  pursuance  thereof  the  appellants  fraudulently  caused  ap- 
pellee's oils  to  be  condemned,  and  willfully  reported  the  oils  to  be  below  the  legal  test, 
when  they  knew  or  had  reason  (<>  believe  they  were  not  below  the  test,  and  had  appellee 
arrested  upon  the  false  charge  of  selling  condemned  oil,  and  obstructed,  harassed,  and 
annoyed  appellee's  drivers  when  delivering  his  oil.  for  the  purpose  of  injuring  and  driv- 
ing appellee  out  of  the  business  of  selling  oils,  we  can  not  say  that  the  verdict  Is 
excessive." 


460  REPORT    OF    THE    COMMISSIONER    OP    CORPORATIONS. 

its  wagons  and  drivers  and  gave  its  attention  wholly  to  its  wholesale 
business.  Although  the  defendants  contended  that  their  conduct 
"  did  not  transgress  the  bounds  of  legitimate  competition,"  it  was 
held  that  while  they  had  the  undoubted  right  to  establish  a  com- 
peting business,  they  had  no  right,  under  the  guise  of  competition, 
to  inflict  a  malicious  injury  on  the  Crystal  Co.  or  drive  it  out  of 
business,  intending  to  retire  when  their  purpose  had  been  effected.^ 

ENGLISH  DECISIONS. 

In  Barley  v.  Walford  a  dealer  in  printed  silk  goods  alleged  that  he 
had  sent  to  the  defendant  a  lot  of  handkerchiefs  which  he  had 
printed  with  a  certain  pattern,  and  that  he  was  about  to  fill  other 
orders  for  handkerchiefs  of  the  same  design  when  the  defendant, 
intending  to  defraud  him  and  induce  him  to  desist  from  printing  the 
same,  falsely  represented  that  the  pattern  Avas  copyrighted  and  that 
other  parties  intended  to  seek  an  injunction  against  him.  The  plain- 
tiff further  alleged  that  he  was  put  to  great  expense  in  investigating 
the  supposed  claims  of  such  other  parties,  that  meanwhile  he  ab- 
stained from  selling  a  large  number  of  his  handkerchiefs,  while  the 
defendant  caused  a  large  number  of  such  handkerchiefs  to  be  printed 
and  sold  them  without  competition.  It  was  held  by  Lord  Denman 
that  a  cause  of  action  had  been  disclosed.- 

In  another  case  where  it  appeared  that  a  dealer  in  order  to  attract 
trade  advertised  a  piano  of  a  certain  make  and  class  at  a  reduced 
price,  and  continued  the  publication  of  such  advertisements  after  the 
piano  had  been  sold,  it  was  held  by  the  court  of  appeal  that  the  piano 
manufacturer  was  not  entitled  to  an  injunction.  In  explanation  of 
his  conduct  the  defendant  stated  that  for  a  time  he  was  prepared  to 
take  orders  for  the  plaintiff's  pianos  since  he  knew  several  dealers 
who  would  supply  him,  and  further,  that  it  was  difficult,  or  at  all 
events  caused  additional  expense,  to  alter  the  advertisement. 
Although  the  court  disapproved  of  the  defendant's  conduct  and 
expressed  the  opinion  that  the  advertisement  was  not  such  as  ought 
to  have  been  published  and  that  great  negligence  had  been  shown 
with  respect  to  its  withdrawal,  it  denied  the  injunction,  being  of 
opinion  that  as  a  general  rule  any  person,  acting  honestly,  may  sell 
or  offer  for  sale  at  any  price  whatsoever  goods  of  which  he  is  not  the 
owner  but  which  he  expects  or  hopes  to  acquire,  and  further,  that 
although  the  advertisements  amounted  to  a  representation  that  the 
defendant  had  in  his  possession  a  piano  of  the  description  advertised, 

iDunshee  v.  Standard  Oil  Co.  et  al..  152  Iowa,  618  (1011).  And  see  Dunshee  r.  Stand- 
ard Oil  Co.  et  al.,  165  Iowa,  625  (1914).  Cf.  Boggs  r.  Duncan-Schell  Furniture  Co. 
et  al..  p.  456. 

=  9  A.  &  E.,  197  (Q.  B.,  1846). 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  461 

such  misrepresentation  was  not  the  cause  of  damage  to  the  phiintitf 
and  consequently  gave  no  right  of  action.^ 

In  a  recent  Scottish  case  it  appeared  that  a  body  of  harbor  trus- 
tees, incorporated  by  an  act  of  Parliament,  were  vested  Avith  au- 
thority to  operate  ferries  within  certain  limits  and  had  power  in 
the  event  of  a  deficiency  in  ferry  revenues  to  increase  the  rates 
payable  by  shipowners'  using  the  harbor.  On  several  occasions 
when  the  steamers  were  not  required  for  ferry  traffic  they  were 
hired  out  by  the  trustees  for  excursions  beyond  the  ferry  limits. 
A  firm  of  shipownei*s,  part  of  whose  business  consisted  in  hiring 
out  excursion  steamers,  brought  an  action  to  restrain  the  trustees 
from  so  using  their  steamers,  claiming,  among  other  things,  that 
the  rates  charged  were  altogether  inadequate  and  such  as  no  private 
shipoAvner  could  compete  with,  that  the  excursions  would  result  in 
a  loss  to  the  trustees,  and  that  such  acts  were  ultra  vires  and  inter- 
fered with  their  business.  It  was  held  that  the  acts  complained  of 
were  ultra  vires,  and  as  it  appeared  that  the  complainants  had  by 
statute  an  interest  in  the  trust  fund,  contributed  as  harbor  rate- 
payers, and  had  certain  statutory  rights  with  respect  to  the  man- 
agement and  control  of  the  undertaking  as  electors  and  possible 
trustees,  it  was  further  held  that  they  were  entitled  to  bring  the 
action.^ 

In  another  case,  where  a  stockholder  of  a  railway  sought  to 
enjoin  the  company  from  running  excursion  boats  to  a  certain  place 
on  the  ground  that  this  was  beyond  the  powers  of  the  corporation, 
and  it  appeared  that  the  plaintiff  was  a  large  stockholder  in  a  steam 
packet  company  which  was  prejudiced  by  the  acts  complained  of 
and,  further,  that  the  packet  company  directed  the  suit  and  indem- 
nified the  plaintiff  against  costs,  the  lord  chancellor  treated  the  suit 
as  an  imposition  on  the  court  and  dismissed  it  accordingly.^ 

1  Ajello  V.  Worsloy,  L.  R.  (1898),  1  Ch.,  274.  Cf.  Passaic  Print  Works  v.  Ely  &  Walker 
Dry  Goods  Co.  et  al.,  p.  456;  Rox  v.  .Takeman,  114  Cox's  C.  C,  158  (1914)  and  Win- 
chester Repeating  Arms  Co.  v.  Butler  Bros.,  128  Fed..  976  (D.  C,  1904). 

2D.  &  J.  Nicol  V.  Trustees  of  the  Harbour  of  Dundee,  1914,  Session  Cases,  874, 
affirmed,  L.  R.  (1915),  A.  C,  550,  559,  561,  Viscount  Haldane,  L.  C:  "I  do  not  think 
that  (he  respondents  could  have  made  their  claim  successfully  on  the  mere  foundation 
of  injury  to  their  interests  as  rival  traders.  It  appears  to  me  that  their  real  case  is 
that  they  are  beneficially  and  individually  interested  in  the  administration  of  property 
and  the  execution  of  powers  to  be  can-ied  out  in  strict  accordance  with  the  terms  and 
limits  prescribed  by  the  x\.ct  of  Parliament  under  which  the  incorporated  trustees  derive 
their  capacity  and  the  respondents  their  beneficial  rights."  Lord  Dunedin :  "  In  the 
phraseology  of  Scottish  law,  when  a  complaincr  can  only  say  that  he  is  a  rival  trader 
and  nothing  more,  he  qualifies  an  interest  but  not  a  title."  Cf.  Stockport  District  Water- 
works Co.  V.  Mayor,  etc.,  of  Manchester  et  al.,  9  Jurist  (N.  S.),  266  (1863)  ;  Pudscy 
("o.Tl  Gas  Co.  r.  Corporation  of  Bradford,  L.  R.  (1873),  15  Eq.,  167;  and  Railroad  Co.  v. 
Ellerman,  105  U.  S.,  166  (1881). 

3  Forrest  v.  The  Manchester,  Sheffield  and  Lincolnshire  Ry.  Co.,  4  De  Gex,  F.  &  J.,  126 
(1861). 


CHAPTER  VIII. 

FEDERAL  STATUTES  RESPECTING  UNFAIR  METHODS  OF  COM- 
PETITION. 

Section  1.  Introductory. 

This  chapter  deals  Avith  certain  Federal  statutes  which  specifically 
prohibit  certain  methods  of  competition  or  which,  under  the  con- 
struction given  them  by  the  courts,  may  be  invoked  to  prevent 
the  use  of  such  methods.  These  statutes  are  the  Sherman  Anti- 
trust Act,  the  Federal  Trade  Commission  Act,  the  Clayton  Act, 
and  the  Act  to  Regidate  Commerce.  While  the  Federal  Trade  Com- 
mission Act  is  undoubtedly  the  most  comprehensive  in  this  respect, 
it  has  not  yet  been  applied.  On  the  other  hand,  the  Sherman  Act 
has  been  interpreted  by  the  courts  with  respect  to  various  methods 
of  competition,  either  through  judicial  decisions  or  decrees.  The 
opinions  and  decrees  under  the  Sherman  Act  are  set  forth  without 
attempting  to  determine  how  far  such  practices  are  unfair  methods 
of  competition  within  the  meaning  of  the  Federal  Trade  Commission 
Act.  Such  statutes  as  the  Pure  Food  and  Drugs  iVct,  which  appear  to 
have  been  enacted  primarily  to  protect  the  consumer  from  fraud  and 
imposition,  but  which  incidentally  protect  the  honest  dealer  from 
the  fraudulent  competition  of  unscrupluous  rivals,  are  not  included 
in  this  chapter,  nor  are  the  statutes  and  decisions  relating  to  trade- 
marks, these  latter  being  fully  treated  in  comprehensive  textbooks 
and  reference  works. 

DECISIONS   UNDER   THE   SHERMAN  LAW   WITH   RESPECT   TO 
METHODS    OF    COMPETITION. 

Section  2.  General  statement. 

Although  the  Sherman  Antitrust  Act  does  not  in  terms  condemn 
unfair  competition,  certain  classes  of  contracts  or  specific  competitive 
practices  have  been  complained  of  in  proceedings  arising  under  the  act 
as  tending  to  establish  a  restraint  of  trade  or  an  attempt  to  monop- 
olize. In  some  instances  the  courts  have  passed  upon  the  legality  of 
those  practices  in  their  decisions;  in  others  they  have  been  prohibited 
in  the  decrees,  but  without  any  comment  by  the  courts  upon  the 
legality  of  the  particular  devices  or  practices. 

The  following  competitive  methods  have  been  passed  on  in  the  re- 
ported decisions :  Price  cutting,  the  use  of  "  fighting  ships,"  "  bogus 
independents,"  exclusive  and  "  tying  "  contracts,  inducing  breach  of 
462 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  463 

contract,  enticing  employees  from  the  service  of  competitors,  bribery 
and  espionage,  and  the  boycott  by  trade  associations,  accompanied  by 
the  black  list. 

Section  3.  Price  cutting. 

In  United  States  v.  Great  Lakes  Towing  Co.  et  al.,'  the  court  re- 
ferred to  the  combination  represented  by  the  towing  company  as  "  a 
monopoly  created  by  abnormal  and  unfair  means,"  specifying  as 
one  of  these,  "  unfair  rate  wars,"  and  stated  that  "  stringent  provi- 
sions against  unfair  rate  cutting  "  were  contained  in  the  decree.- 

In  reviewing  the  evidence  of  a  conspiracy  admitted  by  the  trial 
court  in  a  criminal  prosecution  of  the  president  and  certain  officers 
and  agents  of  the  National  Cash  Register  Co.,  the  circuit  court  of 
appeals  took  occasion  to  connnent  adversely  upon  two  methods  prac- 
ticed by  the  defendants  in  competition  with  the  American  Cash  Reg- 
ister Co.  These  methods  were  (1)  cutting  prices  on  machines  made 
by  the  American  Company  and  secured  by  the  National  in  the  course 
of  business,  and  (2)  cutting  prices  on  their  own  machines.  The  court 
said : 

The  method  of  attack  was  to  prevent  him  [an  eiiiploycx?  of  the  American  Co.] 
from  making  sales  of  Amerieau  machines  and  to  displace  such  as  he  made.  The 
way  in  which  the  former  was  attempted  was  by  oherini,'  Hallwoods  [the  name 
of  the  American  Co.'s  macliinej,  ownt'd  by  the  National  Co.  at  low  prices — i.  e., 
30  cents  on  the  dollar,  in  competition.  *  *  *  The  way  in  which  the  dis- 
placements were  brought  about  was  by  offering  the  reguhu*  National  machines 
on  unusual  terms.     Both  methods  were  unfair.^ 

After  the  judgment  of  the  Supreme  Court  in  United  States  v. 
American  Tobacco  Co.  et  al.,*  the  Circuit  Court  for  the  Southern 
District  of  New  York^  considered  a  request  that  the  defendant  com- 
panies be  enjoined  "  from  giving  away  or  selling  at  or  below  the  cost 
of  numufacture  and  distribution  any  of  its  products,  from  giving  re- 
bates, allowances,  or  other  special  inducements  to  purchasers  or  users, 
and  from  refusing  to  sell  to  any  jobber  any  special  brand  he  may  re- 
quire."   This  request,  however,  was  denied  by  Lacombe,  J.,  who  said: 

The  record  in  this  case  shows  that  these  are  the  common  methods  of  the 
tobacco  business,  practiced  by  all  :ilike.  It  is  only  by  givinu;  away  samples,  or 
by  offering  on  favoral)le  terms,  irrespective  of  cost,  that  now  brands  of  tobacco 
products  can  be  intrcKluced  or  old  brands  extended  into  new  territory.  All 
other  companies  are  free  to  emjiloy  these  methods,  which  are  obnoxious  to  no 
statute,  and  there  is  no  reason  wliy  the  fourteen  companies  should  be  forbidden 
to  do  so. 


1217  Fed.,  656,  659-661  (D.  C.  1014).     This  case  is  now  pending  in  the  U.  S.  Supreme 
Court. 

2  See  decree,  pp.  479,  481,  484. 

3  Patterson  et  .il.  r.  linitcd  States,  Tl-l  PVd.,  599.  (i:'.rt  (C.  C.  A.,  1915). 
<221  U.  S..  106  (1911). 

BU.  S.  V.  American  Tobacco  Co.  et  al.,  191  Fed.,  :571,  381  (1911). 


464  REPORT   OF    THE    COMMISSIOITEE   OF    CORPORATIONS. 

Section  4.  Discriminations. 

The  defendants  in  United  States  v.  Pacific  &  Arctic  Co.^  were  in- 
dicted under  sections  1  and  2  of  tlie  Sherman  law  for  conspiring  to 
restrain  trade  and  commerce  in  the  business  of  transportation  in 
freight  and  passengers  between  various  ports  of  -the  United  States 
and  Canada,  and  Alaska,  and  for  monopolizing  trade  and  commerce 
in  the  same  business  between  the  same  ports.  The  indictment  alleged 
in  substance  that  the  defendant  steamship  companies  operating  be- 
tween Canadian  and  United  States  ports  and  SkagAvay,  Alaska,  estab- 
lished through  routes  and  joint  rates  w^ith  the  defendant  wharves 
company,  which  owned  the  only  wharf  facilities  at  Skagway,  and 
with  the  defendant  railroad  company  which  owned  the  only  railroad 
extending  from  Skagway  to  the  Yukon  River ;  that  by  an  agreement 
between  the  parties  the  railroad  company  refused  to  make  any 
through  route  or  joint  rate  with  independent  steamship  companies, 
and  charged  rates  between  Skagway  and  Yukon  Eiver  points  which 
were  much  higher  than  the  railroad's  pro  rata  of  the  through  route; 
and  that  the  wharves  company  charged  $2  a  ton  for  freight  if  shipped 
on  a  vessel  not  owned  by  one  of  the  defendant  companies  as  against 
$1  a  ton  if  shipped  on  a  vessel  owned  by  one  of  the  latter.  The  de- 
fendants demurred  to  the  indictment,  and  in  support  of  the  demurrer 
it  was  urged  that  since  the  defendants  had  a  common-laAv  right  to 
select  their  connections  and  to  refuse  to  establish  through  routes  and 
joint  rates  with  others  no  offense  was  charged.  The  court  held,  how- 
ever, that  the  indictment  showed  the  existence  of  something  more 
than  a  mere  attempt  on  the  part  of  the  defendants  to  exercise  these 
rights;  and  that  since  it  alleged  that  the  agreement  in  question  had 
been  made  for  the  purpose  of  restraining  trade  and  destroying  com- 
petition, it  was  not  demurrable. 

Section  5.  "  Fighting  ships." 

In  ITnited  States  v.  Hamburg- American  Steamship  Line  et  al.,^ 
Lacombe,  circuit  judge,  said  in  part: 

One  of  the  matters  complained  of  is  what  is  called  in  the  testimony  the 
providing  of  "  fighting  ships."  Upon  occasions  when  some  steamship  owner  or 
charterer,  not  a  member  of  the  combination,  has  put  a  vessel  on  a  berth  adjoin- 
ing one  from  which  vessels  of  a  member  of  the  combination  were  about  to  sail, 
and  has  offered  to  carry  passengers  at  a  lower  rate  than  that  aslied  by  such 
member,  an  extra  vessel  has  been  put  on.  ostensibly  by  one  of  the  lines  in  the 
combination,  but  really  by  the  combination  itself,  at  the  same  or  a  lower  rate, 
and  all  have  co-operated  to  furnish  such  a  "  fighting  ship  "  and  thereby  keep 
out  the  competitor.  This  seems  clearly  to  be  within  the  prohibition  of  the 
act.     *     *     * 

1228  U.  S.,  87   (19] .3). 

2  216  Fed.,  971,  973,  974  (D.  C,  1914), 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  465 

The  Allan  Line  and  Canadian  Pacific  Line  withdrew  from  the  fighting  ship 
agreement  before  the  bill  was  filed.  As  to  both  these  defendants  the  bill  is  dis- 
missed. As  to  the  other  defendants  injunction  will  issue  against  the  continu- 
ance of  the  "  fighting  ships,"  ^  and  as  to  the  other  prayers  for  relief  the  bill  is 
dismissed. 

Dismissing  the  Government's  petition  against  the  American-Asiatic 
Steamship  Co.^  and  other  members  of  the  Far  Eastern  Steamship 
Conference,  the  same  court  observed : 

Defendant's  conference  agreement  contains  a  provision  for  "  fighting  ships." 
If  there  were  evidence  that  any  steps  had  ever  been  taken  towards  putting  one 
on,  we  should  be  inclined  to  grant  an  injunction  similar  to  the  one  we  granted  in 
United  States  v.  Hamburg  American  Co.  et  al.  (D.  C.)  216  Fed.,  971;  but  since 
tliere  is  no  such  evidence  in  this  case,  we  see  no  reason  for  granting  that  relief. 

Section  6.  "  Bogus  independents." 

In  Monarch  Tobacco  Works  v.  American  Tobacco  Co.  et  al.,^  an 
action  for  treble  damages,  it  was  alleged,  among  other  things,  that 
the  American  Tobacco  Co.  acquired  control  of  the  Nail  &  Williams 
Tobacco  Co.,  which  fact  it  kept  secret;  and  that  by  falsely  pretend- 
ing that  the  Nail  &  Williams  Tobacco  Co.  remamed  independent,  and 
by  other  means  set  forth,  the  defendants  carried  out  the  conspiracies 
and  combinations  complained  of  and  competed  imder  false  pretenses 
with  the  plaintiff  in  Indianaj)olis,  Minneapolis,  Cumberland,  and 
Louisville,  greatl}'  to  the  plaintiff's  injury.  The  court,  considering 
the  defendants'  demurrer,  said  in  part : 

It  was  contended  that  it  was  not  unlawful  merely  to  keep  one's  business 
affairs  secret,  nor  for  one  corporation  to  obtain  a  controlling  interest  in  another, 
nor  merely  to  compete  with  a  rival  for  trade  and  by  mere  competition  to  drive 
him  out  of  business,  nor  to  offer  better  terms  au'l  inducements  than  a  rival  in 
business  offered,  and  we  are  by  no  means  inclined  to  deny  either  of  those  propo- 
sitions in  the  abstract,  for  neither  is  in  terms  forbidden  by  the  act,  nor,  possibly, 
by  any  moral  consideration;  but,  as  we  have  seen,  the  seventh  section  of  the 
act,  in  most  general  language,  provides  that  "  any  person  who  shall  be  injured 
in  his  business  or  property  by  any  other  person  or  corporation  by  x'eason  of 
anything  forbidden  or  declared  to  be  unlawful  by  this  act "  shall  have  a  right 
to  recover  therefor,  and  the  rulings  of  the  Supreme  Court  to  which  we  have 
called  attention  seem  clearly  to  show  that  even  lawful  acts  may  become  agencies 
of  wrongdoing  if  the  motive  of  doing  those  acts  be  to  carry  into  effect  a  com- 
bination made  illegal  under  the  statute,  and  particularly  if  doing  them  does  in 
fact  effectuate  the  purposes  of  the  unlawful  scheme. 

Commenting  on  the  secret  ownership  of  D.  ]\I.  Osborne  &  Co.  by 
the  International  Harvester  Co.,  Smith,  circuit  judge,  observed :  * 

When  the  D.  M.  Osbome  &  Co.  purchase  was  made,  while  the  International 
bought  all  the  stock,  it  permitted  the  Osli(»rue  Co.  to  continue  to  appeal-  \o  be  in- 

^  See  decree,  p.  483. 

2  United  States  v.  American-Asiatic  S.  S.  Co.  et  al.,  220  Fed.,  230.  235  (D.  C,  l'J15). 

3  165  Fed.,  774,  781   (C.  C,  1908). 

*U.  S.  c.  International  Harvester  Co.,  214  Fed.,  987,  992   (D.  C,  1914). 

30035°— 16 30 


466  EEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

dependent.  It  is  claimed  that  this  was  done  to  enable  the  Osborne  Co.  to  collect 
its  bills  receivable,  which  were  not  acquired  by  the  International.  There  was 
commercial  advantage  in  claiming  not  to  be  associated  with  the  International. 
Many  persons  were  opposed  to  buying  from  it,  and  for  two  years  the  Osborne 
Co.  persistently  advertised  that  it  was  Independent. 

While  under  the  old-time  law  of  warranty  it  might  be  justifiable  for  the 
Osborne  Co.  to  conceal  its  relations  with  the  International,  there  can  be  no 
excuse  for  the  affirmation  upon  its  part  that  it  was  independent  after  it  had 
been  acquired  by  the  International. 

"  The  seller  may  let  the  buyer  cheat  himself  ad  libitum,  but  must  not  actively 
assist  him  in  cheating  himself." 

The  International  had  bought  all  the  stock  of  the  Osborne  Co.,  and  it  had 
been  transferred  to  a  trustee  for  it,  and  there  was,  in  the  fact  that  the  Osborne 
Co.  might  better  collect  its  bills  receivable,  no  basis  to  justify  the  International 
in  making  a  contract  under  which  the  Osborne  Co.  could  continue  to  advertise 
falsely  that  it  was  an  independent  concern,  when  it  liad  in  fact  been  merged 
with  the  International,  It  is  safe  to  say  that  from  January,  1903,  the  competi- 
tion of  the  Osborne  Co.  was  in  name  only  and  did  not  exist  in  fact. 

What  has  been  said  of  the  Osborne  purchase  is  true  in  principle  of  pur- 
chases made  by  the  International  of  the  Keystone  Co.,  the  Minnie  Harvester 
Co.,  and  the  Aultman-Miller  plant. 

Section  7.  Exclusive  dealing. 

Eebates  TO  INDUCE  EXCLUSIVE  DEALING. — It  has  been  urged  in  a 
number  of  cases  that  contracts  which  provide  for  the  payment  by  a 
vendor  of  a  deferred  rebate  to  such  purchasers  as  deal  only  in  his 
goods  are  in  violation  of  the  Sherman  law.  It  was  early  decided  by 
the  Federal  Circuit  Court  for  the  Southern  District  of  Ohio/  that 
contracts  of  this  description  did  not  contravene  the  act.  The  Distill- 
ing &  Cattle-Feeding  Co.  promised  to  pay  a  rebate  to  those  who  pur- 
chased its  distillery  products  exclusively  for  a  period  of  six  months 
and  w^ho  would  not  sell  the  same  at  prices  less  than  those  fixed  by  the 
company.  It  had  been  previously  decided  by  two  other  courts,  on  the 
same  facts,  that  such  an  arrangement  did  not  amount  to  a  contract 
to  purchase  exclusively  from  the  cattle- feeding  company,-  and  in  this 
case  the  court  took  the  same  view,  but  said  that,  granting  that  it  did 
constitute  a  contract  to  purchase  exclusively  from  the  distilling  com- 
pany, it  was  not  an  attempt  to  monopolize  nor  did  it  operate  to  re- 
strain trade  within  the  meaning  of  the  Sherman  law.  The  following 
is  an  excerpt  from  the  opinion  by  Jackson,  J. : 

*  *  *  there  was  nothing  in  such  an  agreement  unlawful  or  in  contraven- 
tion of  the  statute.  The  promise  of  a  rebate,  as  an  inducement  for  exclusive 
trading,  certainly  does  not  constitute  an  "  attempt  to  monopolize,"  when  the 
purchaser  is  left  at  liberty  to  buy  where  he  pleases,  and  when  all  other  sellers 
of  the  article  are  left  unrestrained  in  offering  the  same,  or  greater,  inducements. 

1  In  re  Greene,  52  Fed.,  104,  117,  118  (1892)  ;  see  also  Olmstcad  v.  Distilling  &  Cattle- 
Feeding  Co.,  77  Fed.,  2G.')   (C.  C,  189G). 

-In  re  Corning,  51  Fed.,  205  (D.  C,  1892)  ;  In  re  Terrell,  51  Fed.,  213  (C.  C,  1892). 


TRUST    LAWS   AND   UNFAIR   COMPETITION.  467 

As  to  the  remaining  condition  upon  wliich  tlie  rebate  was  to  be  payable,  the 
same  observation  may  be  made.  The  purchasers  were  placed  under  no  con- 
tractual or  other  restraint  in  respect  to  the  price  at  which  they  should  sell. 
They  were  simply  offered  a  rebate,  as  an  inducement  not  to  undersell  the 
vendor's  distributing  agents,  two  of  whom  were  located  at  Boston,  Mass.  The 
arrangement  relied  on,  considered  either  in  detail  or  as  a  whole,  involved  no 
"  attempt  to  monopolize  any  part  of  the  trade  or  commerce  among  the  States." 
*  *  *  It  is  well  settled  that  contracts  in  general  restraint  of  trade  are  con- 
trary to  public  policy,  and  therefore  unlawful.  The  arrangement  under  con- 
sideration can  not  possibly  be  considered  as  one  in  general  restraint  of  trade. 
Where  the  restraint  is  partial,  either  as  to  time  or  place,  its  validity  is  to  be 
determined  by  its  reasonableness  and  the  existence  of  a  consideration  to  sup- 
port it.  The  question  of  its  reasonableness  deiJends  on  the  consideration 
whether  it  is  more  injurious  to  the  public  than  is  required  to  afford  a  fair 
protection  to  the  party  in  whose  favor  it  is  secured.  Xo  precise  boundary  can 
be  laid  down  as  to  when,  and  under  what  circumstances,  the  restraint  would  be 
reasonable,  and  when  it  would  be  excessive.  *  *  *  jq  t^e  present  case,  the 
arrangement  treated  as  a  contract  was  founded  upon  a  valid  consideration,  and 
only  secured  to  the  vendors  a  reasonable  protection  in  their  business. 

The  giving  of  a  deferred  rebate  by  steamship  lines  in  consideration 
of  exclusive  patronage  was  recently  declared  lawful  by  the  district 
court  for  the  southern  district  of  New  York  in  the  Government's 
suit  against  the  Prince  Line,  Hamburg-American  Line,  and  other 
members  of  the  Brazilian  Steamship  Conference,  Lacombe,  J., 
saying : 

It  is  contended  that  the  system  of  rebates  adopted  by  the  combination  was 
a  restraint  of  trade.  Rebates  at  a  stated  percentage  were  given  to  exclusive 
shippers.  Their  payment  was  deferred  so  that  it  could  be  determined  at  the 
close  of  a  rebate  period  whether  the  shipments  of  the  concern  asking  for  it 
had  really  been  exclusive.  It  is,  of  course,  desirable  for  a  shipper  to  know  in 
advance  what  rates  he  is  to  be  charged ;  in  like  manner,  it  is  desirable  for  a 
carrier  to  know  as  definitely  as  it  can  what  amounts  of  cargo  it  may  expect  it 
will  have  to  handle  in  a  given  period.  These  rebates  were  not  secret,  nor  were 
they  confined  to  a  favored  few;  they  were  uniform,  were  open  to  all,  and  all 
were  invited  to  avail  of  them.  The  arrangement  is  probably  as  old  as  trade 
itself.  One  natural  result  of  it  would  seem  to  be  stability  in  sailings  and  serv- 
ice— both  desirable  for  trade — which  might  not  otherwise  be  maintained.* 

Still  more  recently,  in  Wilder  Manufacturing  Co.  v.  Corn  Products 
Eefining  Co.,-  the  validity  of  a  contract  or  arrangement  for  exclusive 
dealing  entered  into  in  consideration  of  a  promised  rebate  was  up- 
hold by  the  Supreme  Court.  This  was  an  action  by  the  plaintiff 
refining  company  to  recover  the  purchase  price  of  goods  sold  to  the 
defendant  manufacturing  company.  It  appeared  that  before  the 
sale  in  question  was  consummated,  the  plaintiff,  in  conformity  with 
a  so-called  profit-sharing  scheme  which  it  had  devised,  offered  in 
writing  to  pay  to  the  defendant  a  certain  percentage  on  the  amount 
of  purchases  made  by  the  latter  in  any  one  year,  payment  to  be  made 

1  United  States  v.  Prince  Line  (Ltd.)  et  al.,  220  Fed.,  230,  233  (D.  C,  1915). 

2  236  U.  S.,  165,  172,  173  (1015). 


468  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS.       . 

at  the  end  of  the  followmg  year,  provided  that  during  the  two  years 
thB  defendant  dealt  with  no  one  but  the  plaintiff.^  The  defend- 
ant sought  to  avoid  paying  for  the  goods  on  the  ground  that  the 
I)laintiff  was  a  combination  in  violation  of  the  Sherman  law  and 
that  the  profit-sharing  arrangement  referred  to  was  merely  a  means 
adopted  by  it  to  perpetuate  its  monopoly,  and  hence  was  illegal. 
In  addition  to  this  attack  upon  the  validity  of  the  condition  of 
exclusive  dealing,  a  claim  for  a  percentage  of  the  profits  for  the 
year  1908  was  also  made  by  the  defendant.  The  Supreme  Court 
held  that  the  fact  that  the  plaintiff  was  an  unlawful  combination 
could  not  be  taken  advantage  of  by  the  defendant  in  this  action,  and 
that  therefore  the  defense  and  counterclaim  must  fail,  since  the 
profit-sharing  scheme  was  not  in  itself  illegal.  After  holding  that 
the  status  of  the  plaintiff  company  must  be  left  out  of  consideration, 
the  Chief  Justice  said : 

The  case  therefore  reduces  itself  to  the  question  whether  the  contract  of  sale 
was  inherently  illegal  so  as  to  bring  it  within  the  also  elementary  rule  that 
courts  will  not  exert  their  powers  to  enforce  illegal  contracts  or  to  compel 
wrong-doing.  The  only  suggestion  as  to  the  intrinsic  illegality  of  the  sale  re- 
sults from  the  averments  of  the  answer  as  to  the  oCEer  of  a  percentage  of 
profits  upon  the  condition  of  dealing  exclusively  with  the  Refining  Company 
for  the  following  year  and  the  clause  to  the  effect  that  the  goods  were  bought 
by  the  Manufacturing  Company  for  its  own  use  and  not  for  resale.  But  we 
can  see  no  ground  whatever  for  holding  that  the  contract  of  sale  was  illegal 
because  of  these  conditions. 

It  may  well  happen,  however,  that  under  certain  circumstances 
and  conditions  the  use  of  such  contracts  will  violate  the  Sherman 
law.  This  proposition  is  well  illustrated  by  United  States  v.  Great 
Lakes  Tow^ing  Co.^  In  that  case  it  appeared  that  the  defendant 
company,  which  was  a  combination  of  a  number  of  previously  com- 
petitive towing  companies,  owned  or  controlled  practically  all  the 
boats  operating  at  14  important  lake  ports  and  that  soon  after  its 
formation,  it  had  (in  the  language  of  the  court)  adopted 

a  system  of  exclusive  contracts,  by  which,  in  consideration  of  the  vessel  owners 
employing  throughout  the  entire  season  the  towing  company's  tug  and  loreck- 
ing  service  at  all  ports  covered  by  its  tariffs  (so  far  as  the  vessel  owner  had 
occasion  for  such  service),  a  large  discount  was  given  from  tariff  rates.  In 
1910  a  flat  discount  of  20  per  cent,  was  given  on  all  bills.  The  discount  was  at 
no  time  less  than  20  per  cent,  and  in  later  years  it  varied  with  the  class  of 
service,  ranging  in  1910  from  20  per  cent,  on  lake  towing,  boiler  work,  wreck- 
ing service,  harbor  towing  of  line  boats,  and  first-class  coarse-freight  carriers, 
to  30  per  cent,  on  lumber  boats.  No  discounts  were  allowed  except  under  such 
exclusive  contracts.    The  vessel  owner,  moreover,  was  guaranteed  that  his  con- 

1  See  also  the  petition  in  United  States  v.  Corn  Products  Refining  Co.  (D.  C,  souttiern 
district,  N.  Y.,  1913),  pp.  20-21. 

3  208  Fed.,  733,  738,  744  (D.  C,  1913). 


TEUST    LAWS   AND    UNFAIR   COMPETITION.  469 

tract  rates,  taken  together,  should  not  exceed  the  sum  of  the  "  cut   rates " 
made  to  meet  competition.     *     *     * 

In  holding  the  defendant  an  unlawful  combination  in  violation  of 
the  Sherman  law,  the  court  said  with  reference  to  the  legality  of  these 
contracts : 

Even  competitive  practices,  of  a  nature  which  as  between  business  rivals 
standing  practically  on  equal  terms  may  be  normal  and  lawful,  yet  when  em- 
ployed by  a  powerful  monopolistic  combination  with  the  ability  to  crush,  and 
for  the  purpose  of  crushing,  a  weak  rival,  may  become  abnormal  and  unlawful. 
It  needs  no  discussion  to  demonstrate  that  complete  unification  of  the  towing 
and  wrecking  facilities  at  14  principal  ports,  accompanied  by  restraints  with 
respect  to  competition  imposed  upon  the  sellers  of  towing  properties  in  excess 
of  the  legitimate  protection  necessary  to  the  preservation  of  the  business  pur- 
chased, excessive  restrictions  against  competition  under  joint  operating  con- 
tracts and  on  sales  of  tugs,  bitter  rate  wars,  and  a  system  of  exclusive  con- 
tracts with  customers  such  as  is  found  here,  all  adopted  or  engaged  in  for  the 
purpose  of  effectuating  monopolistic  control,  are  abnormal  methods  of  doing 
business  and  eliminating  competition,  and  that  a  restraint  of  natural  com- 
petition by  such  means  is  undue  restraint.     *     *     * 

When  the  decree  in  this  case  was  entered  exclusive  contracts  were 
specifically  prohibited.^ 

Again,  in  1914,  the  court  characterized  the  combination  repre- 
sented b}'  the  towing  company  as  "  a  monopoly  created  by  abnormal 
and  unfair  means,"  referring,  among  other  things,  to  ''  the  system  of 
exclusive  contracts  by  w^hich  vessel  owners  who  employ  througliout 
the  entire  season  the  towing  company's  tug  and  wrecking  service, 
at  all  the  ports  covered  by  its  tariffs  (so  far  as  the  vessel  owner  had 
occasion  for  such  service),  receive  a  large  discount  from  tariff'  rates, 
which  is  denied  to  all  others."  ^ 

Refusal  to  deal  save  on  exclusive  terms. — In  Wliitwell  v.  Con- 
tinental Tobacco  Co.  et  al.,^  which  was  an  action  to  recover  treble 
damages  under  section  7  of  the  Sherman  law^,  it  was  alleged  that 
the  defendants  refused  to  sell  their  manufactured  products  to  the 
plaintiff  at  prices  which  would  enable  him  to  resell  them  at  a  profit 
unless  he  refrained  from  buying,  selling,  or  handling  tobacco  made 
by  other  manufacturers.  The  plan  was  to  make  an  allotment  to  each 
purchaser  much  in  excess  of  the  amount  which  he  w^ould  l)e  able  to 
sell,  but  if  he  refrained  from  handling  the  goods  of  competitors 
his  allotment  was  reduced  to  the  amount  he  could  dispose  of,  and 
prices  were  reduced,  thus  making  a  profit  possible.  Such  conditions 
amounted  in  effect  to  a  refusal  to  sell  to  the  plaintiff'  unless  he  pur- 
chased only  from  the  defendants.     A  judgment  for  the  defendants 

1  See  p.  4S4. 

2  Unitod  St.ntos  r.  Groat  Lakes  Towing  Co.  et  al.,  217  Fed..  «.".♦;,  6.">9,  600  (D.  C.  1914)  ; 
s?pe  decrcp.  pp.  484,  480. 

3  125  Fed..  454.  461,  463  (C.  C.  A.,  1903). 


470  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

on  demurrer  was  affirmed,  the  coiii't  being  of  the  opinion  that  the 
company  had — 

*  *  *  the  right  to  select  their  customers,  to  sell  and  to  refuse  to  sell  to 
whomsoever  they  chose,  and  to  fix  different  prices  for  sales  of  the  same  com- 
modities to  different  persons.  In  the  exercise  of  this  right  they  selected  those 
persons  who  would  refrain  from  handling  the  goods  of  their  competitors  as 
their  customers,  by  selling  their  products  to  them  at  lower  prices  than  they 
offered  them  to  others.  There  was  nothing  in  this  selection,  or  in  the  means 
employed  to  effect  it,  that  was  either  illegal  or  immoral.  It  had  no  necessary 
effect  to  directly  and  substantially  restrict  free  competition  in  any  of  the 
products  of  tobacco,  and  it  did  not  unlawfully  restrain  interstate  commerce, 
because  it  in  no  way  restricted  the  exercise  of  the  rights  of  the  competitors  of 
the  tobacco  company  to  fix  the  prices  of  their  goods  and  the  terms  of  their  sales 
of  similar  products  according  to  the  dictates  of  their  respective  wills. 

As  to  whether  the  acts  of  the  defendants  constituted  a  violation 
of  section  2  of  the  Sherman  Act  the  court  said : 

*  *  *  An  attempt  to  monopolize  a  part  of  interstate  commerce  which  pro- 
motes, or  but  indirectly  or  incidentally  restricts,  competition  therein,  while  its 
main  purpose  and  chief  effect  are  to  increase  the  trade  and  foster  the  business 
of  those  who  make  it,  was  not  intended  to  be  made,  and  was  not  made,  illegal 
by  the  second  section  of  the  act  under  consideration,  because  such  attempts 
are  indispensable  to  the  existence  of  any  competition  in  commerce  among  the 
States.' 

On  the  other  hand,  in  United  States  v.  Keystone  Watch  Case  Co. ,2 
a  refusal  to  deal  save  on  exclusive  terms  was  held  illegal.  There  the 
defendant  company,  which  had  acquired  the  plants,  business,  and 
good  will  of  several  large  manufacturers  of  watchcases,  sent  a  cir- 
cular to  the  most  prominent  jobbers  in  the  United  States,  which 
contained,  among  other  things,  the  following  statement : 

And,  further,  we  desire  that  the  jobbers  to  whom  we  sell  our  goods  bearing 
the  following  trade-marks  *  *  *  shall  not  deal  in  any  watchcases  other 
than  those  manufactured  by  us. 

Some  of  the  jobbers  assented  to  the  company's  wishes  and  with 
more  or  less  reluctance  gave  up  buying  from  other  manufacturers, 
while  the  jobbers  who  refused  to  assent  were  cut  off  from  the  Key- 
stone product  altogether  unless  they  obtained  it  surreptitiously.  As 
to  the  above-mentioned  circular.  Circuit  Judge  McPherson  said: 

"We  regard  it,  not  as  a  request,  but  as  a  threat ;  and  not  as  an  empty  threat, 
but  as  a  real  menace  from  a  strong  manufacturer.  The  defendant  company 
attempts  to  justify  both  the  circular  and  its  own  conduct  before  and  after  the 
circular  was  issued,  by  the  argument  that  the  selected  jobbers  were  its  "  exclu- 
sive agents,"  and  therefore  were  properly  burdened  with  any  conditions  to 
which  they  might  agree.  But  the  relation  of  principal  and  agent  did  not  exist 
between  the  company  and  the  jobbers.  They  were  not  agents,  paid  for  their 
services  by  salary  or  commission,  and  owing  a  duty  to  report  and  accoimt ; 

1  See  also  First  National  Bank  of  Jeannette,  Pa.,  v.  Missouri  Glass  Co.,  152  S.  W.,  378 
(St.  Louis  Ct.  of  Appeals,  1912). 
*218  Fed.,  502,  511,  512   (D.  C,  1915), 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  471 

they  were  merely  customers  of  the  defendant  company,  who  bought  its  un- 
patented cases  by  a  transaction  of  outriglit  purcluise,  and  thereby  took  a  com- 
plete title  to  the  cases  and  acquired  an  unrestricted  right  to  sell.  And,  more- 
over, it  should  be  observed  that  they  were  already  established  customers,  not 
only  of  the  defendant  company,  but  also  of  its  competitors,  and  had  already 
become  trade  outlets  for  every  manufacturer  of  cases  whose  wares  they  had 
been  accustomed  to  buy.  Now,  what  tlie  defendant  company  did  was  either  to 
clo.se  these  already  existing  and  already  utilized  outlets,  or  to  narrow  them 
materially,  so  far  as  the  cases  of  its  competitors  were  concerned ;  and  we  think 
the  proposition  need  not  be  discussed  that  this  was  pro  tanto  a  direct  and 
unlawful  restraint  of  trade. 

Patented  articles. — In  general,  patent  license  agreements  limit- 
ing the  licensee's  right  to  manufacture,  sell,  or  use  articles  other  than 
those  supplied  by  the  licensor  have  been  held  justified  by  the  patent 
laws  and  not  in  contravention  of  the  Sherman  Act.  Thus  in  Bement 
'V.  National  Harrow  Co.^  an  agreement  by  the  defendant  not  to 
manufacture  or  sell  any  float  spring-tooth  harrows  other  than  those 
which  it  had  made  under  its  patents  before  assigning  them  to  the 
plaintiff  or  which  it  was  licensed  to  manufacture  and  make  imder 
the  terms  of  the  license,  except  such  other  style  and  construction  as 
it  might  be  licensed  to  manufacture  and  sell  by  the  plaintiff',  was  held 
not  to  be  a  violation  of  the  antitrust  act.  The  Supreme  Court  of  the 
United  States  said : 

The  plain  purpose  of  the  provisions  \yas  to  prevent  the  defendant  from  in- 
fringing upon  the  rights  of  others  under  other  patents,  and  it  had  no  purpose 
to  stifle  competition  in  the  harrow  business  more  than  the  patent  provided  for, 
nor  was  its  purpose  to  prevent  the  licensee  from  attempting  to  make  any 
improvement  in  harrows.  It  was  a  reasonable  prohibition  for  the  defendant, 
who  would  thus  be  excluded  from  making  such  harrows  as  were  made  by  otlier.s 
who  were  engaged  in  manufacturing  and  selling  other  machines  under  other 
patents.  It  would  be  unreasonable  to  so  construe  the  provision  as  to  prevent 
defendant  from  using  any  letters  patent  legally  obtained  by  it  and  not  infring- 
ing patents  owned  by  others.     This  was  neither  its  purpose  nor  its  meaning.* 

But  where  contracts  for  exclusive  dealing  are  entered  into  for  the 
purpose  of  restraining  trade  and  destroying  competition,  and  are  not 
necessary  for  the  proper  protection  of  the  patents  which  form  their 
subject  matter,  they  are  in  violation  of  the  Sherman  laAv.  This 
is  well  illustrated  by  the  case  of  Standard  Sanitary  Manufac- 
turing Co.  V.  United  States.^  Tn  that  case  manufacturers  producing 
85  per  cent  of  the  enameled-ironware  output  in  the  United  States 
combined  and  agreed  not  to  deal  with  any  jol)bers  unless  they  in 
turn  agreed  not  to  purchase,  sell,  advertise,  or  solicit  orders  for,  or 
in  any  way  handle  or  deal  in,  sanitary  enameled  ironware  of  any 
manufacturer  othei-  than  those  in  the  combination.  The  Supreme 
Court  held  that  both  the  combination  and  the  contracts  for  exclusive 


M86  U.  S..  70.  04   (1902). 

2  See  also  TTnited  StiUes  Seeded  Raisin  Co.  <'.  (Irlffln  &  Skelley  Co.,  120  Fed.,  :?04  (190.3). 

S226  U,  S.,  20  (ll»12>. 


472  REPORT    OF    THE    COMMISSIONER   OP    CORPORATIONS. 

dealing  were  in  violation  of  the  Sherman  law  in  spite  of  the  fact 
that  the  subject  matter  of  the  contracts  was  patented  articles.^ 

Exclusive  x^gencies. — In  Virtue  t\  Creamery  Package  Manufac- 
turing Co.  et  al.,-  an  action  for  treble  damages  under  section  7  of  the 
Sherman  law,  it  was  alleged  that  one  of  the  methods  of  eliminating 
competition  was  through  a  contract  hj  which  the  Owatonna  Co.,  one 
of  the  defendants,  gave  to  the  Creamery  Package  Manufacturing  Co., 
another  defendant,  the  exclusive  sales  agency  for  the  former's  pat- 
ented machines.  Concerning  this  contract  the  Supreme  Court  of  the 
United  States  said ; 

The  Owatonna  Co.  did  nothing  more  in  its  contract  with  the  Creamery 
Package  Manufacturing  Co.  than  to  make  that  company  its  exclusive  sales 
agent,  and  this  was  no  violation  of  law.  *  *  *  patent  rights  may  he  con- 
veyed partially  or  entirely,  and  the  monopoly  of  use,  of  manufacture  or  of  sale 
is  not  one  condemned  by  law. 

In  United  States  v.  Hamburg- American  Steamship  Line  et  al.^ 
Lacombe,  J.,  said  in  part: 

Much  is  made  in  argument  of  the  circumstance  that  members  of  the  com- 
bination employ  only  agents  who  will  agree  to  confine  their  business  to  selling 
passage  tickets  for  such  members.  When  the  deplorable  conditions  which 
existed  before  this  method  of  business  was  adopted  are  considered,  it  would 
seem  that  such  an  arrangement  has  greatly  benefited  the  traveling  public,  espe- 
cially the  more  ignorant  class  of  many  different  nationalities  which  travels  in 
the  third  class  or  steerage.  Moreover,  dealing  as  it  does  merely  with  the  con- 
trol of  defendant's  agents,  who  are  free  to  accept  or  decline  such  agency,  it  is 
analogous  to  the  case  which  was  presented  in  United  States  v.  Periodical  Clear- 
ing House  *  *  *  *  where,  upon  the  question  whether  or  not  such  control  of 
agents  was  or  was  not  within  the  act,  this  court  was  divided  in  opinion  and 
dismissed  the  bill.  No  attempt  was  made  to  review  that  decision  on  appeal. 
It  is  thought,  therefore,  that  complainant  has  not  shown  itself  entitled  to  relief 
on  this  branch  of  the  case." 

Section  8.  Use  of  certain  articles  as  a  condition  of  the  purchase  or  use 
of  other  articles. 

License  agreements  which  restrict  the  right  of  the  licensee  in  the 
use  of  unpatented  articles  in  connection  with  the  patented  article  which 
is  the  subject  of  the  license  are  held  justifiable  under  the  patent  laws. 
The  plaintiff  in  Heaton-Peninsular  Button  Fastener  Co.  v.  Eureka 
Specialty  Co.  et  aL°  was  the  owner  of  several  patents  relating  to  the 
art  of  fastening  buttons  to  shoes  with  metal  fasteners.  It  sold  the 
machines  upon  the  condition  that  they  were  to  be  used  only  with 
fasteners  made  by  the  plaintiff.  Such  condition  was  made  known  to 
the  purchaser  by  means  of  a  metal  plate  attached  to  the  machine. 

^  See  decree,  p.  484. 

2  227  U.  S.,  8,  .37   (191.3). 

3  216  Fed.,  971,  974   (D.  C,  1914). 

*  Not  reported,  as  no  opinions  were  filed. 

6Cf.  The  Lloyd  Sabaiido  r.  Cubicciotti,  159  Fed.,  191    (C.  C,  1908)  ;  and  Mogul  Steam- 
ship Co.  V.  McGregor,  Gow  &  Co.,  p.  404. 
«77  Fed.,  288  (C.  C.  A.,  1896). 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  473 

The  defendant  manufactured  and  sold  other  staples  to  be  used  with 
the  machine,  and  it  was  alleged  that  it  was  guilty  of  contributory 
infringement.  An  injunction  was  granted,  the  court  holding  that  a 
purchaser  of  the  plaintiff's  machine  was,  in  effect,  a  mere  licensee, 
and  the  use  of  the  machine  contrary  to  the  condition  would  not  only 
be  a  breach  of  contract  but  an  infringement  of  the  patent  monopoly, 
to  restain  Avhich  an  injunction  would  lie.  Xo  appeal  was  taken  in  the 
above  case,  and  the  question  appears  not  to  have  been  decided  by  the 
Supreme  Court  of  the  United  States  until  1912,  when  Henry  v.  A.  B. 
Dick  Co.^  came  before  that  court.  The  facts  in  this  case  are  similar 
to  those  in  the  button-fastener  case  in  that  the  articles  to  be  used  with 
the  complainant's  machine  were  not  patented.  The  Dick  company 
sold  a  patented  device  with  the  restriction  that  it  should  be  used  only 
with  the  stencil,  ink,  and  other  supplies  made  by  the  company.  The 
defendant  Henry  sold  ink  to  a  purchaser  of  the  machine  with  the 
knowledge  that  it  would  be  used  in  violation  of  the  condition, 
whereupon  the  Dick  company  brought  an  action  for  infringement. 
The  question,  "  Did  the  action  of  the  defendants  constitute  contribu- 
tory infringement  of  the  complainant's  patent  ?  "  having  been  certified 
to  the  Supreme  Court  by  the  circuit  court  of  appeals  was  decided  in 
the  affirmative  by  a  divided  bench  (4  to  3).  Justice  Lurton,  in  de- 
livering the  opinion  of  the  court,  said  in  part: 

*  *  *  The  property  right  to  a  patented  machine  may  pass  to  a  purchaser 
with  no  right  of  use,  or  with  only  the  right  to  use  in  a  specified  way,  or  at  a 
specified  place,  or  for  a  specified  purpose.  The  unlimited  right  of  exclusive  use 
which  is  possessed  by  and  guaranteed  to  the  patentee  will  he  granted  if  the 
sale  be  unconditional.  But  if  the  right  of  use  be  confined  by  specific  restric- 
tion, the  use  not  permitted  is  necessarily  reserved  to  the  patentee.  If  that  re- 
served control  of  use  of  the  machine  be  violated,  the  patent  is  thereby  invaded. 
This  right  to  sever  ownership  and  use  is  deducible  from  the  nature  of  a  patent 
monopoly  and  is  recognized  in  the  eases.     *     *     * 

*  *  *  th(n"e  is  no  difference,  in  principle,  between  a  sale  subject  to  specific 
restrictions  as  to  the  time,  place  or  purpose  of  use  and  restrictions  requiring  a 
use  only  with  other  things  necessary  to  the  use  of  the  patented  article  purchased 
from  the  ])atentee.  If  the  violation  of  the  one  kind  is  an  infringement,  the 
other  Is  also.' 

Section  9.  Inducing  breach  of  competitors'  contracts. 

The  defendants  in  United  States  ik  Patterson  et  al.,^  which  was  a 
criminal  prosecution  for  an  alleged  violation  of  the  Sherman  Law, 
requested  an  instruction  to  the  effect  that  it  was  lawful  for  them  in 
competition — 

to  sell  or  offer  and  try  to  sell  National  cash  registers  to  persons  who  had 
bought  and  owned  competing  cash  registers  in  exchange  at  such  price  as  was 
satisfactory  to  the  parties. 

1224  U.  S.,  1.  24.  25,  ?^^^   (1012). 

2Soe  also  Fnited  Shop  Macliinory  Co.  v.  La  Chapelle,  99  N.  E.,  289  (Mass.,  Sp.  Ct, 
1912). 

3  222  Fed.,  599,  650  (C.  C.  A.,  1915). 


474  REPOET    OF    THE    COMMISSIONER    OP    CORPORATIONS. 

The  circuit  court  of  appeals  refused  the  request,  being  of  the 
opinion  that  it  was  unhiwful  for  the  defendants  to  do  as  stated  in  the 
instruction — 

if  the  doing  thereof  involved  the  purchaser  and  owner  of  the  competing  cash 
register  breaking  his  contract  with  the  competitor  in  any  particular,  or  was 
done  for  the  purpose  of  driving  the  competitor  out  of  the  cash-register  field. 
One  comi>etitor  has  the  right  to  try  to  sell  by  fair  means  all  of  his  goods  that 
he  can,  and  if  the  effect  of  his  selling  is  to  drive  another  competitor  out  of 
the  field  he  is  not  to  blame.  But  it  is  wrong  for  one  competitor  to  want  to 
drive  another  competitor  from  the  field  by  unfair  or  illegal  means,  and  to 
take  steps  to  that  end,  so  that  he  may  have  the  field  free  from  such  competition 
and  thereby  be  enabled  to  sell  his  goods. 

Section  10.  Enticement  of  employees. 

The  American  Banana  Co.  brought  an  action  under  section  7  of  the 
Sherman  Act  against  the  United  Fruit  Co.,^  alleging,  among  other 
things,  that  the  defendant  enticed,  or  sought  to  entice  away  the 
jDlaintiff's  employees,  and  oppressed,  or  sought  to  oppress,  such  of  its 
own  employees  as  presumed  to  buy  stock  in  the  plaintiff  company. 
With  respect  to  these  charges  Hough,  J.,  observed : 

*  *  *  These  proceedings,  however  unfair  and  immoral,  are  not  in  and  of 
themselves  forbidden  or  declared  to  be  unlawful  by  the  Sherman  act,  and  I 
do  not  think  that  a  cause  of  action  can  be  built  upon  these  acts  alone.  I  can 
not  regard  it  as  more  than  a  statement  of  evidence,  which  may  well  be  used  in 
explaining  or  proving  the  operation  if  not  the  formation  of  the  alleged  com- 
bination and  monopoly.* 

Section  11.  Bribery  and  espionage. 

Before  entering  the  final  decree  in  United  States  v.  American  To- 
bacco Co.  et  al.  the  Circuit  Court  for  the  Southern  District  of  New 
York''  considered  a  request  to  enjoin  the  defendants  "  from  espionage 
on  the  business  of  any  competitor,  from  bribery  of  employees  of  such 
competitor,  and  from  obtaining  information  from  any  United  States 
revenue  official."*    Lacombe,  J.,  denied  the  request,  saying: 

Why  any  one  individual  or  corporation  engaged  in  this  business  may  not 
acquire  such  information  as  he  Or  it  can  legitimately  obtain  from  private  or 
public  sources  as  to  the  business  of  a  competitor  we  fail  to  see.  When  illegiti- 
mate methods  are  proved,  they  may  be  dealt  with. 

Section  12.  Boycotting  and  blacklisting  by  trade  associations. 

Bo.ycotts  of  dealers  who  do  not  conduct  their  business  in  accordance 
with  the  wishes  of  trade  associations  have  been  specifically  condemned 
by  the  courts. 

1  160  Fed.,  184,  189  (C.  C,  1908). 

2  A  judgment  dismissing  the  complaint  was  affirmed  by  the  circuit  court  of  appeals 
(166  Fed.,  261)  and  the  Supreme  Court  (213  U.  S.,  347).  This  feature  of  the  case,  how- 
ever, was  not  discussed. 

3  191  Fed.,  .371,  .S81    (C.  C,  1911). 

*  See  Record  (C.  C.  So.  Dist.  N.  Y.).  Vol.  IT.  pp.  .326-327,  and  brief  for  the  United 
States  in  the  Supreme  Court,  p.  195;  also  United  States  r.  Standard  Oil  Co.  (C.  C.  E.  D. 
Mo.)  ;  Brief  of  facts  and  argument  for  petitioner,  Vol.  II,  pp.  422-428. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  475 

In  Mines  r.  Scribner  et  al./  which  was  an  action  brought  nnder 
section  7  of  the  Sherman  Act,  the  facts,  as  stated  by  the  court,  were 
as  follows : 

Defendants,  with  others,  became  members  of  the  American  Publishers'  Asso- 
ciation, whereby  90  per  cent  of  the  book  business  of  the  country  was  controlled. 
A  rule  was  adopted  and  agreed  to  all  around  that  they  would  not  sell  to  anyone 
who  cut  prices  on  copyrighted  books,  nor  to  anyone  who  should  be  known  to  have 
sold  to  others  who  cut  prices.  A  blacklist  was  to  be  kept,  containing  the  names 
of  such  persons,  and  no  one  on  that  blacklist  could  buy  any  books  of  anybody  in 
the  scheme.  Plaintiff  got  on  the  blacklist,  could  not  buy.  and  was  thereby 
injured,  and  claims  his  treble  damages. 

Piatt,  J.,  overruled  a  demurrer  to  the  declaration,  saying : 

It  is  true  that  this  scheme  does  not  prevent  each  publisher  from  putting  such 
price  as  he  sees  fit  upon  his  copyrighted  book;  but  it  compels  jobber  and 
retailer  to  stand  by  that  price,  whatever  it  may  be,  and  if  it  is  broken  in  any 
instance  it  puts  such  person  out  of  business.  It  is  not  content  with  refusing  to 
deliver  any  more  copies  of  the  particular  book  upon  which  he  cuts  the  price, 
but  it  closes  him  out  of  all  dealings  on  any  and  every  book,  copyrighted  or  not. 

The  copyright  law  can  not  help  the  defendants,  because,  In  the  first  place,  the 
restraint  is  not  confined  to  copyrighted  books,  and,  if  it  were,  it  can  not  be  so 
that  the  right  given  a  single  publisher  to  do  as  he  pleases  with  his  copyrighted 
book  can  be  extended,  so  that  he  can  combine  with  other  owners  of  copyrights 
and  permit  his  book  to  be  subject  to  the  rules  laid  down  by  the  united  owners.^ 

A  similar  principle  was  involved  in  Straus  v.  American  Publishers' 
Association.^  That  was  an  action  originally  instituted  in  the  Su- 
preme Court  of  New  York  praying  an  injunction  to  restrain  the  de- 
fendants from  interfering  with  the  purchase  and  sale  by  the  j^lain- 
tiffs  of  copyrighted  ])ooks  on  the  ground  that  the  defendants  were 
acting  under  an  agreement  in  violation  of  the  laws  of  New  York 
and  the  Sherman  law.  It  was  established  by  evidence  that  the  de- 
fendant association  was  com]^osed  of  about  75  per  cent  of  the  pub- 

1  147  Fed.,  927   (C.  C,  1900). 

2  But  see  Dneber  Watch  Case  Manufacturing  Co.  v.  Howard  W.Ttrh  Co..  00  Fed..  0.^7, 
decided  by  tlie  circuit  court  of  npix'Mls  for  the  second  circuit  in  1.S9.5.  In  tliat  case  the 
pl.-iiiitifT  s\ied  a  nninlier  of  competitors  tor  treble  damages  under  sec.  7  of  the  Slierman 
law.  The  complaint  allej^ed  in  sulistance  that  the  defendants  had  agreed  to  maintain 
arbitrary  and  fixed  prices  for  their  watchcases,  and  that  for  the  purpose  of  compelling 
the  plaintiff  to  join  with  them  therein  had  further  agreed  not  to  sell  an.v  goods  to  any 
dealer  who  d(>a!t  with  the  plaintiff.  A  majority  of  tlie  court  held  that  a  demurrer  to  the 
complaint  had  beon  rightly  sustained  below,  but  even  the  majority  could  not  agree  as 
to  the  ground  on  which  the  decision  should  be  based.  Lacomlie,  ,T.,  held  that  the  agree- 
ment was  not  in  violation  of  the  Sherman  law.  Shipman,  .!.,  although  agreeing  with 
the  action  of  the  lower  court,  refused  to  adopt  the  reasoning  of  Lacombe.  J.,  and  ex- 
pressly stated  that  be  decided  the  case  on  the  more  technical  ground  that  the  complaint 
failed  to  show  that  interstate  commerce  was  involved.  Wallace,  .7.,  on  the  other  band, 
dissented,  holding  that  the  agreement  complained  of  was  an  illegal  restraint  of  inter- 
state commerce  within  the  meaning  of  the  Sherman  law.  In  commenting  on  this  di'cision 
In  United  States  v.  Addyston  Pipe  &  Steel  Co.,  85  Fed.,  271  (C.  C.  A.,  sixth  circuit, 
1898),  Taft,  J.,  said  with  reference  to  the  three  opinions  expressed  therein  (p.  HOO)  : 
"These  varying  views  decided  the  case,  but  they  certainly  furnish  no  precedent  or 
authority."  See  also  Dueber  Watch  <'ase  Manufacturing  Co.  v.  E.  Howard  Watch  & 
Clock  Co.  et  al..  24  N.  V.  S.,  047   (Sup.  Ct,  1893), 

»231  U.  S.,  222   (1913). 


476  REPOET    OP    THE    COMMISSIONER    OF    CORPORATIONS. 

lishers  of  copyrighted  books  in  the  United  States,  and  that  its  mem- 
bers had  agreed  to  sell  such  books  only  to  those  who  maintained  cer- 
tain retail  prices  fixed  thereon  by  the  association ;  that  whenever  these 
prices  were  cut  by  retailers  the  association  would  issue  cut-off  lists, 
so  called,  directing  the  discontinuance  of  the  sale  of  books  to  of- 
fenders, and  that  the  plaintiffs  who  had  failed  to  maintain  the  fixed 
prices  had  been  put  upon  the  cut-off  lists  and  were  unable  to  secure  a 
supply  of  copyrighted  books  in  the  ordinary  course  of  business.  On 
these  facts  the  Court  of  Appeals  of  New  York  held,^  following  its 
previous  decision  in  Straus  v.  American  Publishers'  Association,^ 
that  the  plaintiffs  had  no  cause  of  action  because  the  books  involved 
were  copyrighted.  This  decision  was  reversed  by  the  Supreme  Court 
of  the  United  States  on  the  ground  that  the  agreement  of  the  de- 
fendants transcended  what  was  necessary  for  the  proper  protection 
of  the  copyright  monopoly,  applying  the  doctrine  announced  in 
Standard  Sanitary  Manufacturing  Co.  v.  United  States^  with  ref- 
erence to  patented  articles. 

In  United  States  v.  The  Eastern  States  Retail  Lumber  Dealers'  As- 
sociation and  others*  it  appeared  that  the  defendants  distributed 
information  in  a  certain  document  known  as  the  "  Official  Eeport," 
the  form  of  which  was  as  follows: 

Official  Report. 

[Name  of  the  particular  association  circulating  it.] 

STATEMENT  TO   MEMBERS    (WITH   THE  DATE), 

You  are  reminded  that  it  is  because  you  are  members  of  our  Association  and 
have  an  interest  in  common  with  your  fellow  members  in  the  information  con- 
tained in  this  statement,  that  they  communicate  it  to  you ;  and  that  they  com- 
municate it  to  you  in  strictest  confidence  and  with  the  understanding  that  you 
are  to  receive  it  and  treat  it  in  the  same  way. 

The  following  are  reported  as  having  solicited,  quoted  or  as  having  sold 
direct  to  the  consumers : 

(Here  follows  a  list  of  the  names  and  addresses  of  various  wholesale  dealers.) 

Members  upon  learning  of  any  instance  of  persons  soliciting,  quoting,  or  sell- 
ing direct  to  consumers,  should  at  once  report  same,  and  in  so  doing  sliould,  if 
possible,  supply  the  following  information : 

The  number  and  initials  of  car. 

The  name  of  consumer  to  whom  the  car  is  consigned. 

The  initials  or  name  of  shipper. 

The  date  of  arrival  of  car. 

The  place  of  delivery. 

The  point  of  origin. 

The  defendants  were  enjoined  from — 

*  *  *  combining,  conspiring,  confederating,  or  agreeing  together  or  with  others 
jointly  to  distribute,  and  from  jointly  distributing,  to  any  of  the  members  of  the 

MftS  N.  Y.,  496  (1008). 

2  177  N.  Y.,  473  (1904). 

3  226  U.  S.,  20  (1912). 

*234  U.  S.,  600,  605,  608,  609,  614  (1914). 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  477 

aforesaid  associatious  or  any  other  person  or  persons  any  information  showing 
soliciting,  quotations,  or  sales  and  shipments  of  lumber  and  lumber  products  from 
manufacturers  and  wholesale  dealers  to  consumers  of  or  dealers  in  lumber,  and 
from  the  preparing  and  distributing  the  said  list  known  as  the  "  Official  Report," 
heretofore  described,  or  by  the  use  of  any  similar  device. 

In  considering  this  case  on  appeal,  the  Supreme  Court,  by  Mr. 
Justice  Day,  said  in  part: 

*  *  *  These  lists  were  quite  commonly  spoken  of  as  blacklists,  and  when 
the  attention  of  a  retailer  was  brought  to  the  name  of  a  wholesaler  who  had 
acted  in  this  wise  it  was  with  the  evident  purpose  that  he  should  know  of  such 
conduct  and  act  accordingly.  True  it  is  that  there  is  no  agreement  among  the 
retailers  to  refrain  from  dealing  with  listed  wholesalers,  nor  is  there  any 
penalty  annexed  for  the  failure  so  to  do,  but  he  is  blind  indeed  who  does  not 
see  the  purpose  in  the  predetermined  and  periodical  circulation  of  this  report 
to  put  the  ban  upon  wholesale  dealers  whose  names  appear  in  the  list  of  unfair 
dealers  trying  by  methods  obnoxious  to  the  retail  dealers  to  supply  the  trade 
which  they  regard  as  their  own. 

*  *  ^  *  ■¥  *  « 

A  retail  dealer  has  the  unquestioned  right  to  stop  dealing  with  a  wholesaler 
for  reasons  sufficient  to  himself,  and  may  do  so  because  he  thinks  such  dealer  is 
acting  unfairly  in  trying  to  undermine  his  trade.*  "  But,"  as  was  said  by  Mr. 
Justice  Lurton,  speaking  for  the  court  in  Grenada  Lumber  Co.  v.  Mississippi,'' 
"  when  the  plaintiffs  in  error  combine  and  agree  that  no  one  of  them  will  trade 
with  any  producer  or  wholesaler  who  shall  sell  to  a  consumer  within  the  trade 
range  of  any  of  them,  quite  another  case  is  presented.  An  act  harmless  when 
done  by  one  may  become  a  public  wrong  when  done  by  many  acting  in  concert, 
for  it  then  takes  on  the  form  of  a  conspiracy,  and  may  be  prohibiteil  or  pun- 
ished, if  the  result  be  hurtful  to  the  public  or  to  the  individual  against  whom  the 
concerted  action  is  directed." 

When  the  retailer  goes  beyond  his  personal  right,  and.  conspiring  and  com- 
bining with  others  of  like  purpose,  seeks  to  obstruct  the  free  course  of  inter- 
state trade  and  commerce  and  to  unduly  suppress  competition  by  placing  ob- 
noxious wholesale  dealers  under  the  coercive  influence  of  a  condemnatory  re- 
port circulated  among  others,  actual  or  possible  customers  of  the  offenders, 
he  exceeds  his  lawful  rights,  and  such  action  brings  him  and  those  acting  with 
him  within  the  condemnation  of  the  act  of  Congress,  and  the  District  Court  was 
right  in  so  holding.     It  follows  that  its  decree  must  be  affirmed.' 

1  In  like  manner  it  has  been  hold  that  the  Sherman  law  does  not  prevent  a  sinslo  whole- 
saler from  refusing  to  deal  with  another  wholesaler.  Locker  r.  American  Tobacco  Co., 
218  Fed.,  447  (C.  C.  A.,  Second  Circuit,  1914).  The  court  there  said:  We  can  think  of 
no  reason  based  on  the  common  law  or  the  Sherman  law  which  required  the  introduction 
of  a  second  jobber  or  wholesaler  between  the  producer  and  the  consumer.  In  short,  we 
are  convinced  that  what  was  done  by  these  defendants  was  not  prohibited  by  law,  but  was 
a  reasonable  common  sense  trade  arrangement  adopted  by  the  exigencies  of  the  situation. 
See  also  Locker  v.  American  Tobacco  Co.,  195  N.  Y.,  565  (1908). 

2  217  U.  S.,  43.3,  440. 

s  In  Lawlor  r.  Loewe,  2.35  U.  S.,  522,  534  (1915),  Mr.  Justice  Holmes,  referring  to  East- 
ern Stati-s  Retail  Lumber  Dealers'  Association  v.  U.  S.,  said  :  "  Whatever  may  he  the  law 
otherwise,  that  case  establishes  that,  irrespective  of  compulsion  or  even  agreement  to 
observe  its  intimation,  the  circulation  of  a  list  of  '  unfair  dealers,'  manifestly  intended  to 
put  the  ban  upon  those  whose  names  appear  therein,  among  an  important  body  of  possible 
customers  combined  witli  a  view  to  joint  action  and  in  anticiiiation  of  such  reports,  is 
within  the  prohibit  ions  of  the  Sherman  .\ct  if  it  is  intended  to  restrain  and  restrains  com- 
merce among  the  States." 


478  EEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

METHODS  OF  COMPETITION  PROHIBITED  BY  DECREES  UNDER  THE 

SHERMAN  LAW. 

Section  13.  General  statement. 

A  number  of  specific  competitive  methods  have  been  prohibited  in 
decrees  entered  under  the  Sherman  law,  and  in  some  instances  the 
courts  have  in  terms  denounced  them  as  unfair.  These  decrees  have 
been  entered  in  two  classes  of  cases  (1)  where  the  suits  have  been 
contested,  and  (2)  where,  before  final  hearing,  the  parties  have  agreed 
on  the  terms  of  the  decree. 

Where  the  courts  have  held  that  the  defendants  have  violated  the 
law  and  the  terms  of  the  injunction  have  been  contested  by  counsel, 
the  practices  prohibited  are  presumably  within  the  condemnation  of 
the  statute,  at  least  when  considered  in  connection  with  the  surround- 
ing facts  and  circumstances.  This  is  particularly  true  where  cases 
have  been  appealed  and  the  terms  of  the  decrees  have  been  approved 
by  the  higher  courts. 

By  far  the  greater  number  of  prohibitions  of  unfair  competitive 
methods,  however,  are  found  in  "  consent  decrees."  The  usual  pro- 
cedure in  such  cases  has  been  for  the  Government  to  file  a  bill  setting 
forth  the  organization  of  the  offending  combination,  association,  or 
other  defendant,  the  violation  of  law  complained  of,  and  the  com- 
j^etitive  methods  employed  by  the  defendants.  The  latter  coming 
into  court  have  admitted  a  technical  violation  of  the  act  and  have 
agreed  to  the  terms  of  a  decree  satisfactory  to  the  Department  of 
Justice.  Under  these  circumstances  it  is  possible  that  the  courts 
have  not  scrutinized  the  injunctions  with  the  same  degree  of  care 
exercised  in  cases  where  the  terms  of  the  decree  have  been  objected 
to  by  the  defendants,  and  while  such  decrees  are  binding  on  the 
parties,  it  is  open  to  question  whether  all  the  competitive  methods  pro- 
hibited are  in  themselves  violations  of  the  Sherman  law.  Moreover, 
in  practically  every  decree  a  number  of  competitive  practices  have 
been  forbidden  and  it  can  not  therefore  be  determined  whether, 
taken  separately,  any  one  of  them  would  have  been  prohibited. 
Furthermore,  the  use  of  the  competitive  methods  in  a  given  case 
should  be  considered  in  the  light  of  surrounding  circumstances, 
such  as  the  character  of  the  defendant,  whether  a  corporate  or  other 
form  of  combination,  the  percentage  of  the  industry  controlled  by 
it,  and  other  related  facts.  But  while  the  legality  of  particular  com- 
petitive methods  probably  can  not  be  determined  from  these  decrees, 
the}^  show  at  least  that  the  methods  prohibited  are  unfair  in  the 
opinion  of  the  officials  charged  with  the  administration  of  the  anti- 
trust act,  and,  inferentially,  also  in  the  opinion  of  the  courts  signing 
the  decrees.  Moreover,  where,  as  sometimes  occurs,  a  particular 
practice  has  been  prohibited  in  a  number  of  decrees  and  under  vary- 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  479 

ing  circumstances  additional  weight  is  given  to  the  conclusion  that 
the  practice  is  of  itself  unlawful. 

The  important  competitive  methods  that  have  been  prohibited 
are  set  out  below. 

Section  14.  Price  Cutting. 

In  general. — The  defendants  in  United  States  v.  Central-West 
Publishing  Co.  et  al.  were  enjoined^  from  underselling  any  com.- 
peting  service  and  from  selling  any  part  of  their  service  at  less  than 
a  fair  and  reasonable  price,  or  at  less  than  a  fair  and  reasonable 
profit,  or  at  cost,  or  less  than  cost,  Avith  the  purpose  or  intent  of 
injuring  or  destroying  the  business  of  any  competitor. 

In  February,  1915,  the  Great  Lakes  ToAving  Co.  and  others  were 
enjoined  from,  among  other  things,  "engaging  in  so-called  'rate 
wars,'  or  making  competitive  cuts  from  its  regular  schedule  of 
tariff  rates,  relating  to  any  kind  of  services  furnished  by  the  towing 
company,  except  that  to  meet  (but  only  to  meet,  and  not  to  go  below.) 
actual  rates  made  by  the  competitor  or  competitors  for  the  same 
kind  and  quality  of  service,  the  towing  company  may  cut  not  exceed- 
ing 25  per  cent  from  its  regular  tariff  rates";  and  it  was  provided 
further,  "that  such  cut  shall  not  reduce  the  rate  beloAV  the  actual 
cost  of  such  service,  nor  shall  it  be  made  in  any  case  under  circum- 
stances constituting  in  fact  unfair  or  fraudulent  competition." 

Bonuses. — The  American  Thread  Co.  and  the  other  defendants  in 
that  case  were  enjoined  ^  "  from  offering  in  the  United  States  a  bonus 
or  gift  in  the  form  of  free  goods  of  any  kind  as  an  inducement  to 
any  class  of  customers  to  purchase  defendants'  threads,  except  that 
the  defendants  or  any  of  them  may  in  good  faith  give  or  offer  to 
give  or  distribute  samples  in  reasonable  quantities  in  order  to  intro- 
duce their  threads  and  establish  new  trade,  and  except  that  they  may 
offer  and  give  free  samples  to  actual  purchasers  for  bona  fide  distri- 
bution among  consumers:  provided,  however,  that  such  samples  to 
purchasers  shall  not  exceed  5  per  cent  of  their  purchases  at  any  one 
time." 

Section  15.  Price  discriminations. 

In  GENERAL. — The  General  Electric  Co.,  and  the  other  defendants 
in  that  case,  were  enjoined  ^  "  from  maintaining,  by  agreement,  differ- 
entials between  lamps  which  do  not  in  fact  differ  in  quality  or  effi- 
ciency." 

Between  localities  (local  price  cutting)  . — In  a  suit  against  the 
American  Thread  Co.  and  others  engaged  in  the  manufacture  and 
sale  of  thread,  the  defendants  were  restrained '  from  selling  or  offer- 

1  Consent  decree. 


480  EEPOET    OP    THE    COMMISSIONER    OF    COEPOEATIONS. 

ing  thread  below  the  cost  of  production,  or  at  prices  which,  after 
allowing  for  differences  in  cost  of  transportation,  grade,  quality,  or 
quantity  sold,  were  lower  than  the  prices  charged  in  other  parts  of 
the  United  States,  with  the  intent  of  thereby  obtaining  a  monopoly 
or  destroying  or  injuring  the  trade  or  business  of  another  or  prevent- 
ing another  from  engaging  in  the  thread  business. 

Between  a  competitor's  customers  and  its  own  customers. — The 
defendants  in  United  States  v.  Central-West  Publishing  Co.  et  al. 
were  enjoined  ^  from  sending  out  traveling  men  to  influence  the 
customers  of  competitors  so  as  to  secure  their  trade  without  regard 
to  price. 

The  American  Coal  Products  Co.,  the  Barrett  Manufacturing  Co., 
and  others  were  prohibited  ^  from  selling  coal  tar,  oil  tar,  and  roof- 
ing material  at  a  less  price  to  customers  of  competitors  than  they 
sold  them  to  their  own  customers  when  such  reduced  prices  were 
made  Avith  the  intention  of  driving  the  competitor  out  of  business  in 
any  particular  section  of  the  United  States. 

The  General  Electric  Co.  and  others  were  enjoined  ^  from  "  offering 
or  making  more  favorable  prices  or  terms  of  sale  for  incandescent 
electric  lamps  to  the  customers  of  any  rival  manufacturer  or  manu- 
facturers than  it  at  the  same  time  offers  or  makes  to  its  established 
trade,  where  the  purpose  is  to  drive  out  of  business  such  rival  manufac- 
turer or  manufacturers,  or  otherwise  unlawfully  to  restrain  the  trade 
and  commerce  of  the  United  States  in  incandescent  electric  lamps; " 
but  no  defendant  was  enjoined  from  "making  any  prices  for  in- 
candescent electric  lamps  to  meet,  or  to  compete  with,  prices  previ- 
ously made  by  any  other  defendant,  or  by  any  rival  manufacturer ; " 
and  nothing  in  the  decree  was  to  be  taken  in  any  respect  to  enjoin 
or  restrain  "  fair,  free  and  open  competition." 

In  United  States  v.  E.  I.  duPont  de  Nemours  &  Co.  et  al.,  certain 
defendants  were  enjoined  from  offering  more  favorable  prices  or 
terms  of  sale  for  the  products  manufactured  by  them  to  the  customers 
of  any  rival  than  they  at  the  same  time  offer  to  their  established 
trade,  "  where  the  purpose  is  to  unfairly  cripple  or  drive  out  of  busi- 
ness such  rival "  or  otherwise  unlawfully  to  restrain  trade,  but  it 
was  provided  that  no  defendant  should  be  restrained  from  making 
any  price  to  meet  or  to  compete  with  the  prices  made  by  any  other 
defendant,  or  by  any  rival,  and  that  nothing  in  the  decree  should  be 
taken  in  any  respect  to  enjoin  or  restrain  "  fair,  free  and  open  com- 
petition." 

The  American  Thread  Co.  and  the  other  defendants  in  that  case 
were  enjoined  ^  "  from  offering  or  giving  secret  rebates  or  other  secret 
inducements  to  any  customer  of  a  competitor  in  the  United  States." 

1  Consent  decree. 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  481 

Between  stockholders  and  nonstockholders. — The  Great  Lakes 
Towing  Co.  and  others  were  enjoined  from,  among  other  things, 
giving  to  any  customer  any  rate,  concession,  discount  or  rebate,  except 
such  as  are  given  equally  and  without  discrimination  to  all  customers 
for  the  like  service,  regardless  of  whether  or  not  such  customers  are 
stockholders  in  the  towing  company. 

BeTAVEEN   COMPETITORS   AND   NONCOMPETITOKS. TllC  AlumillUm   Co. 

of  America  was  enjoined^  from  charging  higher  prices  for  crude  and 
semifinished  products  to  manufacturers  competing  with  its  subsidi- 
aries than  it  charged  under  like  conditions  to  such  subsidiaries. 

Between  customers  who  purchase  a  specified  quantity  or  goods 
AND  those  who  DO  NOT. — The  American  Thread  Co.  and  the  other  de- 
fendants in  that  case  were  enjoined^  from  giving  or  offering  to 
wholesale  or  retail  dealers,  jobbers,  or  consumers  of  sewing  thread, 
any  bonus,  rebate  or  other  inducement  depending  upon  the  aggregate 
amount  of  future  purchases  to  be  made  by  them,  or  from  cooperating 
with  and  assisting  such  dealers  to  pool  their  orders  to  enable  them  to 
obtain  the  benefit  of  any  discount  or  other  concession  allowed  on  a 
specified  quantity  of  goods;  and  from  offering  or  giving  secret  re- 
bates or  other  inducements  to  the  customers  of  competitors ;  and  from 
offering  a  bonus  or  free  goods  as  an  inducement  to  any  class  of  cus- 
tomers to  purchase  their  threads. 

The  Great  Lakes  Towing  Co.  and  others  were  enjoined  from, 
among  other  things,  giving  to  any  customer  any  rate,  concession, 
discount  or  rebate,  except  such  as  are  given  equally  and  without  dis- 
crimination to  all  customers  for  the  like  service,  regardless  of  the 
amount  or  proportion  of  their  custom  furnished  to  the  towing 
company. 

Section  16.  Bogus  Independents. 

The  Centra  1-A\'est  Publishing  Co.  and  two  corporations  controlled 
by  it  were  enjoined^  "from  maintaining  any  auxiliary  plant  in  any 
cities  of  the  LTnited  States  apparently  independent,  but  in  fact  the 
property  of  the  Western  Newspaper  Union,^  or  its  officers  and  stock- 
liolders,  for  the  purpose  and  with  the  intent  of  making  the  newspaper 
trade  generally  believe  such  institutions  to  be  independent."  The 
American  Press  Association  was  enjoined  from  doing  similar  acts. 

In  United  States  v.  E.  I.  duPont  de  Nemours  &  Co.  et  al.,  certain 
corporate  defendants  were  each  enjoined  from  doing  business  under 
any  other  than  its  own  corporate  name  or  the  name  of  a  subsidiary 
and  it  was  provided  that  in  case  of  a  subsidiary  corporation,  the  con- 
trolling corporation  shoidd  cause  the  products  of  such  subsidiary 

1  Consent  decree.  -  Controlled  by  the  Ccutral-West  Publishing  Co. 

;}003r>°— 16 31 


482  EEPOKT    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

which  are  sold  in  the  United  States  and  bear  the  name  of  the  manu- 
facturer to  bear  also  a  statement  indicating  the  fact  of  such  control. 

The  General  Electric  Co.  was  enjoined^  from  conducting,  except 
in  its  own  name,  the  business  carried  on  by  it  in  incandescent  lamps, 
and  it  was  further  decreed  that  "  all  factories,  plants,  and  manufac- 
turing and  selling  departments  o])erated  or  owned  by  said  General 
Electric  Co.,  for  the  manufacture  and  sale  of  incandescent  lamps, 
shall  be  made  known  to  the  general  public  and  trade  as  the  property 
and  business  of  the  said  General  Electric  Co. ;  provided  that  the  Gen- 
eral Electric  Co.  is  not  prohibited  hy  this  decree  from  preserving  and 
using  the  trade  names  of  incandescent  lamps  lawfully  manufactured 
or  sold  by  it,  including  the  trade  names  now  employed  "  by  certain 
companies  mentioned  "  if  it  acquires  such  trade  names  and  the  busi- 
ness of  manufacturing  lamps  to  which  the  same  are  applied ;  but  such 
names  shall  be  publicly  known  as  the  property  of  the  General  Elec- 
tric Co." 

In  United  States  v.  American  Tobacco  Co.  et  al.  the  defendants 
were  enjoined  from  "doing  business  directly  or  indirectly  under  any 
other  than  its  own  corporate  name  or  the  name  of  a  subsidiary  cor- 
poration controlled  by  it;  Provided,  however,  That  in  case  of  a 
subsidiary  corporation  the  controlling  corporation  shall  cause  the 
products  of  such  subsidiary  corporation,  which  are  sold  in  the  United 
States  and  bear  the  name  of  the  manufacturer,  to  bear  also  a  state- 
ment indicating  the  fact  of  such  control."  ^ 

In  United  States  v.  American  Coal  Pioducts  Co.  et  al.  the 
use  of  the  name  of  any  one-time  independent  company  or  any  com- 
pany acquired  by  the  Barrett  Manufacturing  Co.  or  the  Coal  Prod- 
ucts Co.  was  enjoined^  and  prohibited  on  the  part  of  defendant  com- 
panies or  defendant  individuals,  except  as  departments  of  the  Bar- 
rett Manufacturing  Co.  and  except  for  the  use  of  any  registered  trade- 
mark which  was  to  be  permitted;  and  such  ownership  by  depart- 
ments was  required  to  be  made  public  by  printing  the  same  on 
letterheads,  billheads,  and  in  advertising. 

Section  17.  *'  Fighting  ships,"  "  fighting  brands/'  and  "  flying  squadrons." 

Fighting  ships. — It  has  lieen  a  common  practice  of  combinations 
or  conferences  of  steamship  lines  to  maintain  what  are  termed 
"  fighting  ships."  ^  These  vessels  are  employed  to  meet  and  destroy 
the  competition  of  other  lines,  particularly  that  of  lines  just  enter- 

1  Consent  decree. 

2  United  States  v.  American  Tobacco  Co.  et  al.,  191  Fed.,  371,  429  (C.  C,  1911).  See 
also  Report  of  the  Commissioner  of  Corporations  on  the  Tobacco  Industry,  Pt.  I,  pp. 
110-111. 

3  Investigation  of  shipping  combinations  under  H.  R.  587,  by  House  Committee  on  the 
Merchant  Marine  and  Fisheries,  62d  Cong.,  2d  sess. ;  Hearings,  Vol.  II,  pp.  1252-1254, 
1257 ;  Vol.  Ill,  pp.  53-54,  131, 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  483 

ing  the  field.  On  occasions  when  some  outside  company  or  ship- 
owner has  put  a  vessel  on  a  berth  near  a  vessel  belonging  to  one  of 
the  conference  lines  and  offered  to  carry  at  cheaper  rates,  a  fighting 
ship  has  been  dispatched  to  offer  the  same  or  a  lower  rate.  AMien  not 
engaged  in  thus  waging  war  on  a  competitor  the  vessels  can  be  em- 
ployed on  regular  charters.  In  the  case  of  United  States  v.  Hamburg- 
American  Steamship  Line  et  al.^  the  practice  of  the  members  of  a 
steamship  conference  contributing  to  the  maintenance  of  fighting 
ships  to  be  used  as  required  l)y  the  various  lines  was  condemned.  The 
injunction  in  this  case  restrained  the  defendants  from — 

combining,  conspii-iug  or  agreeing  to  interfere  with  or  restrain  the  business  of 
any  owner  of  a  vessel  operated  in  competition  with  tlie  vessel  or  vessels  of  one 
or  the  other  of  said  defendants,  by  providing,  operating,  or  maintaining  an  extra 
vessel  for  the  purpose  of  having  it  compete  with  such  competing  vessel  by 
offering  to  carry  passengers;     *     *     *. 

'\Miile  the  court  in  this  case  enjoined  the  defendants  from  com- 
bining or  agreeing  to  maintain  or  operate  and  from  contributing  to 
the  expense  of  a  fighting  ship,  the  following  clause  in  the  injunction 
apparently  leaves  any  one  of  the  companies  composing  the  combina- 
tion free  to  employ  this  method  of  competition  if  not  done  in  com- 
bination with  any  of  the  other  lines : 

This  injunction,  howevei-,  shall  not  in  any  way  affect  the  right  of  each  indi- 
vidual defeudiint  to  run  such  vessels  and  on  such  terras  as  such  individual 
defendant  may  choose  in  ojiijosition  to  any  competitor  provided  that  the  cost 
and  expense  thereof  is  not  contributed  in  whole  or  in  part  by  any  of  the  other 
defendants.^ 

In  a  subsequent  case^  the  conference  agreement  attacked  by  the 
(lovernment  provided  for  fighting  shii)s,  and  the  court  remarked  in 
dismissing  the  bill  that  if  there  were  evidence  that  steps  had  been 
taken  to  put  such  a  ship  on  they  w^ould  be  inclined  to  grapt  an 
injunction  similar  to  the  one  in  the  Hamburg-American  case. 

"  Fighting  brands." — It  has  been  the  practice  of  some  manufac- 
turers to  offer  certain  brands  of  goods  at  special  prices  in  competitive 
territory.  The  sale  of  these  goods  at  particularly  attractive  prices 
relieves  the  manufacturer  of  the  necessity  of  cutting  prices  on  estab- 
lished brands  Avhile  at  the  same  time  giving  the  dealer  practically  as 
good  an  article  at  a  price  which  will  take  the  business  from  com- 
petitors. Goods  used  for  this  purpose  have  been  termed  "  fighting 
brands"  and  were  defined  in  United  States  v.  American  Thread  Co. 
ct  ah*  to  be  "brands  which  are  devised  or  revived  and  used  for  the 
purpose  of  being  offered  principally  to  customers  of  competitors  at 

1216  Fod.,  971  (D.  C.  1014). 

-a.  I.oujrh  V.  Outerbridgo.  p.  45.-..  nm\  Mogul  Steamship  Co.  v.  McGregor.  Gow  &  Co., 
p.  404. 

3  United  States  v.  American-Asiatic  Steamship  Co.  et  al.,  l-'-O  Fed.,  li.'.S,  236  (D.  C, 
1915). 

*  Consent  decree. 


484  EEPOKT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

cut  prices,  that  is  to  say,  at  prices  lower,  or  on  terms  more  favorable, 
than  the  price  or  terms  askecl  by  the  seller  for  substantially  the  same 
thread  under  different  brands  or  trade  names."  As  thus  dehned, 
their  use  was  prohibited  by  the  decree  in  the  thread  case. 

"  Flying  squadrons." — Special  selling  forces,  sometimes  termed 
"  flying  squadrons,"  have  been  generally  used  to  push  these  fighting 
bi'ands.  In  the  thread  case  it  was  alleged  that  Avhere  an  independent 
jobber  refused  to  deal  with  the  defendants  these  salesmen  would  can- 
vass his  trade  and  offer  the  orders  obtained  to  the  jobber  as  an  induce- 
ment to  deal  with  the  defendants.  This  failing,  the  orders  w^ould  be 
offered  to  competing  jobbers  until  some  one  accepted  them,  or  in  the 
event  that  no  jobber  accepted  them  they  were  filled  direct  by  the 
defendant  thread  manufacturers.  The  use  of  flying  squadrons  was 
prohibited  in  the  thread  decree,^  as  was  the  special  canvassing  of 
any  dealer  or  jobber  in  the  manner  described  above. 

Section  18.  Exclusive  dealing^. 

Contracts  for  exclusfve  dealing. — In  United  States  v.  Standard 
Sanitary  Manufacturing  Co.  the  court  found  that  among  the  means 
adopted  by  the  defendants  to  carry  out  the  purposes  of  an  unlawful 
combination  were  certain  jobbers'  license  agreements  which  were 
required  to  be  executed  by  the  purchaser  in  order  to  obtain  licensed 
sanitary  enameled  ironware.  Among  other  things,  the  purchaser 
luider  such  contracts  agreed  "  not  to  purchase,  sell,  advertise  or  solicit 
orders  for,  or  in  any  way  handle  or  deal  in  sanitary  enameled  iron- 
ware of  any  manufacturer  not  licensed  under  the  letters  patent "  enu- 
merated in  the  agreement  except  with  the  express  Avritten  permission 
of  the  licensor.  The  defendants  were  enjoined  and  prohibited  from 
doing  anything  in  furtherance  of  said  agreements  and  from  enforc- 
ing any  of  the  terms  thereof.- 

The  American  Thread  Co.  and  others  were  enjoined  ^  "  from  so- 
liciting or  exacting  from  wholesale  or  retail  dealers  or  jobbers  or 
from  customers  of  competitors  in  the  United  States  any  agreement 
not  to  handle  or  to  cease  handling  the  brands  of  competitors." 

The  Great  Lakes  Towing  Co.  and  certain  corporations  controlled 
by  it  were  restrained  from  "entering  into  any  agTeement,  contract 
or  understanding,  direct  or  indirect,  with  any  customer,  new  or  old, 
for  the  exclusive  furnishing  of  the  whole  or  any  part  of  the  towing 
or  any  other  service  of  such  customer,  except  the  single  item  of  service 
then  immediately  to  be  performed,  and  either  as  respects  more  than 
one  port  or  place  or  as  respects  but  one  port  or  place,  to  the  end  that 
the  ultimate  rate  to  each  customer  shall  be  absolutely  the  Same  for 
each  like,  contemporaneous  item  of  service." 


1  Consent  decree. 

-Standard  Sanitary  Manufacturing  Co.  v.  United  States,  UJG  U.  S.,  UO,  4U  (1!>11.'). 


TEUST    LAWS   AND    UNFAIR   COMPETITION,  485 

In  n  petition  filed  by  tlie  Government  it  was  alleged  that  the 
General  P^lectric  Co.  and  National  Electric  Lamp  Co.  controlled  all 
patents  covering  tantalum  filament  and  tungsten  filament  lamps  and 
caused  dealers  to  enter  into  contracts  with  them  and  their  controlled 
companies  wherein  it  was  agreed  that  these  companies  would  sell 
tantalum  filament  and  tungsten  filament  lamps  to  such  dealers  if 
the  latter  would  purchase  from  such  companies  all  of  the  carbon  fila- 
ment lamps  required  by  them;  and  that  inasmuch  as  the  dealers 
were  compelled,  in  order  to  meet  the  demands  of  their  trade,  to  have 
all  three  types  of  lamps,  the  necessary  result  of  these  contracts  was 
to  compel  the  dealers  to  l)uy  carbon  filament  lamps  only  from  the 
defendants,  with  the  further  result  of  making  it  practically  im- 
])ossible  for  any  outside  company  to  successfully  engage  in  the  manu- 
facture and  sale  of  the  carl)on  filament  lamp.  In  this  case  the  General 
Electric  Co.  and  other  lamp-manufacturing  defendants  were  enjoined^ 
from  "enforcing  any  contracts,  arrangements,  agreements  or  re- 
quirements with  dealers.  jol)bers  and  consumers,  who  Imy  from  the 
said  defendants  either  tantalum  filament,  tungsten  filament,  metal- 
ized  carbon  filament  or  ordinary  carbon  filament  lamps,  or  any  of 
them,  by  which  such  dealers,  jobliers  and  consumers  are  compelled 
to  purchase  all  their  ordinary  carbon  filament  lamps  from  said  de- 
fendants as  a  condition  to  obtaining  such  other  typesof  lamps,  or  any 
of  them,  or  by  which  dealers,  jobliers  and  consumers  are  compelled 
to  purchase  any  one  or  more  of  the  above-mentioned  tj'pes  of  lamps 
from  the  said  defendants  as  a  condition  to  the  purchase  or  supply  of 
any  other  or  all  of  said  types  of  lamps  " ;  and  they  Avere  further  en- 
joined from  "discriminating  against  any  dealer,  jobber  or  consumer 
desiring  to  purchase  tantalum,  tungsten  or  metalized  carbon  filament 
lamps  because  of  the  fact  that  such  dealer,  jol)ber  or  consumer  pur- 
chases ordinary  carbon  filament  lamps  from  others,"  and  from  "  dis- 
ci'iminating  against  any  dealer,  jol)ber  or  consumer  desiring  to  pur- 
chase any  one  or  more  of  the  above-mentioned  types  of  lamps  be- 
cause of  the  fact  that  such  dealer,  jol)ber  or  consumer  purchases  any 
other  of  said  lamps  from  other  manufacturers  or  dealers." 

TvEFusAi.  TO  DEAL  SAAT3  OX  EXCLUSIVE  TERMS. — The  American  Thread 
Co.  and  others  were  enjoined^  from,  among  other  things,  "refusing 
to  deal  with,  or  discriminating  against,  or  threatening  to  refuse  to 
deal  with  or  to  discriminate  against  those  who  handle  the  goods  of 
competitors." 

The  Central-West  Publishing  Co.  and  two  other  corporations  con- 
trolled l)y  it  were  enjoined '  from  causing  or  permitting  their  agents 
or  salesmen  to  intimate  or  convey  the  imj^ression  that  unless  pub- 
lishers approached  by  such  salesmen  dealt  with  these  companies  they 

1  Consent  decree. 


486  EEPOET    OF    THE    COMMTSRTONER    OP    COEPORATTONS. 

would  be  discriminated  against  as  soon  as  the  American  Press  Asso- 
ciation, a  competitor,  should  be  put  out  of  business  by  the  competi- 
tion to  which  it  was  being  subjected. 

The  Great  Lakes  Towing  Co.  and  others  were  enjoined  from,  among 
other  things,  "  refusing  or  neglecting  to  furnish  service  as  speedily 
as  practicable  to  any  applicant  therefor,  except  where  refusal  to 
render  service  to  such  applicant  is  justified  by  a  good-faith  belief, 
communicated  to  the  customer,  that  payment  for  such  service  will 
not  promptly  be  made." 

In  another  suit  the  Government  alleged  that  the  proprietors  of  the 
Prince  Line,  Lamport  &  Holt  Line,  and  Hamburg- American  Line,  in 
furtherance  of  a  combination  and  conspiracy  in  violation  of  the  Sher- 
man Act,  and  in  violation  of  their  legal  duty  as  common  carriers, 
sought  to  coerce  shippers  and  destroy  the  competition  of  rivals  by 
refusing  altogether  to  carry  the  goods  of  such  shippers  as  refused  to 
confine  their  shipments  to  defendants'  lines  and  other  lines  with  whom 
the  defendants  were  in  combination.  The  court,  by  Lacombe,  J., 
enjoined  this  practice,  although  in  all  other  respects  the  bill  was 
dismissed.^ 

Section  19.  Use  of  certain  articles  as  a  condition  of  purchase  or  use  of 
otlier  articles. 

Uttlizing  a  patent  to  control  the  sale,  etc.,  of  unpatented  arti- 
cles.— The  General  Electric  Co.  and  the  other  defendants  in  that 
case  were  enjoined  ^ "  from  utilizing  any  patents  which  they  may  have 
or  claim  to  have  or  which  they  may  hereafter  acquire  or  claim  to  have 
acquired,  as  a  means  of  controlling  the  manufacture  or  sale  of  any 
type  or  types  of  lamps  not  protected  l)y  lawful  patents." 

ReqijirinCt  the  purchase  of  certain  unpatented  articles  as  a 
condition  of  purchasing  other  unpatented  articles  (full-line 
forcing). — Tlie  practice  of  requiring  dealers  to  order  additional  lines' 
or  brands~of  goods  as  a  condition  of  obtaining  some  other  line  has 
been  described  as  "  full-line  forcing."  In  United  States  v.  American 
Tobacco  Co.  et  al.^  the  defendants  were  enjoined,  among  other  things, 
from  "  refusing  to  sell  to  any  jobber  any  brand  of  any  tobacco  prod- 
uct manufactured  by  it,  except  upon  condition  that  such  jobber  shall 
purchase  from  the  vendor  some  other  brand  or  product  also  manu- 
factured and  sold  by  it ;  provided,  however,  that  this  prohibition  shall 
not  be  construed  to  apply  to  what  are  known  as  '  combination  orders,' 
under  which  some  brand  or  product  may  be  offered  to  a  jobber  or 
dealer  at  a  reduced  price,  on  condition  that  he  purchase  a  giA^en  quan- 
tity of  some  other  brand  or  product." 

1  United  States  v.  Prince  Line  (Ltd.)  et  al.,  220  Fed.,  230  (D.  C,  1915). 

2  Consent  decree. 

3  191  Fed.,  371,  429  (C.  C,  1911). 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  487 

Section  20.  Inducing  breach  of  competitors'  contracts. 

The  decree  in  United  States  v.  The  Burroughs  Adding  Machine  Co. 
et  al.^  directed  the  defendants  to  instruct  tlieir  agents  in  writing  to 
"  a]:)Sohitel3^  desist  and  refrain"  from  interfering  with  the  business, 
machines,  or  appliances  of  competitors  "  by  inducing  or  trying  to  in- 
duce such  purchasers  to  cancel  their  contracts  with  competitors  and 
to  return  to  such  competitors  the  adding  machines  or  appliances  so 
purchased."  The  petition  in  this  case  alleged  that  the  defendants  had 
instructed  their  agents  and  salesmen  how  to  manipulate  competitors' 
machines  for  the  purpose  of  showing  alleged  defects  therein,  and  thus 
dissatisfying  customers  or  prospective  customers  with  competing  ma- 
chines; and  also  that  they  had  supplied  agents  with  parts  or  illustra- 
tions misrepi-esenting  the  mechanism  of  machines  being  sold  by  com- 
petitors, for  the  purpose  of  deceiving  customers  or  prospective  cus- 
tomers of  such  competitors.  These  were  methods  apparently  used  by 
the  defendants  to  induce  the  cancellation  of  contracts  and  the  return 
of  competitors'  machines. 

In  United  States  v.  Central-West  Publishing  Co.,  Western  News- 
paper Union,  et  al.,  certain  of  the  defendants  engaged  in  selling 
stereotyped  news  and  other  matter,  and  the  so-called  "  patent  inside  " 
or  ready  printed  matter  to  country  newspapers,  were  enjoined  ^  from 
offering  to  protect  publishers  of  such  papers  against  expenses  and 
costs  of  any  suit  that  might  arise  from  their  breaking  contracts  with 
others  supjdying  the  same  class  of  material  and  entering  into  con- 
tracts with  the  defendants.  All  of  the  defendants  were  likewise  en- 
joined from  offering  l>onuses  of  paper  or  plate  service  free  or  at  a 
nominal  price  with  the  intent  of  inducing  or  enabling  customers  of 
competitors  to  break  their  contracts. 

Sction  21.  Espionage  by  corruption  or  bribery  of  employees. 

The  Burroughs  Adding  ISfachine  Co.  was  required '  to  direct  its 
servants  and  agents  to  desist  from  interfering  with  the  business  of 
competitors  hy  wrongfully  obtaining  information  respecting  tlie  busi- 
ness, sales,  or  shipments  of  such  competitors,  or  "by  fraudulent  or 
illegal  means  inducing  the  employees  of  said  competitors  to  give  them 
such  information,"  or  by  permitting  its  agents  or  employees  to  seek 
or  induce  others  to  seek  employment  with  competitors  for  the  purpose 
of  wrongfully  securing  information  as  to  the  business  of  said  competi- 
tors, or  by  any  other  similar  and  unlawful  means  ac<|uiring  such 
information. 

^  Consent  decree. 


488  REPORT    OP    THE    COMMISSIONER    OF    CORPORATIONS. 

Section  22.  Boycotting'  and  blacklisting  by  trade  associations. 

In  recent  years  there  has  been  manifested  a  tendency  toward  more 
direct  distribution;  that  is,  for  the  manufacturer  to  sell  directly  to 
the  retailer,  the  mail-order  house,  the  department  store,  and,  in  some 
instances,  even  to  the  consumer.  This  movement  has  been  opposed 
by  dealers  who  would  be  unfavorably  affected  by  such  direct  selling, 
and  organized  opposition  has  come  principally  from  associations  of 
jobbers,  wholesalers,  or  retailers.  Their  object  has  been  to  maintain 
the  established  system  of  selling,  and  thus  to  secure  for  themselves 
a  profit  on  all  products  passing  from  the  manufacturer  to  the  con- 
sumer. 

The  boycott  has  been  the  principal  means  used  to  further  this 
object.  Members  of  wholesalers'  associations  have  agreed  not  to 
patronize  manufacturers  who  sell  directly  to  retailers  or  consumers, 
and  the  members  of  retail  associations  have  likewise  refused  to  buy 
from  wholesalers  who  sell  to  consumers.  Various  methods  have  been 
employed  by  these  associations  to  advise  their  members  of  manu- 
facturers or  wholesalers  who  make  direct  sales.  In  some  instances 
lists  of  such  sellers,  sometimes  termed  "  black  lists,"  have  been  circu- 
lated among  the  members,  and  this  has  been  followed  by  a  boycott  of 
the  wholesalers  or  manufacturers  so  listed.  Eeciprocal  agTeements 
have  also  been  effected  between  wholesalers'  associatifms  and  manu- 
facturers' associations  whereby,  in  consideration  of  the  manufac- 
turers selling  only  to  the  wholesalers,  the  latter  have  agreed  to  pur- 
chase exclusively  from  such  manufacturers.  Retail  dealers  have  en- 
tered into  similar  agreements  with  wholesalers.  To  further  the  exe- 
cution of  these  agreements  both  classes  of  associations  have  exchanged 
lists  of  their  members  in  order  that  they  might  be  advised  of  the 
concerns  with  whom  they  should  deal.  Such  lists,  are  sometimes 
termed  "white  lists."  In  some  instances  wholesale  associations  have 
admitted  manufacturers  and  importers  to  associate  membership,  and 
in  such  cases  the  lists  of  associate  members  constitute  another  form 
of  "  white  list." 

A  number  of  such  organizations  have  been  attacked  under  the 
Sherman  law,  and  the  courts  have  condemned  not  only  certain  ends 
sought  to  be  attained  by  these  associations  but  have  prohibited  the 
use  of  any  means  by  which  these  purposes  may  be  achieved.  The 
usual  means — the  hoycott,  black  list,  and  white  list — ^have  been  spe- 
cifically enjoined. 

Unlawful  objects. — In  a  suit  by  the  United  States  against  the 
Southern  Wholesale  Grocers'  Association  the  members  of  the  associ- 
ation were  enjoined^  from,  among  other  things,  combining,  conspir- 
ing, confederating,  or  agreeing,  together  or  with  others,  expressly 

^  Consent  decree. 


TRUST    LAWS   AND    UNFAIR   COMPETITION,  489 

or  impliedly^  directl}-  or  indirectly  (1)  to  prevent  manufacturers  or 
producers  from  selling  commodities  to  any  person  ^\ho  was  not  a 
member  of  the  association  or  who  was  not  listed  in  the  Green  Book 
(white  list)  ;  (2)  to  prevent  any  person,  firm,  or  corporation  not  a 
member  of  the  association  from  purchasing  commodities  from  manu- 
facturers, jobbers,  or  producers;  (3)  to  do  or  refrain  from  doing 
anything  the  purpose  or  effect  of  which  was  to  hinder  or  prevent,  by 
intimidation  or  coercion,  anji'  person,  firm,  or  corporation  from  buy- 
ing or  selling  any  commodity  from  and  to  whomsoever  might  be 
agreed  upon. 

In  United  States  i\  The  National  Wholesale  Jewelers'  Association, 
the  National  Association  of  Manufacturing  Jewelers  et  ah,  the  de- 
fendants were  enjoined  ^  from  combining,  conspiring,  confederating, 
or  agreeing  with  each  other  or  with  others,  expressly  or  impliedly, 
directly  or  indirectly  (1)  to  hinder  or  prevent  manufacturers  of 
jewelry  or  jewelry  products  from  selling  the  same  to  any  person, 
firm,  or  corporation  not  a  jobber  or  wholesaler  of  such  products  or 
not  so  classified  by  the  defendant  wholesale  association  or  not  listed 
in  the  rating  books  of  the  trade;  (2)  to  hinder  and  prevent  such 
manufacturers  from  selling  to  retail  dealers,  department  stores,  mail- 
order houses,  purchasing  syndicates,  or  others  desiring  to  purchase ; 
(3)  to  hinder  or  jirevent  any  person,  firm,  or  corporation  from  buying 
jewelry  directly  from  manufacturers;  (4)  to  hinder  or  prevent  any 
j)erson,  firm,  corjioration,  or  other  organization  from  buying  or 
selling  jewelry  from  or  to  whomsoever  he,  they,  or  it  may  desire; 
(5)  to  favor  with  their  custom  and  patronage  only  those  manufac- 
turers who  agreed,  or  whose  avowed  policy  it  was,  to  sell  through  the 
Avholesaler  or  jobber  and  not  directly  to  retailers,  mail-order  concerns^ 
department  stores,  or  purchasing  syndicates;  (G)  to  intimidate  or 
coerce  manufacturers  or  producers  of  jeweliy  into  selling  only  to 
persons,  firms,  etc.,  appi-ovcd  by  the  wholesale  association;  (7)  to 
do  (u*  refrain  from  doing  anything  the  purpose  or  effect  of  which 
would  be  to  hinder  or  prevent,  by  intimidation,  coercion,  or  with- 
drawal, or  threatened  withdrawal,  of  patronage,  any  person,  firm, 
etc.,  from  buying  or  selling  jewelry  wherever,  whenever,  and  from 
or  to  whomsoever  might  be  agreed  upon  by  the  seller  or  purchaser. 

In  United  States  v.  Tacific  Coast  Plumbing  Supply  Association  et 
al.  the  defendants  were  enjoined  ^  from  combining,  conspiring,  con- 
federating, or  agreeing  together,  or  with  others,  expressly  or  im- 
l>liedly,  directly  or  indirectly,  to  prevent  manufacturers  of  plumbing 
supi)lies  from  selling  such  supplies  to  any  person  not  a  member  of 
the  defendant  supply  association  or  whose  name  did  not  appear  on 
the  list  of  dealers  pulffished  by  the  defendant  association. 

1  Consent  decree. 


490  KEPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

In  United  States  v.  Philadelphia  Jobbing  Confectioners'  Associa- 
tion et  al.,  the  defendants  were  enjoined/  among  other  things,  "from 
combining,  conspiring,  confederating,  agreeing  or  contracting  to- 
gether, or  with  one  another,  or  with  others,  orally  or  in  writing, 
expressly  or  impliedly,  directly  or  indirectl}^  with  a  view  to  prevent- 
ing manufacturers  or  producers,  or  their  agents,  engaged  in  shipping 
and  selling  such  commodities  among  the  several  States,  from  ship- 
ping and  selling  such  commodities  freely  in  the  open  market "  and 
"  from  sending  to  manufacturers  or  producers,  or  their  agents,  en- 
gaged in  selling  or  shipping  said  commodities  among  the  several 
States,  communications,  oral  or  written,  suggesting  directly  or  indi- 
rectly that  such  manufacturers  or  producers,  or  their  agents,  shall 
refrain  from  selling  such  commodities  directly  to  the  consuming  or 
retail  trade,  or  to  jobbers  not  members  of  said  association." 

Boycotts. — In  United  States  v.  National  Wholesale  Jewelers'  Asso- 
ciation et  al.  the  defendants  were  enjoined  ^  "  from  combining,  con- 
spiring, confederating,  or  agreeing  with  each  other  or  with  others, 
expresslj?^  or  impliedly,  directlj^  or  indirectly  to  bo3^cott  or  threaten 
Avith  loss  of  custom  or  patronage  any  manufacturer  engaged  in  inter- 
state or  foreign  commerce  in  jewelry  or  jewelry  products  for  having 
sold,  or  being  about  to  sell  jewelry  or  jewelry  products  to  retail 
dealers,  department  stores,  mail-order  houses,  purchasing  syndicates, 
or  to  any  other  person,  firm,  or  corporation  not  engaged  in  the  whole- 
sale or  jobbing  jewelry  business." 

Bo3^cotts  have  also  been  specifically  prohibited  in  United  States  v. 
Pacific  Coast  Plumbing  Supply  Association  et  al.,^  United  States  v. 
Southern  "Wholesale  Grocers'  Association  et  al.,^  and  United  States  v. 
Philadelphia  Jobbing  Confectioners'  Association  et  al.^ 

Black  lists. — In  United  States  v.  The  Eastern  States  Retail  Lum- 
ber Dealers'  Association  and  others-  the  defendants  were  enjoined 
from  "■  combining,  conspiring,  confederating,  or  agreeing  together  or 
with  others  jointly  to  "distribute,  and  from  jointly  distributing,  to  any 
of  the  memljers  of  the  aforesaid  associations  or  any  other  person 
or  persons  any  information  showing  soliciting,  quotations,  or  sales 
and  shipments  of  lumber  and  lumber  products  from  manufacturers 
and  wholesale  dealers  to  consumers  of  or  dealers  in  lumber"  and 
from  the  preparation  and  distribution  of  lists  known  as  the  "  Official 
Report,"  heretofore  described,"  or  by  the  use  of  any  similar  device. 

The  defendants  in  United  States  v.  National  Wholesale  Jewelers' 
Association,  National  Association  of  Manufacturing  Jewelers  and 
others,  were  enjoined,^  among  other  things,  from  "  publishing  or 
distributing,  or  causing  to  be  published  or  distributed,  or  aiding  or 
assisting  in  the  publication  or  distribution  of  *  *  *  the  names  of 
any  manufacturers  of  jewelry  or  jewelry  products  who  have  been 

1  Consent  decree.  -234  U.  S.,  600  (1914).  »  See  p.  476. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  491 

or  are  selling  or  shipping  jewelry  or  jewelry  products  to  any  person, 
firm,  corporation,  or  other  organization  not  classified  or  recognized 
by  the  said  National  Wholesale  Jewelers'  Association  as  legitimate 
wholesalers  or  jobbers"  or  not  listed  in  certain  rating  books  as 
wholesalers  or  jobbers,  "or  the  names  of  any  manufacturers  from 
whom  any  such  person,  firm,  corporation,  or  other  organization 
has  been,  is,  or  is  supposed  to  be  receiving  jewelry  or  jewelry 
products." 

The  defendants  in  United  States  v.  Pacific  Coast  Plumbing  Sup- 
ply Association  et  al.  were  enjoined,^  among  other  things,  from  cir- 
culating, causing  to  be  circulated,  or  aiding  in  the  cii-culation  of 
"  the  name  of  any  manufacturer  of  plumbing  supplies  who  is  or  may 
be  selling  and  shipping  plumbing  supplies  to  persons,  firms,  or  cor- 
porations wlio  are  not  members  of  the  said  Pacific  Coast  Plumbing 
Supply  Association,"  or  who  are  not  listed  in  the  so-called  Blue  Book 
published  b}'  one  of  the  defendants,  or  any  book,  pamphlet,  or  list  of 
like  character. 

The  defendants  in  United  States  v.  The  x^merican  Thread  Co. 
et  al.  were  enjoined^  "from  soliciting,  making,  ratifying,  or  con- 
firming, by  agreement  or  understanding  of  any  kind  or  nature  with 
any  other  corporation,  copartnership,  or  person,  any  lists  of  wholesale 
or  retail  dealers  or  jobbers  in  the  United  States  with  whom  trade  in 
sewing  thread  shall  not  be  carried  on." 

The  defendants  in  United  States  v.  The  New  Departure  Manufac- 
turing Co.  et  al.  were  enjoined,*  among  other  things,  from  "  selecting, 
making  up.  ratifying  or  confirming  by  combination,  conspiracy, 
mutual  agreement  or  understanding  by  and  between  any  of  said 
parties,  any  lists  of  manufacturers  or  jobbers  or  dealers  with  whom 
trade  shall  or  shall  not  be  carried  on    *    *    *    ." 

White  lists — lists  of  APrnoYED  manufacturers  and  dealers. — 
The  Southern  Wholesale  Grocers'  Association  and  its  members  were 
enjoined,*  among  otlier  things,  from  publishing  or  encouraging 
the  publication  or  distributi<m  of  any  list  of  wholesale  grocers 
located  in  tlie  territor}?^  embraced  by  said  organization  who  had  an- 
nounced their  intention  or  agreed,  directly  or  indirectly,  expresslj^  or 
imi)liedly,  to  work  in  harmony  with  said  association.  They  were 
also  enjoined  from  publishing  or  encouraging  the  publication  or  dis- 
tribution of  lists  of  manufacturers  or  producers  who  had  expressly 
or  impliedly,  directly  or  indirectly,  agi'eed  to  sell  only  to  members 
of  said  association,  or  to  persons  or  firms  listed  in  the  so-called  (ireen 
Book,  entitled  "  Official  List  of  Wholesale  Grocers  in  the  States  of 
Alal)ama,  Arkansas.  District  of  Columbia,  Florida,  Georgia,  Indian 
Territory,  Louisiana,  Maryland,  Mississippi,  North  Cai'olina,  Okla- 

1  Consent  decree. 


492  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

homa,  South  Carolina,  Tennessee,  Texas,  and  Virginia,"  or  any  list 
of  like  character.^  In  a  contempt  proceeding  subsequently  brought 
for  violating  this  decree,  the  Government  having  conceded  that  it 
Avould  not  ask  punishment  for  any  act  Avhich  did  not  violate  both  the 
decree  and  the  Sherman  laAV,  it  was  held  that  members  of  the  associa- 
tion who  continued  to  send  to  manufacturers  lists  of  dealers  who  had 
announced  their  intention  or  agreed,  directly  or  indirectly,  expressly 
or  impliedly,  to  work  in  harmon}'  with  the  association,  were  guilty  of 
contempt.^ 

Section  23.  Defamation  of  competitors  and  disparagement  of  competitors' 
goods. 

Tlie  Central- West  Publishing  Co.,  and  certain  corporations  con- 
trolled by  it,  were  enjoined  ^  from  causing  or  permitting  their  agents 
or  salesmen  to  circulate  reports  or  to  intimate  that  these  companies 
would  put  the  American  Press  Association  out  of  lousiness,  or  that 
the  latter  would  not  be  able  to  continue  in  business  against  the  compe- 
tition of  such  companies,  or  that  the  American  Press  Association  in- 
tended to  combine  with  them.  They  were  further  enjoined  from  un- 
fairly criticizing  and  abusing  the  method  of  the  American  Press 
Association  with  reference  to  advertising,  from  misrepresenting  the 
business  and  business  methods  of  the  American  Press  Association, 
with  the  intent  and  for  the  purpose  of  taking  away  its  customers  or 
otherwise  injuring  its  business,  and  from  continuing  or  participating 
in  unfair  attacks  upon  the  said  press  association,  with  the  purpose 
of  injuring  or  depreciating  or  destroying  the  value  of  its  property 
and  securities. 

The  American  Press  Association  was  likewise  enjoined  from  doing 
some  acts  of  a  similar  nature  for  the  purpose  of  taking  away  the 
customers  of  the  Western  Newspaper  Union  (controlled  by  the  Cen- 
tral-West Publishing  Co.)  or  destroying  the  value  of  its  property 
and  securities. 

All  the  companies  above  referred  to  were  enjoined  from  commit- 
ting any  acts  of  "  unfair  competition,"  and  particularly  from  doing, 
among  other  things,  the  acts  above  referred  to. 

The  American  Thread  Co.  and  others  have  likewise  been  enjoined  ^ 
"  from  attacking  the  credit  or  liusiness  reputation  of  or  the  quality 
of  thread  dealt  in  by  an}^  competitor  in  the  United  States,  by  means 

1  Substantially  similar  injunctions  havo  Ix'on  is'suofl  in  Uio  following  cases:  Fnited 
States  V.  National  Wholesale  Jewelers'  Association,  National  Association  of  Manufactur- 
in.K  Jewelers  et  al.  ;  t'nited  States  r.  Pacific  Coast  Plnmliintj  Supply  Association  et  al.  ; 
United  States  r.  New  Departure  Manufacturing  Co.  et  al.  ;  United  Slates  r.  Philadelphia 
Jobbing  Confectioners'  Associalion  et  al.  ;  and  United  States  r.  National  Association  of 
Retail  Druggists,  et  al. 

2  United  States  r.  Southern  Wholesale  Grocers' Associalion,  :.'07  Fed.,  4.34  rD.  C,  1013). 
"  Consent  decree. 


TRUST    LAWS    AND    UNFAIR    COMPETITION,  493 

of  any  report  known  to  be  false  or  which  there  is  no  reasonable 
ground  to  believe." 

Section.  24.  Preventing   competitors   from   obtaining  raw   material   or 
machinery. 

The  Government  alleged  that  the  Alnmininn  Co.  of  America  ow^ned 
from  80  to  90  per  cent  of  the  raw  material  in  the  United  States  w^hich 
entered  into  a  crude  product,  and  controlled  by  contract  the  disposi- 
tion of  the  remainder;  and  by  contract  wdth  foreign  companies  pre- 
vented the  importation  of  such  raw  material,  and  that  the  said  com- 
pany through  subsidiaries  controlled  from  50  to  70  per  cent  of  the 
manufacture  of  finished  products  from  this  raw  material.  This  com- 
pany was  restrained  ^  from : 

1.  Delaying  shipments  of  raw  material  to  any  manufacturer  com- 
l»eting  with  its  own  subsidiaries  in  the  manufacture  and  sale  of  fin- 
ished products,  without  reasonable  notice  and  cause. 

2.  Refusing  to  ship  or  to  continue  shipments  of  such  material  to  a 
competing  manufacturer  upon  contracts  or  orders,  and  particularly 
on  partially-filled  orders. 

3.  Delaying  bills  of  lading  on  such  shipments. 

4.  Furnishing  known  defective  material  to  such  competitors. 

5.  Charging  higher  prices  for  crude  or  semifinished  products  to 
manufacturers  competing  with  its  subsidiaries  than  it  charged  under 
like  conditions  to  such  subsidiaries. 

6.  Kefusing  to  sell  criule  or  semifinished  products  to  prospective 
competitors  on  like  terms  and  conditions  of  sale  as  it  sold  to  its  sub- 
sidiaries. 

7.  From  demanding,  as  a  condition  precedent  to  selling  such  mate- 
rial to  a  competitor,  that  it  should  divulge  the  terms  which  the  com- 
])etitor  would  make  to  secure  the  work  in  connection  with  w  hicli  the 
material  would  be  used  and  from  giving  this  information  to  its  sub- 
siiliaries  or  others. 

8.  liequiring  competitors  not  to  compete  in  certain  lines  with  the 
company  or  its  subsidiaries  as  a  condition  of  securing  material. 

9.  Eepresenting  that  unless  companies  dealt  with  it  or  its  sub- 
sidiaries they  would  be  unable  to  secure  a  sufficient  supply  of  the 
material,  or  at  a  price  that  would  enable  them  to  compete  with  it; 
or  that  their  supply  would  be  cut  off  entirely. 

10.  Preventing  the  expansion  of  the  business  of  other  manufac- 
turers by  threatening  to  cut  off  their  supply  of  raw  material  if  they 
attem]ited  to  enlarge  their  business. 

11.  Raising  the  price  of  crude  or  semifinished  products  to  its  sub- 
sidiaries in  order  to  raise  it  to  competing  manufacturers. 


1  Consent  decree. 


494  REPORT    OF    THE    COMMISSIONER    OF    COEPOKATIONS. 

In  United  States  v.  General  Electric  Co.  et  al.,  the  Government 
alleged,  among  other  things,  that  the  defendants  either  prevented  or 
hindered  the  manufacturers  of  raw  material  and  machinery  employed 
in  the  manufacture  of  lamps  from  selling  to  competitive  companies 
with  the  purpose  and  result  of  driving  them  out  of  business,  or  forc- 
ing them  to  sell  out  to  the  defendants  or  to  join  the  combination.  The 
General  Electric  Co.  and  the  lamp-manufacturing  defendants  were 
enjoined  ^  from  "  making  or  carrying  out  directly  or  indirectly,  any 
contracts  Avith  any  manufacturer  or  manufacturers  of  lamp-making 
machinery,  or  with  any  manufacturer  or  manufacturers  of  bulbs  and 
tubing  for  incandescent  lamps,  whereby  such  manufacturers,  or  any 
of  them  shall  be  bound  not  to  sell  the  goods,  manufactured  by  them, 
respectively,  to  others  than  the  said  defendants  or  any  of  them,  or 
hindered  from  so  doing  or  obligated  to  sell  to  the  said  defendants 
or  any  of  them,  at  other  and  diiferent  prices  and  terms  of  payment 
than  those  to  which  they  severally  may  sell  to  other  purchasers." 

Section  25.  Coercion,  threats,  and  intimidation. 

Threats  to  establish  competing  plants. — In  T'^^nited  States  -". 
Central- West  Publishing  Co.  et  al.,  the  defendants  were  enjoined  ^ 
from  threatening  competitors  of  either  of  them  that  they  must  cease 
competing  or  sell  out  to  one  or  the  other  of  them,  and  from  threat- 
ening that  unless  they  did  their  industries  would  be  destroyed  by 
the  establishment  of  near-by  i)lants  to  actively  compete  with  them, 
"  or  by  any  other  method  of  unfair  competition."  The  above-named 
companies  were  also  enjoined  from  threatening  any  customer  of  a 
competitor  with  starting  a  competing  plant  unless  he  patronized  one 
or  the  other  of  the  defendants.- 


1  Consent   decree. 

2  Cf.  Petition  in  United  States  v.  Corn  Prortiuts  Refining  Co.,  in  wbich  it  was  alleged 
that  the  defendant  "  informed  the  various  candy  manufacturers  throughout  the  country 
that  it  expected  them  to  purchase  a  certain  very  large  percentage  of  the  glucose  needed  by 
them  from  the  Corn  Products  Refining  Company  :  tliat  if  said  company  did  not  get  a  suffi- 
cient percentage  of  such  glucose  business,  it  would  go  into  the  candy  manufacture  itself  in 
competition  with  such  manufacturers,"  and  that  pursuant  to  this  threat  it  acijuired  control 
of  the  Novelty  Candy  &  Chocolate  Co.  for  the  purpose  (among  others)  of  retaliation 
against  those  manufacturing  confectioners  purchasing  starch  and  glucose  from  independ- 
ent  manufacturers. 

And  see  Rice  v.  Standard  Oil  Co..  l.'>4  Fed.,  464,  409  (C.  C,  190.^)),  where  it  was  alleged, 
among  other  things,  that  the  defendant  and  its  associates  operated  "  retail  stores  for  the 
sale  of  groceries,  oil,  and  other  commodities  in  localities  where  retailers  banded  togetliei- 
and  agreed  to  purchase  and  did  purchase  oil  of  the  plaintiff,  for  the  puri>ose  of  injuring 
sucli  retailers  and  customers  of  the  plaintiff  by  destroying  their  grocery  or  other  business 
so  lobg  as  they  should  buy  oil  of  the  plaintiff,"  and  that  they  also  sold  groceries  and  mer- 
chandise "  to  the  customers  of  the  plaintiffs  customers  at  such  ruinous  prices  as  to 
threaten  ruin  and  loss  to  the  plaintiff's  customers."  The  court  sustained  a  motion  to  dis 
miss  the  declaration'  on  the  ground  that  the  averments  were  too  vague,  and  observed  that 
the  plaintiff  failed  to  name  any  of  his  customers  who  were  thus  affected.  See  also  Stand- 
ard Oil  Co.  I".  Doyle,  p.  459. 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  495 

Threats  to  sue  for  infringement  of  patents. — The  New  De- 
parture Manufacturing  Co.  and  other  corporations  engaged  in  the 
manufacture  and  sale  of  bicycle  accessories  and  parts,  particularly 
coaster  brakes,  formed  a  combination  to  fix  prices  and  for  other 
purposes,  the  scheme  being  built  around  a  system  of  licensing  the 
sale  and  use  of  articles  in  the  construction  of  which  a  basic  patent 
Avas  professedly  necessary.  On  the  dissolution  of  this  combination 
at  the  suit  of  the  GoA'ermnent  these  corporations  were  enjoined^ 
from  Avarning,  harassing,  or  intimidating  by  means  of  personal  acts, 
letters  or  adAertisements  any  corporations  or  persons  in  relation 
to  the  sale,  shipment,  and  trade  in  bicycle  accessories  and  parts.  By 
reference  to  the  petition  in  this  case  it  appears  that  the  intimidation 
consisted  of  threats  to  sue  jobbers  and  dealers  for  infringement  in 
case  they  dealt  in  any  coaster  brake  other  than  that  of  the  members 
of  tlie  combination. 

Section  26.  Miscellaneous. 

Retention  of  competitor's  property. — The  Central-West  Publish- 
ing Co.,  the  Western  Newspaper  Union,  and  the  Western  NeAvspaper 
Union  of  New  York  were  enjoined  ^  "  from  in  any  manner  retaining 
or  permitting  the  retention  by  their  agents  or  employees  of  plate 
metal  or  other  property  belonging  to  the  American  Press  Associ- 
ation, or  other  com[)etitor,"  and  the  American  Press  Association 
was  likcAvisc  prohibited  from  retaining  property  belonging  to  the 
Western  NeAA^spaper  Union.^ 

Purchase  of  stock  for  the  purpose  of  harassing  a  competitor. — 
The  Western  NeAvspaper  Union,  the  Western  NeAvspaper  Union  of 
NeAV^  York,  the  Central- West  Publishing  Co.,  and  certain  individuals 
AA'ere  enjoined^  from  causing  any  person  or  company  to  purchase 
stock  or  become  interested  in  the  American  Press  Association,  a 
couipetitor,  for  the  purpose  or  AA'ith  the  effect  of  harassing  said 
association  by  unconscionable  or  unreasonable  demands  for  an  ex- 
amination of  its  books  or  inquiry  into  its  business  methods,  or  the 
institution  of  suits  Avith  such  or  like  i:)urpose  in  AioAV.-' 

FEDERAL  TRADE  COMMISSION  ACT  AND   OTHER  ACTS   RELATING 

TO  METHODS  OF  COMPETITION. 

Section  27.  Federal  Trade  Commission  Act. 

In  section  5  of  the  Federal  Trade  Commission  Act,  approved  Sep- 
tember 26,  1914,  unfair  methods  of  competition  in  commerce  are  de- 
clared unlaAvful  and  the  Commission  is  empowered  to  prohibit  the 

1  Consent  docrco. 

=  Cf.  Warren  Mills  v.  New  Orleans  Seed  Co.,  p.  40S. 

•'  Cf.  Funck  r.  Farmers'  Elevator  Co.  of  Gowrie  et  al.,  p.  4U0  ;  and  Forrest  v.  Uy.  Co., 
p.  4G1. 


496  REPORT    OF    THE    COMMISSIONER    OF    CORPOEATIOISIS. 

use  of  such  methods.    The  hmguage  of  this  section  has  been  quoted 
in  full  on  page  130.    The  substantive  law  of  the  section  is  as  follows: 

Sec.  5.  That  unfair  methods  of  competition  ^  in  commerce  are  hereby  declared 
unlawful. 

The  commission  is  hereby  empowered  and  directed  to  prevent  persons,  part- 
nerships, or  corporations,  except  banks,  and  common  carriers  subject  tu  the 
acts  to  regulate  commerce,  from  using  unfair  methods  of  competition  in  com- 
merce. 

Authority  is  given  the  commission  to  proceed  under  this  law  if  in 
its  opinion  such  action  is  in  the  public  interest. 

Section  28.  Clayton  Antitrust  Act. 

Sections  2  and  3  of  the  Clayton  Act,  approved  October  15,  1914, 
prohibit  certain  practices  to  lessen  competition  with  respect  to  price 
discrimination  and  exclusive  contracts.  The  language  of  these  two 
sections  is  as  follows : 

Sec.  2.  That  it  shall  jje  unlawful  for  any  person  engaged  in  commerce,  in 
the  course  of  such  commerce,  either  directly  or  indirectly  to  discriminate  in 
price  between  different  purchasers  of  commodities,  which  commodities  are  sold 
for  use,  consumption,  or  resale  within  the  United  States  or  any  Territory 
thereof  or  the  District  of  Columbia  or  any  insular  possession  or  other  place 
luider  the  jurisdiction  of  the  United  States,  where  the  effect  of  such  discrimina- 
tion may  be  to  substantially  lessen  competition  or  tend  to  create  a  monopoly  in 
any  line  of  commerce:  Proinded,  That  nothing  herein  contained  shall  jirevent 
discrimination  in  price  between  purchasers  of  commodities  on  account  of  differ- 
ences in  the  grade,  quality,  or  quantity  of  the  commodity  sold,  or  that  makes 
only  due  allowance  for  difference  in  the  cost  of  selling  or  transiwrtation,  or 
discrimination  in  jtric'e  in  the  same  or  different  communities  made  in  good 
faith  to  meet  comix;tition :  And  provided  further.  That  nothing  herein  contained 
shall  prevent  persons  engaged  in  selling  goods,  wares,  or  merchandise  in  com- 
merce from  selecting  their  own  customers  in  bona  tide  transactions  and  not  in 
restraint  of  trade. 

Skc.  y.  That  it  shall  be  unlawful  for  any  pex'son  engaged  in  commerce,  in  the 
course  of  such  commerce,  to  lease  or  make  a  sale  or  contract  for  sale  of  goods, 
wares,   merchandise,  machinery,   supplies  or  other  commotlities,  whether  pat- 

1  In  United  Slates  v.  Keystone  Watch  Case  Co.  et  al.,  lilS  Fed.,  502,  518  (D.  C,  1015), 
jMcriierson,  Circuit  Jiid.ye.  said  in  part :  "  Whatever  makes  it  more  difBcult  for  such  persons 
to  carry  on  their  business  restrains  theui,  and  restrains  tlieir  trade;  l)ut  (to  spealc  gen- 
erally) as  every  successful  effort  of  a  merchant  to  increase  his  own  trade  makes  it  harder 
for  his  rivals  to  succeed,  and  therefore  restrains  their  trade,  and  as  Congress  certainly  did 
not  intend  to  condemn  the  proper  exercise  of  business  zeal  and  energy,  vp«  must  recur  to  the 
rule  of  reason  and  ask — not  merely  what  is  restraint  of  trade,  but  what  is  unreasonable 
restraint  of  trade?  On  this  subject  we  are  certainly  able  to  say  some  things  with  con- 
lidence.  Competitors  must  not  be  oppressed  or  coerced  ;  fraudulent  or  unfair  or  oppressive 
rivalry  must  not  be  pursued.  And  if  these  words  are  criticized  as  too  general  we  may 
reply  that  such  generality  is  apparently  unavoidable,  as  some  recent  legislation  of  Congress 
testifies,  and,  moreover,  we  may  safely  deny  that  the  words  are  too  vague  for  satisfactory 
use  ;  for  it  must  be  remembered  that  the  common  agreement  of  moral  opinion  in  the  com- 
munity furnishes  an  adetjuate  guide  to  their  practical  meaning  and  their  practical  applica- 
tion.    They  are  not  likely  to  be  misapprehended  or  misapplied." 


TRUST   LAWS   AND    UNFAIR   COMPETITION.  497 

ented  or  unpatented,  for  use,  consumption  or  resale  within  tlie  United  States 
or  any  Territory  tliereof  or  the  District  of  Columbia  or  any  insular  iwssession 
or  other  place  under  the  jurisdiction  of  the  United  States,  or  fix  a  price  charged 
therefor,  or  discount  from,  or  rebate  upon,  such  price,  ou  the  condition,  agree- 
ment or  understanding  that  the  lessee  or  purchaser  thereof  sliall  not  use  or 
deal  in  the  goods,  wares,  merchantlise,  macliinery,  supplies  or  other  commodi- 
ties of  a  competitor  or  comi)etitors  of  the  lessor  or  seller,  where  the  effect  of 
such  lease,  sale,  or  contract  for  sale  or  such  condition,  agreement  or  under- 
standing may  be  to  substantially  lessen  competition  or  tend  to  create  a  monopoly 
in  any  line  of  commerce. 

By  section  11  the  Federal  Trade  Commission  is  authorized  to 
enforce  compliance  with  sections  2  and  3  of  the  act. 

This  legishition  is  of  such  recent  date  that  there  are  as  yet  few 
decisions  of  courts  to  throw  light  on  its  construction  or  its  application 
to  concrete  facts. 

In  Elliott  ]\Iachine  Co.  v.  Center  ^  the  defendant  urged  that  section 
3  of  the  Clayton  Act  was  not  retroactive  and  could  not  affect  cour 
tracts  entered  into  before  its  enactment.  This  contention  was  denied, 
Sessions,  J.,  saying,  in  part: 

The  statute  does  not  in  terms  except  from  its  operation  any  agreements  or 
contracts,  past,  present  or  future,  and  in  the  absence  of  such  exception,  it  is  to 
be  presumed  that  Congress  intended  to  prohibit  not  only  the  making  of  future 
contracts  but  also  the  further  performance  of  past  contracts  of  tlie  kind  speci- 
fjg^_  =f=  *  *  jt  jj^  iio^v  too  well  settled  to  admit  of  controversy  that  a  contract 
to  do  a  thing,  lawful  when  made,  may  be  avoided  by  subsequent  legislation 
making  it  unlawful  and  that  an  Act  of  Congress  may  lawfully  affect  rights 
which  had  their  inception  before  its  passage.^ 

In  Sperry  &  Hutchinson  Co.  v.  Fenster  et  al.^  it  appeared  that  the 
plaintiff  issued  trading  stamps  to  subscribers  who  agreed  to  distribute 
the  stamps  only  to  customers,  and  that  the  defendants  obtained  such 
stamps  from  subscribers  under  conditions  equivalent  to  a.  purchase 
and  gave  them  to  their  own  customers  as  an  inducement  for  trading. 
On  an  application  for  a  preliminary  injunction  the  defendants  con- 
tended that  the  plaintiff's  practice  of  seeking  to  enjoin  and  in  certain 
States  to  prosecute  dealers  using  such  stamps  without  having  sub- 
scribed for  the  right  so  to  do,  and  without  having  obtained  the  stamps 
by  pa3anent  to  the  issuing  company,  is  contrary  to  the  decisions  of  the 
United  States  Supreme  Court  and  to  the  provisions  of  the  hnvs  for- 
bidding monopoly.  Chatfield,  J.,  issued  {  temporary  injunction, 
saying,  in  part : 

1227  Fed.,  124   (D.  ('.,  1015). 

2  Citing  L.  &  N.  R.  U.  Co.  v.  Mottk'.v,  210  U.  S.,  407  (1011)  ;  Anuoiir  racklns  Co.  v. 
U.  S.,  200  U.  S.,  50  (lOUiSj  ;  1".  B.  i:  W.  U.  K.  Co.  v.  Scliuljei-t,  224  f.  S.,  Ou:;  (1012)  ; 
Addyston  Tipe  &  Steel  Co.  v.  U.  S.,  175  U.  S.,  211  (1890)  ;  Portland  R.y.  Co.  v.  Oreyou 
R.  U.  Comm.,  220  U.  S..  ;;97  (101^)  ;  A.  C.  L.  R.  Co.  v.  Finn,  105  Fed.,  685  (C.  C.  A., 
1012)  ;  Ih)lt  V.  llenley,  103  Fed.,  1020  (C.  C.  A.,  1012). 

»210  Fed.,  755,  750  (D.  C,  1915). 

30035°— 1(3 32 


498  EEPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

This  statute  [Clayton  Act,  sec.  31  forbids  tlie  converse  of  the  acts  complained 
of  in  the  present  action,  and  we  have  nothing  to  do  with  what  might  happen  if 
the  Green  trading  stamp  people  were  seeking  to  forbid  the  nse  by  its  subscribers 
oii  any  other  kind  of  trading  stamps.  This  might  or  might  not  be  a  restriction 
upon  competition  or  tend  to  effect  a  monopoly.^ 

Section  29.  The  Act  to  Regulate  Commerce. 

In  addition  to  the  above,  the  provisions  of  the  interstate-commerce 
law  -  making  it  a  crime  for  a  raih'oad  to  give,  or  for  a  shipper  to 
receive,  a  rebate  from  the  published  tariffs  of  the  railroads,  as  well  as 
those  provisions  prohibiting  unjust  discrimination  and  the  giving  of 
undue  preference  to  any  shipper,  may  be  regarded  as  directed  at  one 
form  of  unfair  competition.  A  shipper  who  secures  a  lower  rate  than 
is  enjoyed  by  his  competitors,  or  who  obtains  an  undue  preference  in 
some  other  form,  is  frequently  in  a  position  to  exclude  them  from 
certain  territory  and  thus  to  deprive  the  public  entirely  of  comj)eti- 
tion  in  the  particidar  locality.  The  administration  of  these  provi- 
sions of  the  interstate-commerce  law  respecting  rebates,  unjust  dis- 
criminations, and  imdue  preferences  is  in  lai-ge  measure  conferred  on 
the  Interstate  Commerce  Commission,  and  their  enforcement  is 
lodged  with  the  said  Commission  and  the  courts.  No  attempt  Avill  be 
made  in  this  report  to  summarize  the  decisions  construing  these  pro- 
visions, but  the  portions  of  the  statutes  quoted  beloAv  will  serve  to 
give  a  general  idea  of  the  unfair  advantages  in  competition  which  it 
was  intended  to  prevent : 

*  *  *  if  any  common  carrier  subject  to  the  provisions  of  this  act  shall, 
directly  or  indirectly,  by  any  special  rate,  rebate,  drawback,  or  other  device, 
charge,  demand,  collect,  or  receive  from  any  person  or  persons  a  greater  or  less 
compensation  for  any  service  rendered,  or  to  be  reutlered,  in  the  transportation 
of  passengers  or  property,  subject  to  the  provisions  of  this  act,  than  it  charges, 
demands,  collects,  or  receives  from  any  other  person  or  persons  for  doing  for 
him  or  them  a  like  and  contemporaneous  service  in  tlie  transportation  of  a  like 
kind  of  traffic  under  substantially  similar  circumstances  and  conditions,  such 
common  carrier  shall  be  deemed  guilty  of  unjust  discrimination,  which  is  hereby 
prohibited  and  declared  to  be  unliiwful. 

*  *  *  it  shall  be  unlawful  for  any  common  carrier  subject  to  the  provisions 
of  this  act  to  make  or  give  any  undue  or  unreasonable  preference  or  advantage 
to  any  particular  person,  company,  firm,  corporation,  or  locality,  or  any  par- 
ticular description  of  traffic,  in  any  respect  whatsoever,  or  to  subject  any  par- 
ticular person,  company,  firm,  coriwratiou,  or  locality,  or  any  particular  de- 
scription of  traffic,  to  any  undue  or  unreasonable  prejudice  or  disadvantage 'in 
any  respect  whatsoever.^ 

*  *  *  it  shall  be  unlawful  for  any  person,  persons,  or  corporation  to  offer, 
grant,  or  give,  or  to  solicit,  accept  or  receive  any  rebate,  concession,  or  dis- 
criminntiou  in  respect  to  the  transportation  of  any  property  in  interstate  or 

iCf.  Merchants'  Legal  Stamp  Co.  v.  Murphy  et  al.,  p.  IHOu. 

234  Stat.  L.,  587. 

3  24  U.  S.  Stats.,  pp.  379-380. 


TEUST    LAWS    AND    UNFAIR   COMPETITION.  499 

foreign  commerce  by  auy  common  carrier  subject  to  said  Act  to  regulate  com- 
merce ami  the  Acts  amendatory  thereof  wliereby  any  sucli  property  shall  by 
any  device  whatever  be  transported  at  a  less  rate  than  that  named  in  the  tarifls 
pul)lishetl  and  filed  by  such  carrier,  as  is  required  by  said  Act  to  regulate  com- 
merce and  the  Acts  amendatory  thereof,  or  whereby  any  other  advantage  is 
given  or  discrimination  is  practiced.     *     *     * 

In  construing  and  enforcing  the  provisions  of  this  section,  the  act,  omission, 
or  failure  of  auy  officer,  agent,  or  other  i>erson  acting  for  or  employed  by  any 
common  carrier,  or  shipper,  acting  within  the  scope  of  his  employment,  sliail  in 
every  case  be  also  deemed  to  be  the  act,  omission,  or  failure  of  such  carrier  or 
shipper  as  well  as  that  of  the  person.  Whenever  any  carrier  files  with  the 
Interstate  Commerce  Commission  or  publishes  a  particular  rate  under  the  pro- 
visions of  the  Act  to  regulate  commerce  or  Acts  amendatory  thereof,  or  par- 
ticipates in  any  rates  so  filed  or  published,  that  rate  as  against  such  carrier, 
its  oflicers  or  agents,  in  any  prosecution  begun  under  this  Act  shall  be  conclu- 
sively deemed  to  be  the  legal  rate,  and  any  departure  from  such  rate,  or  any 
offer  to  depart  therefrom,  shall  be  deemed  to  be  an  offense  under  this  section 
of  this  Act.' 

No  carrier,  unless  otherwise  providctl  by  this  Act,  sludl  engage  or  participate 
in  the  transportation  of  passengers  or  property,  as  defined  in  this  Act,  unless  the 
rates,  fares  and  charges  upon  which  the  same  are  transported  by  said  carrier 
have  been  filed  and  published  in  accordance  with  the  provisions  of  this  Act; 
nor  shall  any  carrier  charge  or  demnnd  or  collect  or  rec-eive  a  greater  or  less 
or  different  compensation  for  such  transportation  of  passengers  or  property,  or 
for  any  service  in  connection  therewith,  between  the  points  named  in  such 
tariffs  than  the  rates,  fares,  and  charges  which  are  specified  in  the  tariff  filed 
and  in  effect  at  the  time;  nor  shall  any  carrier  refund  or  remit  in  any  manner 
or  by  any  device  any  portion  of  the  rates,  fares,  and  charges  so  specified,  nor 
extend  to  any  shipper  or  person  any  privileges  or  facilities  in  the  transporta- 
tion of  passengers  or  property,  except  such  as  are  specified  in  such  tariffs : 
Provided,  That  wherever  the  word  "  carrier  "  occurs  in  this  Act  it  sliall  be  held 
to  mean  "  conunon  carrier."  ^ 

A  fiirtlier  relevant  provi-sioii  of  the  Interstate-Commerce  law  is 
tliat  which  prohibits  common  carriers  or  their  agents  from  disclosinj'', 
without  the  consent  of  the  shipper  or  consignee,  any  information 
concerning  any  shipment  in  interstate  commerce  made  by  them,  and 
likewise  makes  it  unlawful  to  solicit  or  knowingly  receive  such 
information.    This  part  of  the  law  is  as  folloAvs: 

It  shall  be  unlawful  for  any  conunon  carrier  subject  to  the  provisions  of  this 
Act,  or  any  oflicer,  agent,  or  employee  of  such  conunon  carrier,  or  for  any  other 
person  or  coritoration  lawfully  authorized  by  such  conunon  carrier  to  receive 
information  therefrom,  knowingly  to  disclose  to  or  permit  to  be  acquired  by  any 
person  or  corporation  other  than  the  shipper  or  consignee,  without  the  consent 
of  such  shipper  or  consignee,  any  information  concerning  the  n.-ituro.  kind, 
quantity,  destination,  consignee,  or  routing  of  any  property  tendered  or  delivered 
to  such  common  carrier  for  interstate  transportation,  which  information  mny 
be  used  to  the  detriment  or  prejudice  of  such  shipper  or  consignee,  or  which 
may    improperly   disclose   his   business   transactions   to    a   competitor ;    and    it 

'   1  34  U.  S.  Stats.,  pp.  587-588.  -  "A  U.  S.  Stats.,  p.  5S7. 


500  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

shall  also  be  unlawful  for  auy  person  or  corporation  to  solicit  or  knowingly 
receive  any  such  information  wliich  may  be  so  used     *     *     *  * 

The  law  also  provides  that  Avhenever  a  carrier  by  railroad  shall  in 
competition  with  a  water  route  reduce  the  rates  on  the  carriage  of  any 
species  of  freight  to  or  from  competitive  points  it  shall  not  be  per- 
mitted to  increase  such  rates  unless  after  hearing  it  shall  be  found 
that  such  proposed  increase  rests  upon  changed  conditions  other  than 
the  elimination  of  water  competition.^ 

1  06  U.  S.  stats.,  p.  55".  This  is  a  part  of  the  act  to  create  tlie  Commerce  Court,  and 
was  offered  as  an  amendment  by  Senator  lUirton,  who  explained  its  purpose  as  follows  :  "  It 
has  developed  in  judicial  proceedings  in  two  instances  that  certain  great  industrial  com- 
binations maintain  information  bureaus.  Those  engaged  in  the  worli  of  tliese  bureaus,  by 
divers  methods,  none  of  which,  I  think,  can  be  rated  as  commendable,  obtain  fi'om  railway 
corporations,  or  through  their  agents,  information  relating  to  the  business  of  their  minor 
competitors.  For  example,  a  great  establishment  ascertains  that  a  competitor  intends  to 
ship  into  the  State  of  Oh.io,  Indiniia,  or  Texas  a  consignment  of  merchandise.  Tlie  amount 
of  that  merchandise  becomes  known  to  the  information  bureau,  and  the  name  of  the  con- 
signee is  also  ascertained.  Using  this  information,  a  strenuous  effort  is  made  to  prevent 
the  competitor  from  disposing  of  his  merchandise,  from  making  any  sales  in  the  locality  to 
which  the  sliipment  Ls  made.  An  unfair  advantage  is  thus  given  to  the  larger  establish- 
ment, which  enables  it,  in  fi  measure,  to  crush  out  competition,  I  have  a  mass  of  informa- 
tion on  this  subject,  if  there  is  a  desire  that  I  should  read  it."  (Congressional  Record, 
June  1,  1910,  vol.  45,  Pt.  VII,  p.  7207.) 

In  the  brief  for  the  Government  in  U.  S.  v.  Reading  Company  et  al.  (D.  C.  E.  D.  Pa.) 
it  was  stated  that  "  in  plain  violation  of  this  provision  of  law,  defendant  Reading  Railway 
Co.  made  a  practice  of  furnishing  each  morning  to  an  employee  of  the  defi'ndant  Read- 
ing Coal  Co.,  sent  to  it  for  that  purpose,  a  complete  list  of  all  the  anthracite  coal 
shipments  transported  over  its  lines  and  received  by  it  at  Philadelphia  during  the  pi-evious 
day,  together  with  the  names  of  all  the  shippers  and  consignees.  *  *  *  This  practice 
continued  until  it  was  detected  and  complained  of  by  an  examiner  of  the  Interstate  Com- 
merce Commission  late  in  the  year  1012." 

The  following  sources  of  information  indicate  that  manufacturers  and  dealers  have 
engaged  in  the  practice  of  bribing  employees  of  railroads  to  disclose  information  con- 
cerning shipments  of  competitors :  United  States  v.  Standard  Oil  Co.  of  New  Jersey 
(C.  C.  E.  D.  Mo.),  173  Fed.,  177,  100  (1909),  brief  of  facts  and  arguments  of  petitioner. 
Vol.  II,  pp.  358-428,  and  record.  Vol.  V,  pp.  250;J-2505,  Vol.  VI,  pp.  .".0:;2-:!0.3.S  ;  State 
(Mo.)  V.  Standard  Oil  Co.  of  Indiana,  Watt'rs-Pierce  Oil  Co.,  and  Republic  Oil  Co.,  218 
Mo.,  1,  71,  72,  98,  102,  103,  105,  106,  115,  123,  174,  222,  285,  286,  397,  398;  Report  of 
the  Commissioner  of  Corporations  on  the  Petroleum  Industry,  Pt.  I,  p.  19,  and  Pt.  II,  p.  669. 

By  the  decree  in  United  States  v.  Burroughs  Adding  Machine  Co.  et  al.,  the  defendant 
company  was  directed  to  instruct  its  agents  to  desist  from  interfering  with  the  business 
of  competitors,  by  v/rongfully  obtaining  information  respectmg  the  business,  sales,  or 
shipments  of  such  competitors. 

For  testimony  concerning  efforts  of  the  Southern  Paeilic  Co.  to  secure  copies  of  mani- 
fests of  cargoes  of  the  Philadelphia  &  Gulf  Steamship  Co.'s  steamers,  see  hearings  before 
the  House  Committee  on  the  Merchant  Marine  and  Fisheries  in  the  investigation  of  shipping 
combinations  under  House  resolution  587,  62d  Cong.,  2d  sess.,  vol.  2,  pp.  934-943. 

The  annual  report  of  the  Board  of  Directors  of  the  New  Jersey  Lumbermen's  Protective 
Association,  submitted  Feb.  20,  1906,  contained  the  following  :  "  In  our  last  report  we 
called  attention  to  the  necessity  of  bringing  i)rcssure  to  bear  upon  the  various  railroad 
companies  to  furnish  the  name  of  consignors  of  irregular  shipments.  *  *  *  "  (I'.  S. 
V.  Eastern  States  Retail  Lumlier  Dealers  Association  et  al.,  record,  Vol.  IV,  petitioner's 
Exhibit  No.  13,  p.  277  ;  see  also  pp.  244-245.) 

-  36  U.  S.  Stats.,  p.  548. 


TRUST   LAWS    AND    UNFAIR   COMPETITION.  501 

Section  30.  Legislation  prohibiting  importation  of  articles  bearing  decep- 
tive trade  descriptions. 

A  section  of  the  trade-mark  act  of  1005  prohibits  the  entry  of 
merchandise  \Yhich  shall  copy  or  simulate  the  name  of  any  domestic 
manufacture,  or  manufacturer,  or  of  any  manufacturer  located  in  any 
foreign  country  which  affords  similar  privileges  to  citizens  of  the 
United  States,  or  which  shall  copy  or  simulate  a  trade-mark  regis- 
tered in  accordance  with  this  act,  or  shall  bear  a  name  or  mark  calcu- 
lated to  induce  the  public  to  believe  that  the  article  is  manufactured 
in  the  United  States,  or  that  it  is  manufactured  in  any  foreign  coun- 
try or  locality  other  than  the  country  or  locality  in  which  it  is  in  fact 
manufactured.^ 

133  U.  S.  stats.,  730;  Cuf?toms  Rppciilations  of  190S.  art.  315;  Treasury  Dw.  2GtOS. 
A  somewhat  similar  provision  was  contained  in  an  act  approved  Mar.  3,  1871,  proliibiting 
tlie  importation  of  watches,  watch  cases,  watch  movements,  or  parts  of  watch  movements 
of  foreign  manufacture,  which  sliall  copy  or  simulate  the  name  or  trade-mark  of  any  domes- 
tic manufacturer,  unless  such  domestic  manufacturer  is  the  importer  of  the  same  (IG  U.  S. 
Stats.,  580).  See  also  Tariff  Acts,  26  U.  S,  Stats.,  6i:'. ;  28  U.  S.  Stats.,  .''.47,  .548  ;  30  I'.  S. 
Stats.,  207  ;  In  re  Vintschger,  50  Fed.,  459  (C.  C,  1892i  ;  21  Op.  Atty.  Gen.,  2G0  (1895). 


CHAPTER  IX. 

STATE  STATUTES  CONCERNING  ITNFAIR  COMPETITION  AND 
CERTAIN  RELATED  TRADE  PRACTICES. 

Section  1,  Introduction. 

There  is  a  considerable  volume  of  State  legislation  prohibiting 
certain  dishonest  or  improper  trade  practices,  some  of  which  may 
be  regarded  as  unfair  competition.  These  laws  are  designed  (1) 
to  protect  business  men  from  competitive  practices  hurtful  to  them, 
and  in  some  instances  injurious  to  the  purchasing  public  or  to  public 
morals  as  well;  and  (2)  to  protect  the  public  from  dishonest  or 
fraudulent  practices  of  manufacturers  or  dealers.  The  chief  dis- 
tinction between  the  two  classes  of  statutes  is  that  in  the  first  the 
protection  of  the  competitor  appears  to  be  the  primary  object,  while 
in  the  second  the  protection  of  the  public  appears  to  be  the  dominant 
piirpose.  As  an  illustration  of  the  first  class  may  be  mentioned 
laws  making  it  criminal  to  offer  a  bribe  or  secret  commission  to 
the  agent  or  employee  of  another  for  the  purpose  of  influencing 
his  conduct  respecting  his  principal's  or  employer's  business.  One 
of  the  causes  for  the  enactment  of.  such  laws  was  unquestionably 
the  prevalence  of  the  practice  of  giving  buyers  for  commercial 
houses,  domestics,  and  others,  commissions  on  purchases  made  for 
their  employers.  In  addition  to  preventing  an  abuse  of  the  fiduciary 
relation  of  principal  and  agent  which  results  in  loss  to  the  employer, 
these  statutes  protect  the  more  scrupulous  manufacturer  or  merchant 
who  finds  himself  too  often  unable  to  sell  in  competition  with  those 
willing  to  resort  to  bribery  in  order  to  secure  patronage.  Statutes 
jn'ohibiting  the  use  by  one  corporation  of  a  name  previously  adopted 
by  another,  or  prohibiting  manufacturers  or  dealers  from  repre- 
senting, by  marks,  labels,  or  otherwise,  that  the  goods  of  one  manu- 
facturer are  those  of  another,  are  instances  of  legislation  having 
a  similar  purpose  but  perhaps  more  clearly  directed  to  the  pro- 
tection of  the  competitor.  On  the  other  hand,  an  example  of  laws 
apparently  intended  pi-imarily  to  guard  the  purchasing  public 
against  fraud  and  imposition  is  found  in  those  statutes  forbidding 
false  or  misleading  advertisements  or  the  use  of  false  marks  respect- 
ing the  quality  of  gold  or  silver  ware.  Laws  of  this  character,  how- 
ever, incidentally^  protect  the  honest  manufacturer  or  dealer  from 
the  competition  of  unscrupulous  rivals. 

502 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  503 

Some  of  these  statutes  appear  also  to  be  a  move  in  the  direction 
of  curtailing  in  a  measure  the  liberality  with  which  the  common  law 
regarded*  the  statements  of  tradesmen  respecting  their  own  goods. 
So  far  as  his  competitors  were  concerned,  at  the  common  law  the 
dealer  could  "  puff "  his  own  goods  as  much  as  he  liked.^  Laws 
^prohibiting  false  or  misleading  advertisements  constitute  a  limi- 
tation on  the  rule  that  the  dealer  may  make  any  statements  what- 
soever respecting  his  goods,  being  responsible,  if  at  all,  only  to 
the  defrauded  customer.  In  a  number  of  jurisdictions  at  least, 
false  statements  in  advertisements  are  prohibited,  and  to  this  ex- 
tent manufacturers  or  dealers  are  protected  against  the  loss  of  cus- 
tom through  the  misrepresentations  of  less  conscientious  competitors. 
Similarly,  if  the  quality  of  articles  of  commerce  may  not  be  misrep- 
resented by  marks  or  brands,  not  onl}^  the  purchasing  public  is  bene- 
fited, but  the  honest  trader  as  well. 

This  chapter  deals  with  legislation  on  the  following  subjects:  (a) 
Bnbery  of  emploj'ees;  (h)  adoption  of  corporate  names  already  in 
use;  (c)  unauthorized  use  of  names  of  corporations  or  individuals; 

(d)  counterfeiting  or  fraudulent  use  of  labels,  marks,  and  brands; 

(e)  passing  off  the  goods  of  one  person  or  corporation  as  those  of 
another;  (/)  enticement  of  employees;  (r/)  use  of  trading  stamps; 
(A)  false,  deceptive,  or  misleading  advertising;  (/)  misbranding  or 
falsely  marking  goods;  (y)  conducting  business  under  an  assumed 
or  fictitious  name;  and  (/.;)  placing  loose  handbills  or  advertising 
sheets  in  newspapers  and  magazines  without  the  consent  of  the  pub- 
lisher. AVhile  the  State  laws  against  local  discrimination  in  prices, 
exclusive  and  tying  contracts,  etc.,  some  of  which  expressly  term 
such  practices  unfair  competition,  would  also  be  appropriate  for 
discussion  in  this  chapter,  they  are  generally  closely  connected 
with  antitrust  legislation  and  have  been  considered  in  Chapter  IV 
(see  pp.  184—195),  and  reference  thereto  is  sufficient  in  tliis  connec- 
tion. Several  of  the  subjects  treated  in  this  chapter  are  discussed 
very  briefly.  For  instance,  the  laws  respecting  the  counterfeiting 
or  the  fraudulent  use  of  labels,  marks,  and  brands  appear  to  have 
been  passed  priuuirily  for  the  protection  of  trade-marks,  or  of  marks 
or  brands  registered  with  State  or  local  authorities.  As  explained 
elsewhere,  it  is  unjiecessary  to  inchule  in  this  leport  any  j^art  of  tlie 
American  law  respecting  trade-marks,  and  for  this  reason  these  stat- 
utes are  merely  mentioned. 

It  has  not  appeared  advisable  to  include  other  statutes  intended 
primarily  to  protect  the  health  or  safety  of  employees  or  consumers. 
Broadly  considered,  all  laws  which  prevent  fraudulent  business  trans- 
actions of  any  description  are  beneficial  to  scrupulous  manufacturers 
and  dealers,  but  to  attempt  to  include  all  such  statutes  would  neces- 

1  See  pp.  378n,  383n,  384n. 


504  EEPORT    OF    THE    COMMISSIOI^ER    OF    CORPORATIONS. 

sitate  the  inclnsion  of  a  large  volume  of  legislation  both  civil  and 
criminal  in  character.  For  this  reason  only  a  fevr  classes  of  statutes 
having  a  direct  bearing  on  competitive  conditions  have  been  selected 
for  presentation  in  this  chapter. 

Section  2.  Bribery  of  employees. 

The  briber}'  of  another's  employees  has  been  made  a  criminal 
offense  in  a  number  of  States.^  Although  there  are  some  variations 
in  the  terms  of  these  statutes,  they  are  similar  in  substance  to  an  act 
passed  in  the  State  of  New  York.  With  respect  to  that  statute, 
Justice  Laushlin  stated  that 


Tlie  corrupt  practice  of  secretly  offering  bribes  to  servants,  agents  and  em- 
ployees, to  induce  tliem  to  place  contracts  for  tlieir  niastei's  or  employers,  had 
spread  to  such  an  alarming  extent  in  this  State  that  its  viciousness  and  dis- 
honesty and  demoralizing  tendencies  attracted  the  attention  of  the  Legislatui'e 
at  its  session  in  1005  and  led  it  to  declai-e  it  to  be  a  misdemeanor  to  give  or 
receive  such  a  bribe,  by  enacting  section  384r.  of  the  Penal  Code." 

The  section  above  referred  to  is  as  follows: 

Whoever  gives,  offers  or  promises  to  an  agent,  employee  or  servant,  any  gift 
or  gratuity  whatever,  without  the  knowledge  and  consent  of  the  principal,  em- 
ployer or  master  of  such  agent,  employee  or  servant,  with  intent  to  influence  his 
action  in  relation  to  his  principal's,  employer's  or  master's  business;  or  an 
agent,  employee  or  servant  who  without  the  knowledge  and  consent  of  his  prin- 
cipal, employer  or  master,  requests  or  accepts  a  gift  or  gratuity  or  a  promise 
to  make  a  gift  or  to  do  an  act  beneficial  to  himself,  under  an  agreement  or  with 
an  understanding  that  he  shall  act  in  any  particular  manner  to  his  principal's, 
employer's  or  master's  business;  or  an  agent,  employee  or  servant,  who,  being 
authorized  to  procure  materials,  supplies  or  other  articles  either  by  purchase  or 
contract  for  his  principal,  employer  or  master,  or  to  employ  service  or  labor 
for  his  principal,  employer  or  master,  receives  directly  or  indii-ectly,  for  him- 
self or  for  another,  a  commission,  discount  or  bonus  from  the  person  who 
makes  such  sale  or  contract,  or  furnislies  such  materials,  supplies  or  other 
articles,  or  from  a  person  who  i*enders  such  service  or  labor ;  and  any  person 
who  gives  or  offers  siich  an  agent,  employee  or  servant  such  commission,  dis- 
count or  bonus  shall  be  guilty  of  a  misdemeanor  and  shall  be  punished  by  a  fine 
of  not  less  than  ten  dollars  nor  more  than  five  hundred  dollars,  or  by  such  fine 
and  by  imprisonment  for  not  more  than  one  year.^ 

1  Connecticut  Laws,  1905,  eh.  90;  Iowa  Code  Snpp.,  1907,  rpcs.  ,^02S  n,  o. ;  Massachu- 
setts Laws,  1912,  ch.  495;  Michiiran  Laws,  1905,  No.  210;  Nebraska  R.  S.,  1913,  sec. 
8728  ;  Nevada  R.  L.,  1912,  sees.  67S6,  G796  ;  New  .Jersey,  2  Comp.  Stats.,  1910,  p.  1810,  sec. 
212e ;  New  York  Penal  Law,  see.  439 ;  North  Carolina  Penal  Laws,  1913,  ch.  190 ;  Rhode 
Island  Oen.  Laws.  1909,  ch.  349,  sees.  21,  22;  South  Carolina  Code,  1912,  Cr.  Code,  sec. 
277;  Virginia  Laws,  1906,  ch.  2G0 ;  Washington,  Rom.  &  Bal.  Code,  sees.  2678,  2679;  Wis- 
consin Stats.,  191.".,  ch.  1S5,  sees.  4575m,  4575n. 

2Sirkin  v.  The  Fourteenth  Street  Store,  124  N.  Y.  App.  Div.,  384.  387  (1908).  And  see 
Ballin  v.  The  Fourteenth  Street  Store,  123  N.  Y.  App.  Div.,  582  (1908),  where  Justice 
Hooker  observed  that  the  facts  "  reflect  one  phase  of  an  unfortunate  condition  which  is  all 
too  prevalent  in  the  business  world,  narael.v,  the  bribing  by  wholesale  dealers  of  purchas- 
ing agents  of  prospective  customers." 

•''  New  York  Laws  1905,  ch.  136 ;  Penal  Laws,  sec.  439.  See  also  Indiana  Laws,  1907, 
ch.  120,  prohibiting  the  bribery  of  railway  employees,  and  36  U.  S.  Stats.,  553,  prohibit- 
ing the  disclosure  by  common  carriers  of  information  concerning  shipments  in  interstate 
commerce,  pp.  499—500,  and  note. 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  505 

In  the  first  successful  prosecution  under  this  act  it  appeared  tliat 
the  defendants,  one  of  whom  was  the  superintendent  of  the  Conley 
Foil  Co.,  had  paid  a  workman  to  obtain  employment  with  a  competi- 
tor, and  had  subsequently  received  from  him  the  names  of  its  cus- 
touiers,  the  dimensions  of  certain  machinery,  and  a  sample  of  its  foil.^ 

It  may  be  noted  that  this  act  has  been  availed  of  by  merchants  to 
avoid  payment  for  goods  received  and  retained  by  them,-  and  un- 
successfully lu'ged  in  an  attempt  to  recover  the  entire  sum  expended 
for  repairs  to  Avagons  wliicli  had  since  been  worn  out  or  destroyed,^ 

Section  3.  Adoption  of  corporate  names  already  in  use. 

Generate  statement. — A  number  of  States  have  statutes  regu- 
lating the  adoption  of  corporate  names  by  domestic  corporations. 
All  of  these  statutes  prohibit  the  adoption  of  a  name  already  in  use, 
while  many  also  enjoin  the  taking  of  a  name  so  similar  to  one 
alread}'  in  use  as  to  be  likely  to  cause  confusion.  Those  protected 
in  the  use  of  a  previously  adopted  name  are:  Domestic  corporations, 
foreign  corporations  which  have  been  admitted  to  do  business,  com- 
panies, associations,  and  partnerships.  Furthoi-more,  it  is  provided 
in  two  States  tliat  a  corpoi-ation  can  not  adopt  the  name  of  a  natural 
person  unless  words  are  used  in  connection  therewith  indicating  the 
nature  of  the  business  to  be  carried  on,  followed  by  the  style  "  Com- 
pan}'^,"  "  Corporation,"  or  "  Inc."  Some  States  provide  that  no  for- 
eign corporation  will  be  admitted  to  do  business  under  any  name 
which  is  not  plainly  distinguishable  from  that  of  an  existing  do- 
mestic corporation,  or  that  of  a  previously  admitted  foreign  corpora- 
tion. Xone  of  these  statutes  is  of  a  penal  nature,  the  effect  being 
simply  to  prescribe  certain  conditions  upon  which  charters  or 
authority  to  do  business  shall  be  granted  to  corporations.     In  one 

1  People  V.  Edward  PergoU  and  .Tames  Flood,  N.  Y.  Law  Journal,  .Tan.  14.  1907.  Per 
Deuel,  .T. :  "  In  the  present  case  the  defendants  did  not  attempt  to  suborn  an  actual  em- 
ployee ;  they  hired  a  spy  to  go  into  the  I)usincss  house  of  Lehmaier,  Schwartz  &  Com- 
pnny  ;  they  made  it  a  condition  tliat  he  become  an  employee ;  thej'  made  no  payment 
until  he  became  such  employee ;  they  resorted  to  the  spy  system,  which  is  universally 
condemned,  save  in  the  enforcement  of  law  and  the  detection  of  evlldoer.s.  Such  methods 
in  ordinary  trade  competition  do  not  appeal  to  the  sympathy  of  a  court." 

See  also  .\i)ple1)ee  r.  Skiwanek,  140  N.  Y.  Supp.,  4.">0  (1912),  invoiving  an  attempt  to 
secure  knowledge  of  a  secret  process. 

It  appears  that  there  have  also  been  two  successful  prosecutions  based  on  the  giving 
of  secret  commissions  to  another's  employees  for  the  purpose  of  securing  custom. 
See  statement  of  Hooker,  J.,  in  BalUn  v.  The  Fourteenth  Street  Store,  123  N.  Y.  App. 
Div.,  r)S2,  OS:J  (1908),  and  Kelby,  .1.,  in  Ilearn  et  al.  v.  Schuchman,  141  N.  Y.  Supp.,  242, 
24;i  (1913). 

2Sirkin  v.  The  Fourteenth  Street  Store.  124  N.  Y.  App.  Div.,  :'.S4  (1908),  reversing  .5.". 
N.  v.  Misc.,  288  (1907),  and  .^>4  N.  V.  Misc.,  ^■^-•,  (1907).  CI".  Hallin  r.  Fourteenlh  Street 
Store,  12:{  N.  Y.  App.  Div.,  582  (lOoS),  affirmed  without  opinion,  195  N.  Y.,  .580   (1909). 

=*  Ilearn  et  al.  v.  Schuchman,  141  N.  V.  Supp.,  242;  Schank  et  al.  v.  Schuchman,  212 
N.  Y.,  .•}52  (1914).  See  also  Becket  r.  S.  S.  Ilepworth  Co.,  129  N.  Y.  App.  Div.,  914 
(190S)  :  Roseuwasser  r.  Amusement  Knteriirises.  1.50  N.  Y.  Supp.,  501  (1914).  See,  also, 
Sandford  v.  Miller,  80  N.  .1.  Law,  411    (  IVUO). 


506  REPORT   OP   THE    COMMISSIONER   OF    CORPORATIONS. 

instance  it  is  provided  that  a  corporation  which  is  doing  business 
under  a  name  assumed  in  violation  of  law  may  be  enjoined  from  using 
such  name,  although  its  articles  of  organization  may  have  been  ap- 
proved and  a  certificate  of  incorporation  may  have  been  issued  to  it. 
Domestic  corporations. — The  Alabama  statute  provides  that — 

A  certificate  of  incorporation  *  *  *  sliall  set  forth  the  name  of  the  cor- 
poration ;  no  name  sliall  be  assumed  which  is  identical  with  that  of  any 
corporation  already  existing  in  this  State,  or  so  nearly  similar  thereto  as  to 
lead  to  confusion  and  imcertainty,  nor  shall  the  name  of  any  person  or  partner- 
sliip  be  assumed  withcmt  the  addition  of  some  word  or  words  designating  the 
nature  of  at  least  one  of  the  Inisinesses  to  be  can-led  on,  followed  by  the  word 
"  company,"  "  corporation,"  and  "  Inc."  i 

A  similar  statute  is  in  force  in  Missouri.- 

The  provision  respecting  the  adoption  of  corporate  names  in  the 
Alaska  statutes  is  as  follows: 

The  articles  of  incorporation    *     *    *    shall  contain  and  state: 
The  name  of  the  corporation,  which  shall  not  be  the  same  as,  nor  so  similar 
as  to  cause  confusion  with,  the  name  of  any  other  domestic  corporation   oi- 
foreign  corpora1i(»n  admitted  to  do  l)usiness  in  (bis  territory.' 

Similar  laws  are  found  in  Illinois,^  Michigan,^  Minnesota,*'  TTtah,'^ 
and  Washington.'^ 

The  corporation  laws  of  Arizona  provide  that— 

The  articles  of  incorporation  nnist  contain  *     *     name  of  the  corpora- 

tion,    *     *     *     provided,  tliat  not  more  than  one  corporation  shall  have  the 
same  corporate  name." 

Similar  provisions  are  contained  in  statutes  of  Colorado,^"  District 
of  Colimibia,"  Florida,^-  New"  Hampshire,"  Ehode  Island,^*  and 
Vermont.^^ 

The  Delaware  general  corporation  law  requires  that  certificates  of 
incorporation  shall  set  forth: 

The  name  of  the  corporation,  which  *  *  *  shall  I)e  such  as  to  distinguish 
it  from  any  other  corporation  engaged  in  the  same  business,  or  promoting  or 
carrying  on  the  same  objects  or  purposes  in  this  State."* 

1  Alabama  Civil  Code,  1007,  sec.  3446. 

2  Missouri  Rev.  Stats.,  ItiOfl,  sec.  2978. 
"  Laws  of  1013,  ell.  58. 

*  Laws  of  1005,  p.  130. 

6  Howell's  Stats.,  1913,  sec.  9523. 

6  Gen.  Stats.,  1013,  sec.  G147. 

'  Cotup.  l^aws  of  1007,  sec.   314. 

8  Remington  &  Ballinger's  Code  (1910),  sec.  3680. 

»Rev.  Stats.,  1013,  sec.  2100. 

"Mills'  Ann.  Stats.  (1912),  sec.  976. 

"  Code,  sec.  G04. 

i^Comp.   Laws,   1014,  sec.  2676. 

13  Pub.  Stats.,  1001,  ch.  147,  sec.  3. 

"  Cen.  Laws,  1009,  ch.  212,  sec.  2. 

^  Pub.  Stats.,  1906,  sec.  4288. 

i«Gen.  Corp.  Law,  1899,  sec.  5. 


11 

G 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  507 

Similar  statutes  are  in  force  in  Connecticut/  Kentucky,"  Missouri,^ 
Nevada,*  and  Virginia.^ 

The  Indiana  law  requires  incorporators  to  make,  sign,  and  acknowl- 
edge a  certificate  which  shall  state: 

The  corporation  name  adopted  1i.v  tlie  company,  wliich  name  shaU  not  be  the 
same  as,  or  strikingly  similar  to,  that  of  any  existing  corporation.^ 

Statutes  of  like  purport  and  substantially  similar  wording  are  in 
foi'ce  in  California,'^  Idaho,'^  Mississippi,'*  Montana,^"  New  Jersey, 
New  Mexico,^-  New  York,^^  North  Carolina,"  Oregon,"  Porto  Rico,^ 
West  Virginia, ^'^  and  Wisconsin.^^ 

The  Massachusetts^^  and  Ohio-**  laws  do  not  forbid  uncondition- 
ally the  adoption  of  a  name  already  in  use  by  any  other  domestic  cor- 
poration, but  require  that  as  a  condition  precedent  to  the  adoption  of 
such  name,  the  new  corporation  shall  file  with  its  articles  of  associa- 
tion the  consent,  in  writing,  of  the  corporation  already  using  the 
same  or  similar  name. 

lender  a  provision  of  the  Pennsylvania  corporation  law  which  re- 
quires certificates  of  incori:)oration  to  be  presented  to  a  law  judge  for 
approval,-^  it  has  been  held  that  a  certificate  of  incorporation  may  be 
lawfully  refused  if  the  name  proposed  to  be  adopted  is  the  same  as  or 
similar  to  that  of  an  existing  corporation.-^ 

Foreign  corporations. — A  number  of  States  provide  that  a  for- 
eign corporation  having  a  name  the  same  as  or  strikingly  similar  to 
that  of  a  domestic  corporation  or  a  foreign  corporation  already  do- 
ing business  in  the  State  shall  not  be  admitted  to  the  State  under 
that  name.    The  Indiana  law  on  this  subject  is  as  follows: 

No  foreign  corporation  leaving  the  same  or  strikingly  similar  name  as  any 
Indiana  corporation,  or  having  the  same  or  strikingly  similar  name  as  any  for- 
eign corporalioa  previonsly  admitted  to  do  bnsiness  in  this  State,  shall  be  ad- 
mitted to  do  business  in  this  State  niider  such  name.^ 

iPub.  Acts,  1907,  ch.  155. 

-Kentucky  Stats.   (CaiToll),  1915,  sec.  539. 

"Rev.  Stats.,   1910,  sec.  :«;!9. 

*Rev.  Laws,  1912,  sec.  1108. 

'■•Virginia  Code,  1904,  sec.   lio.^a. 

"Burns'  Ann.   Stats.    (1!>l-li.  sec.  50G2. 

^  Civil  Code   (Kern,  sec.  290. 

**  Laws,  1911,  ext.  sess.,  ch.  6,.  sec.  8. 

»  Code,  190G,  sec.  93G. 

i«Code,  1<MI7,  sec.  3825. 

11  Comp.   S(a(s.  (1910),  p.   lOO.'i. 

1^' Stats.,  T.I15,  sec.  891. 

"Laws  of  191.3,  vol.  1,  cb.  24. 

"Pell's  Revisal  of  1908,  sec.  li:",7. 

'•"■Laws  of  191.3,  ch.  220. 

lORev.  Stats..  1911,  sec.  41.3. 

"Code.  191.3,  sec.  2899. 

i«Rev.  Stats.,  1913,  sec.  1772. 

"Supp.  to  Rev.  Laws,  1902-1908,  p.  8TG. 

-'"Gen.  Code,  1910,  sec.  SG2S. 

=1  Pepper  &  Lewis's  Diirest,  1907,  col.  1C99. 

-■•-■  American  Clay  MIg.  Co.  r.  .Vmerican  Clay  Mfg.  Co.,  198  Pa.  St.,  189  (1901). 

23  Laws  of  1907,  pp.  2SG-290. 


508  REPOET    OF    THE    COMMISSIONED    OE    COEPOBATIONS. 

Similar  statutes  are  in  force  in  Florida/  Illinois,"  Massachusetts,^ 
Missouri,^  New  York,^  and  Vermont.^ 

Section  4.  Unauthorized  use  of  names  of  corporations  or  individuals. 

In  two  States  statutes  are  found  which  make  it  a  criminal  offense 
for  any  corporation  to  use  a  name  which  is  the  same  as  or  similar  to 
that  used  by  any  other  corporation.  The  Georgia  penal  code  provides 
t  hat- 
Any  firm,  person,  corporation,  or  association  who  shall  use  the  name  or  seal 
of  any  other  persoiT,  firm,  corporation  or  association,  in  or  about  the  sale  of 
goods  or  otherwise,  not  being  authorized  to  use  the  same,  knowing  that  such  use 
is  nnanthorized,  with  intent  to  deceive  the  public  in  the  sale  of  goods,  shall  be 
guilty  of  a  misdemeanor.'' 

The  Marj'^land  law  provides — 

It  shall  be  unlawful  for  any  individual,  firm,  partnership,  corporation,  asso- 
ciation or  joint  stock  company  with  intent  to  defraud  to  trade,  do  or  transact 
any  l)usiness  in  the  State  of  Maryland  under  any  name,  trade  name  or  title, 
which  is  the  same  as,  or  similar  to,  that  nsed  by  any  other  individual,  firm, 
partnership,  corporation,  association  or  joint  stock  company,  previously  using, 
trading  or  doing  business  under  such  name,  trade  name  or  title  in  tlie  State  of 
jMaryland,  or  to  imitate  such  name,  trade  name  or  title,  Provided  that  this  Act 
shall  not  apply  to  individuals  possessing  similar  names.^ 

Individual  names. — In  addition  to  the  Georgia  and  Maryland 
statutes  above  quoted  there  is  a  Massachusetts  law  which  prohibits 
one  person  from  assuming  the  name  of  any  other  person  without  the 
la  tier's  consent,  and  authorizes  the  courts  to  restrain  such  use  of  indi- 
vidual names.    The  act  is  in  part  as  follows: 

A  person  who  cai-ries  on  business  in  this  commonwealth  shall  not  assume  or 
continue  to  use  in  his  business  the  name  of  a  pei'son  formerly  connected  with 
him  in  partnershii)  or  the  name  of  any  other  person,  either  alone  or  in  connection 
with  his  own  or  with  any  other  name  or  designation,  without  the  consent  in 
writing  of  snch  person  or  his  legal  representatives." 

Section  5.  Counterfeiting  or  fraudulent  use  of  labels,  marks,  and  brands. 

Counterfeiting. — Statutes  prohibiting  the  counterfeiting  or  imi- 
tating of  labels,  marks,  and  brands  are  in  force  in  21  States  and  in 
the  District  of  Columbia.^"  Most  of  these  statutes  appear  to  have 
been  passed  primarily  for  the  protection  of  trade-marks,  and  the 

1  Comp.  Laws,  ]914,  sec.  2fi821i. 

=  Laws  of  mon,  p.  130. 

=  Revised  Laws,  1002,  cli.  120,  sec.  8. 

^  Rev.   Stats.,   1009,  sec.   3039. 

^  Cons.  Laws,  ch.  2.S,  sec.  15. 

Tub.  Stats.,  1900,  sec.  774. 

■'Park's  Penal  Code  (1914),  sec.  257. 

"  Maryland  Laws,  1910,  ch.  595. 

"Rev.  Laws  (1902),  cb.  72,  sec.  5. 

1"  Statutes  relating  to  union  labels  have  been  omitted. 


TKUST    LAWS   AND    UNFAIK    COMPETITION.  509 

extent  of  their  application  to  nontechnical  marks,  labels,  etc.,  ap- 
pears to  be  somewhat  doubtful.  For  this  reason  notliing  more  than 
the  references  to  them  are  given.^ 

The  same  comment  applies  to  statutes  affording  similar  protection 
to  labels,  marks,  and  brands  which  have  been  registered  with  the 
various  State  authorities.  Such  statutes  are  to  be  found  in  11  States 
and  in  Porto  Rico.- 

Fraudulent  use  of  genuine  labels,  marks,  and  brands. — This  is 
prohibited  in  general  terms  by  the  following  Kentucky  statute : 

Skc.  1.  That  no  dealer  or  uierchant  shall  make  or  apply  or  cause  to  be  made 
or  applied  to  any  parcel  or  packa,ii:e  any  printed,  written,  stamped,  engraved  or 
other  kind  or  character  of  label  bearing  the  brand  or  name  or  both  such  brand 
and  name  of  any  manufacturer  without  the  written  auUiority  of  said  manu- 
facturer. 

SiX'.  2.  Any  person,  tirm  or  corporation  violating  the  provisions  of  this  net 
shall  be  lined  in  any  sum  not  less  than  ten  nor  more  than  fifty  dollars  for  each 
offense.^ 

In  addition,  there  are  statutes  in  38  States,  Porto  Eico  and  the 
District  of  Columbia  which  prohibit  the  refilling  and  reselling  of 
labeled,  marked,  or  branded  containers  by  persons  othei-  than  those 
who  originally  filled  and  sold  them.  Whether  the  protection  of 
these  statutes  is  limited  to  containers  bearing  technical  trade-marks 
is  also  doubtful,  and  hence  their  citations  only  are  given."* 

1  Arizona  Ponal  Code  (1913),  sees.  350-35?.;  District  of  Columbia  Code,  sec.  879; 
Georgia  I'enal  Code  (lUll),  sees.  :i54,  1^55;  Idalio  Rev.  Codes,  sees.  0StJi:-G8G5  ;  Iliiuois 
J.  &  A.  Ann.  Stats.  (1913),  sees.  3696,  3697;  Iowa  Code  (1897),  sec.  5047;  Maine  Rev. 
Stats.  (1003),  ell.  40,  see.  26;  Massaeliusetts  Rev.  Stats.  (1902),  ch.  72,  sees.  2,  3,  6 ; 
Micliig.m,  Howell's  Stats.  (1913),  sees.  14713-14716;  Minnesota  Gen.  Stats.  (1913),  sees. 
SS52-8857;  Mississippi  Code  (1906),  sees.  1380-1382;  Missouri  Rev.  Stats.  (1909),  sees. 
11789-11796;  Nebraska  Rev.  Stats.  (1913),  sees.  8701,  8705;  Nevada  Rev.  Laws  (1912), 
sees.  60S9-6690  ;  New  Jersey  Comp.  Stats.  (1010),  p.  1802,  sec.  19G ;  New  Yorli  Penal 
Law,  sees.  2350-2354;  Nortli  Daliota  Conip-  Laws  (1913),  sees.  9711-9718;  Ohio  Gen. 
Code  (1910),  sees.  13089,  13091;  Oregon,  Bellinger  and  Cotton's  Code,  sec.  1840;  South 
Dakota  Penal  Code,  sees.  423-427;  Wisconsin  Stats.  (1913),  sec.  4463;  Wyoming  Comp. 
Stats.   (1910),  se?.  3000. 

2  California  Penal  Code  (Kerr),  sees.  350-353;  Colorado,  Mills'  Ann.  Stats.  (1912), 
sees.  7557-7561;  Connecticut  Gen.  Stats.  (1002),  sees.  4904— lOOO  ;  Indiana.  Burns'  Ann. 
Slats.  (1914),  sees.  10441-10452;  Massachusetts  Re\%  Stats.  (1902),  ch.  72,  sees.  7-14; 
Montana  Rev.  Codes  (1907),  sees.  8447-8450;  Nevada  Rev.  Laws  (1912),  sees.  6691- 
C694  ;  New  Jersey  Comp.  Stats.  (1910),  pp.  564:1-5648;  New  Mexico  Stats.  (1915),  sec. 
5559;  North  Carolina,  Pell's  Rev.  of  1908,  sees.  3019-:!022;  Oregon  Laws  (1911),  ch. 
97;  Pennsylvania,  P.  &  L.  Digest,  cols.  7315-7318;  Porto  Rico  Rev.  Stats.  (1911),  sees. 
5759,  5760;  Utah  Comp.  Laws  (1907),  sees.  4482-4485;  Vermont  Pub.  Stats.  (1906), 
sees.  4962-4067,  as  amended  by  Pub.  Acts,  1908,  No.  121. 

"K.'ntucky,  Acts  1912,  ch.  51,  i).  205. 

*  Alabama  Code  (1007),  sees.  7318-7321;  Arizona  Penal  Code  (1913),  sec.  354;  Ar- 
kansas, Kirby's  Digest  (1904),  sees.  7969-7973;  California  Penal  Code  (Kerr),  sees. 
354i-354i{,  Laws  of  1911,  ch.  230;  Colorado,  Mills'  Ann.  Slats.  (1912),  sees.  7570-7576, 
inc.;  Connecticut  Pub.  Acts  (1911),  ch.  208;  District  of  Columbia  Code,  sec.  878;  Florida 
Comp.  Laws  (1914),  sees.  3345.  3340;  Indiana.  Burns'  Auu.  Stats.  (1914),  sec.  10439; 
Idaho  Laws  (1911),  ch.  212;  Iowa  Code  Supp.  (1907),  sec.  5052;  Kansas  Stats.  (1909), 
sees.  9670-9674;  Maine  Rev.  Stats.  (1903),  ch.  40,  sees.  37-39;  Maryland  Code,  art.  27, 
sees.  331-335;  Massachusetts  Rev.  Stats.  (1902),  ch.  72,  sees.  15-18;  Michigan,  Howell's 
Stats.  (1913),  sees.  4341-4343;  Minnesota  Gen.  Stats.  (191.'.),  sees.  6951,  6952;  Missouri 
Rev.  Slals.  (1909),  sec.  4S31  ;  Montana  Rev.  Stats.  (1907),  sec.  8451;  Nebraska  Rev. 
Stats.  (1913),  sees.  8869-8805;  New  Hampshire  Laws  (1903),  eh.  120;  New  Jersey  Comp. 


510  EEPOET    OF    THE    COMMISSIONER    OF    CORPOEATIOTSTS. 

Section  6.  Passing  off  the  goods  of  one  person  or  corporation  as  those  of 
another. 

Apparently  the  only  State  statute  which  applies  comprehensively 
to  the  whole  subject  of  passing  off  the  goods  or  establishment  of  one 
person  or  corporation  as  those  of  another  is  found  in  New  York. 
This  enactment  is  in  part  as  follows: 

A  person  who ;     *     *     * 

Shall  sell  or  shall  expose  for  sale  any  goods  in  bulk,  to  Avhich  no  label  or 
trade-mark  shall  be  attached,  and  shall  by  representation,  name  or  mark  writ- 
ten or  printed  thereon,  represent  tlmt  such  goods  are  the  production  or  manu- 
facture of  a  person  wlio  is  not  the  manufacturer ;  or. 

Shall  knowingly  sell,  offer  or  expose  for  sale  any  article  of  merchandise,  and 
shall  orally  or  by  representation,  name  or  mark  written  or  printed  thereon  or 
attached  thereto  used  in  connection  therewith,  or  by  advertisement,  or  otherwise, 
in  any  manner  whatsoever  make  any  false  representation  as  to  the  person  by 
whom  such  article  of  merchandise  or  the  material  thereof  was  made,  or  was  in 
whole  or  in  part  produced,  manufactured,  finished,  processed,  treated,  marketed, 
packed,  bottled  or  boxed,  or  falsely  represents  that  such  article  of  merchandise 
or  the  material  or  any  part  thereof  has  or  may  properly  have  any  trade-mark 
attached  to  it  or  used  in  connection  \\ith  it,  or  is  or  may  properly  be  indicated 
or  identified  by  any  trade-mark. 

Is  guilty  of  a  misdemeanor     *     *     *.* 

Section  7.  Enticement  of  employees. 

Tweh^e  States,"  the  District  of  Columbia,  Hawaii,  and  the  United 
States,  have  laws  prohibiting  the  enticing  away  of  employees,  that  of 
the  United  States  being  applicable  only  to  employees  in  arsenals  or 
armories.  With  the  exception  of  the  Tennessee  statute,  Avhich  forbids 
the  enticement  of  any  person  under  contract  or  in  the  employ  of  an- 
other, and  of  the  Maine  laAv,  which  pi'ohibits  employment  agencies 
from  inducing  any  employee  to  leave  his  employment,  these  laAvs  are 
limited  in  their  application  to  certain  classes  of  emplo3"ment.  Con- 
sidered in  the  aggregate,  they  apply  to  the  following  employees: 

stats.  (1910),  pp.  29:J-290;  New  Mexico  Stats.  (1915),  sec.  55.58;  New  York  Penal  Law, 
sees.  2:>55-2:!57,  general  business  law,  sees.  .j60-o67  ;  Louisiana  Acts  (1S96|,  No.  120,  as 
amended  by  Acts  1904,  No.  71;  Nortli  Carolina,  lievisal  of  1908  (I'ell's),  sees.  o027a- 
3027d;  North  Dakota  Comp.  Laws  (1913),  sees.  9719-9721;  Ohio  Gen.  Code  (1910),  sec. 
13111 ;  Oklahoma  Comp.  Laws,  sees.  8207-8209  ;  Pennsylvania,  Pepper  and  Lewis's  Dig., 
2d  ed.,  pp.  7019-7324;  Porto  Rico  Rev.  Stats.  (1911),  sees.  57G;J-57G5  ;  Rhode  Island 
Gen.  Laws  (1909),  ch.  198;  South  Dakota  Penal  Code,  sees.  428-130,  Laws  1903,  ch.  83, 
sec.  1;  Texas,  White's  Penal  Code,  arts.  918a  to  918c;  Utah  Comp.  Stats.  (1907),  sees. 
4475X,  4486;  Vermont  Pub.  Stats.  (1906),  sees.  4968-4972;  Virginia  Code  (1904),  sec. 
1906a;  West  Virginia  Code  (1913),  sees.  3598-3600;  Washington,  Remington  and  Bal- 
linger's  Code  (1910),  sees.  9501-0503;  Wisconsin  Stats.  (1913),  sees.  1747a-l-1747dd. 

iNcw  York  Laws  (1914),  vol.  2,  ch.  332. 

2  Alabama  Code  (1907),  sees.  6849,  6850;  Arkansas  Laws  (1905),  Act.  No.  298;  Florida 
Comp.  Laws  (1914),  sec.  3232;  Georgia  Penal  Code,  sec.  123;  Kentucky,  Carroll's  Stats. 
(1915),  sec.  1349;  Louisiana  Acts  (1906),  No.  54;  Maine  Laws  (1911),  ch.  87,  sec.  4; 
Mississippi  Code  (1906),  sec.  1146;  New  Jersey  Comp.  Stats.  (IDIO),  p.  2205;  North 
Carolina,  Pell's  Rev.  of  1908,  sees.  3365,  3367;  South  Carolina  Crim.  Code  (1912),  sec. 
504,  as  amended  by  Acts  1913,  No.  28;  Tennessee  Acts  (1907),  ch.  154;  U.  S.  Stats.  L., 
vol.  34,  D.  308  (D.  C.)  ;  Hawaii  Rev.  Laws  (1915),  sec.  4201;  U.  S.  Stats.  L.,  vol.  35,  p. 
1097. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  511 

Api:>rentices/  servants,-  domestics,^  laborers,*  tenants,^  share  crop- 
pers,*' and  artificers/  The  hiws  of  the  District  of  Cohunbia,  Maine, 
and  New  Jersey  apply  only  to  enticement  by  employment  agencies. 
A  violation  of  these  statutes  is  punishable  criminally  in  all  jurisdic- 
tions save  one,^  where  a  civil  liability  alone  is  prescribed,  while  in  five 
jurisdictions,"  there  is  imposed  both  a  criminal  and  a  civil  liability, 
the  measure  of  damages  under  the  latter  usually  being  the  losses  in- 
curred b}^  reason  of  the  enticement.  In  Alabama  a  sum  in  no  case 
less  than  double  the  damages  may  be  recovered  in  a  civil  action,  one- 
half  of  which  goes  to  the  injured  emploj'^er  and  the  other  half  to  the 
county  in  which  the  offense  occurs;  and  in  Louisiana  the  injured 
employer  is  allowed  double  the  amount  of  any  debt  owed  him  by 
the  enticed  employee. 

Also  in  several  States,^"  early  statutes  enacted  to  prevent  the  en- 
ticement of  lawful!}^  bound  apprentices  are  still  in  force.  The  viola- 
tion of  these  statutes  was  usually  punished  by  either  fine  or  imprison- 
ment, or  both. 

Section  8.  Use  of  trading-  stamps. 

General  statement. — The  trading  stamp  has  been  very  generally 
employed  by  merchants  in  recent  years  as  a  device  to  induce  patrons 
to  c(mfine  their  trade  to  them  and  to  attract  neAV  customers.  The 
\alue  of  the  stamps  represents  a  small  percentage  of  the  purchase 
price  of  goods  and  they  are  usually  given  onh^  to  cash  purchasers. 
The  stamps  are  redeemable  in  goods,  or  sometimes  in  money  or  goods, 
either  by  the  establishment  gi^■ing  them  or  by  the  compan}^  which 
sold  the  stamps  to  the  dealer.  Very  generally  the  stamps  are  sold  to 
merchants  by  companies  organized  for  the  purpose  of  engaging  in 
this  business,  and  are  redeemed  by  the  trading-stamp  company  after 
being  issued  by  the  merchant  to  his  customers.  Some  merchants, 
however,  have  adopted  the  policy  of  issuing  and  redeeming  their 
oAvn  stamps.  It  is  common,  also,  for  manufacturers  to  issue  coupons 
with  their  products  redeemable  by  the  consumer  in  "premiums." 

''■  .M aba  ma. 

-Alabama,  Florida,  Georgia,  Hawaii,  Nortli  Carolina,  and  South  Carolina. 

2  District  of  Columbia  and  New  Jersey. 

*  Alabama,  Arkansas,  Florida,  Georgia,  Hawaii,  Ivcjiliicli.v,  Mississippi,  Soutli  Carolina, 
and  United  States. 

^  AIaI)ama,  Arkansas,  Florida,  Louisiana,  Mississippi,  North  Carolina,  and  South  Caro- 
lina. 

"Alabama.  Georgia,  Louisiana,  Mississippi,  and  Xortli  Carolina. 
''  United  States. 

*  Tennessee. 

"Ahibama.  Arkansas,  Kentucky,  Louisiana,  and  Mississippi. 

10  Connecticut  Gen  Stats.,  sec.  iL'.jO;  Florida  Comp.  Laws  (1914),  sec.  ."231;  fieorgia 
renal  Code,  sec.  121  ;  Illinois,  J.  and  .V.  Ann.  Stats.,  sec.  45r> ;  Kentucky,  I'arroll's  Stats. 
(1915),  sec.  2G01  ;  Missouri  Stals.  (1909).  sec.  4S17 ;  Nevada  Kev.  Laws  (1912),  sec. 
495;  New  Uampshire  Pub.  Stats.  (1901),  eh.  ISO,  sec.  12;  North  Carolina,  Pell's  Rev. 
of  190S,  sec.  193 ;  and  Ohio  Gen.  Code,  sec.  8018. 


512  EEPORT    OF    THE    COMMISSIONEE    OF    COEPOKATIONS. 

Allien  the  stamps  are  sold  to  merchants  by  trading-stamp  com- 
panies the  hitter  usually  agree  to  distribute  to  the  public  books  con- 
taining the  names  of  merchants  giving  the  stamps  and  explaining  the 
method  of  issuing  and  redeeming  them,  and  in  other  waj^s  to  advertise 
the  merchants.  By  agreement  between  the  stamp  company  and  mer- 
chants, the  right  to  distribute  the  stamps  is  usually  limited  to  one 
merchant  within  a  specified  area. 

There  has  been  considerable  legislation  enacted  in  recent  years  for 
the  purpose  of  abolishing  tlie  use  of  trading  stamps.  The  advocates 
of  legislation  of  this  class  urge  that  the  use  of  the  stamps  tends  to 
monopoly,  fosters  combinations,  and  restrains  trade  by  restricting 
open  competition;  and  that  in  so  far  as  the  business  is  conducted  by 
stamp  companies  it  is  a  mere  intervention  between  the  buyer  and 
seller  of  a  third  party  preying  upon  both.  They  further  assert  that 
it  adds  to  the  cost  of  living  by  imposing  a  useless  tax  on  the  com- 
munity, leads  to  the  sale  of  inferior  goods,  and  encourages  indiscrimi- 
nate buying.  The  opponents  of  legislation  prohibiting  the  use  of 
stamps  urge,  however,  that  their  use  is  merely  a  method  or  scheme  of 
advertising  and  that  they  afford  a  ready  means  of  giving  a  small  dis- 
count to  cash  purchasers.  They  further  characterize  the  efforts  to 
prohibit  their  use  as  attempts  to  protect  one  class  from  the  fair,  free, 
and  full  competition  of  another  class. 

Legislation  affecting  the  use  or  distribution  of  trading  stamps 
may  be  broadly  divided  into  two  classes,  (1)  That  which  is  appar- 
ently designed  to  abolish  their  use  entirely  or  to  tax  them  out  of 
existence,  and  (2)  that  which  is  intended  to  regulate  the  issuance  and 
redemption  of  such  stamps. 

Legislation  prohibiting  the  useoe  trading  sTxVMps. — Anti trading 
stamp  legislation  proper  did  not  begin  in  the  United  States  until 
1808.  Unsuccessful  attempts,  however,  were  previously  made  in 
Massachusetts,  New  York,  Pemisylvania,  and  Marjdand  to  prevent 
gifts  or  premiimis  by  mercharits  to  their  customers  under  existing 
statutes  against  (1)  any  offer  with  the  sale  of  any  article,^  or  any 
article  of  food,^  of  anything  except  what  was  stated  to  be  the  subject 
of  the  sale,  (2)  "lottery  gifts  by  storekeepers  and  others,""  and 
(3)  gift  enterprises.^ 

The  New  York  act  was  held  to  invade  constitutional  rights  under 
the  guise  of  the  police  power,  and  was  characterized  by  the  Court 
of  Appeals  as  belonging  to  a  type  of  legislation  intended  to  protect 
one  class  against  the  free,  fair,  and  full  competition  of  another  class.^ 

1  Massaclnisetts  Laws  (1884),  cli.  277. 

-New  York  Laws  (1887),  ch.  691  ;  South  Carolina  Laws  (1887),  No.  o07. 

"Pennsylvania  Laws   (1885),  No.  S6. 

•1  Maryland  Laws   (1886),  cb.  480. 

B  People  V.  Gillson,  101)  N.  Y.,  yS'J  (1888). 

/ 


TEUST   LAWS    AND    UNFAIR    COMPETITION.  513 

A  similar  statute  in  South  Carolina  appears  not  to  have  been  con- 
strued. In  passing  upon  the  Massachusetts  statute  the  court  said 
that  it  did  not  forbid  the  sale  of  two  things  at  once,  even  though 
one  was  the  particular  object  desired  and  the  other  an  additional  in- 
ducement.^ Although  the  body  of  the  Pennsylvania  act  forbade  the 
gift  or  sale  of  any  ticket,  check,  token,  or  memorandum  entitling  the 
holder  to  money  or  any  article  of  value,  it  was  held  void  on  the  techni- 
cal ground  that  its  title,  mentioning  lottery  gifts  merely,  did  not  suffi- 
ciently indicate  its  purpose."  In  Maryland,  a  statute  prohibiting  gift 
enterprises  not  involving  chance  was  held  to  be  an  unwarrantable 
exercise  of  the  police  power.? 

The  first  attempt  to  prevent  the  use  of  stamps  issued  by  trading- 
stamp  companies  by  invoking  a  gift  enterprise  statute  was  in  the  Dis- 
trict of  Columbia,  where  the  statute  declares  that  every  person  who 
in  any  manner  holds  out  the  promise  of  gift  or  bestowal  of  any  arti- 
cle or  thing  for  and  in  consideration  of  the  purchase  of  any  other 
article  or  thing  shall  be  regarded  as  engaged  in  a  gift  enterprise,  and 
prohibits  gift  enterprises  as  thus  defined  and  in  general  terms.*  The 
statute  thus  construed  Avas  upheld  on  the  ground  that  the  trading- 
stamp  company  is  a  device  for  getting  something  for  nothing,  and 
hence  may  be  controlled  under  the  police  power,  no  matter  whether 
its  operation  involves  chance  or  not.  In  emphasizing  the  fact  that 
the  application  of  the  statute  to  merchants  was  not  being  passed 
upon,  the  court  said: 

That  it  was  not  intended  to  apply  to  ordinaiy  discounts  for  cash,  or  in  pro- 
portion to  amounts  of  purcliases  when  made  by  tlie  mercliaut  liimself  to  his 
customers,  may  be  regarded  as  certain  and  the  exercise  of  sucli  power  would 
doubtless  be  denied  if  expressly  attempted.^ 

Provisions  substantially  identical  with  the  above,®  however,  have 
since  been  held  invalid  in  Colorado  and  Nebraska  if  designed  to 
prohibit  the  trading-stamp  business.  They  were  there  regarded, 
when  thus  applied,  as  attempts  to  prohibit  legitimate  business  that 
was  not  obnoxious  to  public  morals  or  detrimental  to  the  public  wel- 
fare,^ and  thus  to  invade  constitutional  rights  under  the  guise  of  the 
police  power.^  And  in  1911  when  the  Massachusetts  Legislature  was 
considering  the  adoption  of  the  District  of  Columbia  statute  the  jus- 
tices of  the  Supreme  Judicial  Court  gave  it  as  their  opinion  that  the 

1  Commonwealth  v.  Emerson,  165  Mass.,  14G  (1896). 

2  Com.  V.  Moorhead,  7  Ta.  Co.  Ct.,  513   (1890). 
sLong  I!.  State,  74  Md.,  565  (1891). 

<  District  of  Columbia  Laws.     1871-1872,  p.  90,  and  R.  S.  D.  C,  sees.  1176-1177. 
5  Lansl)urf,'h  v.  District  of  Columbia,  11  Apps.  D.  C,  512  (1897).     Followed  in  D.  C.  v. 
Kraft,  35  Apps.  D.  C,  253  (1910),  and  D.  C.  v.  Gregory,  35  Apps.  D.  C,  271  (1910). 
«  Denver  Ordinance  No.  62,  1904  ;  Nebraska  Laws,  1911,  ch.  179. 
If  Denver  i;.  Frueauff,  39  Colo.,  20  (1906). 
8  State  V.  Sperry  &  Ilutcliinson  Co.,  94  Nebr.,  785   (1913). 

30035°— 16 33 


514  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

statute  would  be  unconstitutional  as  "  there  is  nothing  in  the  conduct 
proposed  to  be  prohibited  that  necessarily  appeals  to  the  gambling 
instinct  or  involves  the  element  of  chance."  ^  Statutes  in  Alabama 
and  Kansas^  prohibiting  gift  enterprises,  without  any  definition  of 
the  term,  have  also  been  held  not  to  apply  to  the  trading-stamp  busi- 
ness as  usually  conducted.^  A  Michigan  act  so  defining  a  gift  enter- 
prise as  to  cover  the  trading-stamp  company  has  not  apparently  been 
construed.* 

Statutes  intended  to  prohibit  the  operation  of  trading-stamp  com- 
panies are  much  more  numerous.  Laws  have  been  passed  in  a 
number  of  States  prohibiting  the  issuance  or  redemption  of  stamps 
by  any  person  other  than  a  merchant  or  manufacturer.^  In  all  these 
States  except  Rhode  Island  and  Vermont  it  is  expressly  provided  that 
the  retail  merchant  may  give  coupons  issued  by  manufacturers  with 
their  products.  These  statutes  have  been  held  unconstitutional  in 
New  Hampshire,*'  New  York,'^  Rhode  Island,^  Vermont,^  and  Vir- 
ginia,^" as  an  unwarranted  interference  with  individual  liberty  and 
a  violation  of  the  fourteenth  amendment  to  the  Federal  Constitution, 
as  a  violation  of  similar  clauses  in  State  constitutions,  or  as  an  un- 
lawful exercise  of  the  police  power.  A  Massachusetts  statute  of  this 
character  was  held  not  to  prohibt  the  use  of  trading  stamps  to  be 
redeemed  by  a  stamp  company  unless  there  was  an  element  of  chance 
involved  in  the  transaction.^^  The  Louisiana  statute  was  declared 
void  on  the  ground  that  its  title  was  inadequate  and  misleading."  In 
construing  a  Maryland  statute  of  another  type  the  court  said  that  if 
the  stamps  were  otherwise  free  from  objection  it  was  immaterial 
whether  they  were  to  be  redeemed  by  the  merchant  selling  the  goods 
or  by  a  third  party.^^  A  Michigan  statute  of  this  character  has  not 
been  construed  in  any  reported  case. 

1  Opinion  of  the  Justices,  208  Mass.,  GOT   (1911). 

2  Alabama  Laws  (1891),  No.  352;  Kansas  Laws  (1895),  ch.  152. 

estate  V.  Shugart,  138  Ala.,  86  (1903);  United  Jewelers  Mfg.  Co.  v.  Keckley,  77 
Kans.,  797   (1907). 

^Michigan  Laws  (1911),  No.  244. 

B  Louisiana  Laws  (1900),  Act  No.  35;  Maryland,  Laws  1898,  ch.  207,  Laws  1904,  chs. 
233,  577,  Laws  1910,  ch.  381,  p.  95;  Massachusetts  Laws  (1898),  ch.  576;  Michigan  Laws 
(1911),  No.  244;  New  Hampshire  Laws  (1899),  ch.  GO;  New  York  Cons.  Laws,  Penal 
Law,  sees.  2360,  2361;  Rhode  Island  Laws  (1899),  ch,  652;  Vermont  Laws  (1898),  No. 
123;  Virginia  Laws  (1897-98),  ch.  406,  p.  442. 

estate  V.  Ramscycr,  73  N.  H.,  31   (1904). 

'People  V.  Dycker,  72  N.  Y.  App.  Div.,  308  (1902)  ;  People  v.  Zimmerman,  102  N,  Y. 
App.  Div.,  103   (1905). 

«  State  V.  Dalton,  22  R.  I.,  77  (1900). 

»  State  V.  Dodge,  76  Vt.,  197   (1904). 

w  Young  V.  Commonwealth,  101  Va.,  853   (1903), 

"Commonwealth  v.  Sisson,  178  Mass.,  578   (1901). 

"  State  V.  Walker,  105  La.,  492   (1901). 

"State  V.  Hawkins,  95  Md.,  133  (1902). 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  515 

Taxes  or  license  fees  on  the  use  of  trading  stamps  have  been  im- 
posed in  a  dozen  or  more  States.^  These  are  sometimes  limited  to 
trading-stamp  companies,  but  some  of  the  statutes  and  ordinances 
are  so  worded  as  to  include  both  trading-stamp  companies  and  mer- 
chants using  stamps  put  out  by  such  companies,  and  others  are  ap- 
parently intended  to  cover  even  the  merchant  who  issues  and  redeems 
his  own  stamps. 

In  their  application  to  trading-stamp  companies  such  taxes, 
whether  laid  directly  by  the  State  or  by  the  city  under  charter  author- 
ity,^ and  whether  for  revenue  or  regulation,  have  generally  not  been 
successfully  attacked  in  State  courts.^  Intimations  and  holdings 
that  the  tax  must  be  reasonable,  however,  are  found  in  decisions  by 
State  courts  *  and  some  ordinances  have  been  declared  void  by  them  as 
in  excess  of  delegated  authority.^  And  tax  provisions  in  Arkansas, 
Oregon,  and  Washington  have  been  held  by  Federal  courts  to  be  op- 
pressive or  to  be  an  invasion  of  the  trading-stamp  company's  con- 
stitutional rights.''  In  the  Arkansas  case  the  court  declared  the  ordi- 
nance in  question  to  be  in  excess  of  charter  authority.  Later,  after 
the  legislature  had  specifically  authorized  cities  to  tax  the  use  of  trad- 
ing stamps,  a  city  ordinance  levying  a  still  heavier  tax  was  upheld 
by  a  different  Federal  court  as  a  valid  regulation  under  the  police 
power.^ 

When  applied  to  merchants  using  stamps  put  out  by  trading-stamp 
companies  or  to  merchants  issuing  and  redeeming  their  own  stamps, 
tax  provisions  have  been  held  void  wherever  called  in  question,**  ex- 

1  Alabama  Laws  (1909),  p.  229;  Arkansas  Laws  (1899),  No.  21;  Florida  Laws  (1913), 
ch.  G421,  sees.  ."5,  55;  Kentueky  Stats.,  sec.  4224;  Louisiana  Laws  (1904),  No.  47; 
Massachusetts  Laws  (1904),  ch.  403;  New  Hampshire  Laws  (1905),  ch.  83;  North  Caro- 
lina Laws  (1913),  ch.  201,  sees.  51,  75;  Oregon  Laws  (1915),  ch.  228;  Tennessee  Laws 
(1899),  chs.  27,  207;  Utah  Laws  (1915),  chs.  IIG,  117;  Washington  Laws  (1913),  ch. 
134;  West  Virginia,  Laws  1904,  ch.  3;  Laws  1905,  ch.  36;  Code  1913,  sees.  1114j,  1155, 
1232. 

2  Authority  to  tax  gift  enterprises  is  held  not  to  be  authority  to  tax  the  use  of  trading 
stamps.  Winston  v.  Beeson,  135  N.  C,  271  (1904)  ;  Humes  v.  Little  Rock,  138  Fed.,  929 
(189S>. 

==  Gamble  r.  Montgomery,  147  Ala.,  GS2  ;  State  v.  Merchants  Trading  Stamp  Co.,  114 
La.,  529  (1905)  ;  Fleetwood  r.  Read,  21  Wash.,  547  (1899)  ;  Oilurc  Mfg.  Co.  l\  I'idduck- 
Ross  Co.,  38  Wash.,  137  (1905)  ;  Sperry  &  Hutchinson  Co.  v.  Tacoma,  68  Wash.,  254 
(1912)  ;  state  v.  Fitncy,  79  Wash.,  608   (1914). 

*  Gamble  v.  Montgomery,  147  Ala.,  G82  ;  Columbia  v.  Lusk,  (Ct.  Com.  rieas,  Richland 
Co.,  S.  C,  September,  1909)  ;  Sperry  &  Hutchinson  Co.  i'.  Danville  (Corp.  Ct.,  Danville, 
Va„   October,    1910). 

6  Winston  v.  Beeson,  135  N,  C,  271  (1904)  ;  Merchants  Trading  Stamp  Co.  v.  Memphis, 
101  Touu.,  181  (1.S98J  ;  Sperry  &  Hutchinson  Co.  r.  Owensboro,  151  Ky.,  3.S9  (1912). 

0  Humes  v.  Little  Rock.  138  Fed.,  929  (1898)  ;  Ex  parte  Hutchinson  (Wash.),  137  Fed., 
949    (1904)  ;  Ex  parte  Hutchinson    (Oreg. »,   137  Fed.,  950   (1905). 

'Humes  v.  Fort  Smith,  93  Fed.,  857  (1899). 

8  Montgomery  r.  Kelly,  142  Ala.,  552  (1905);  Humes  v.  Little  Rock,  138  Fed.,  929 
(1898)  ;  Ex  parte  McKenna,  126  Cal.  429  (1899)  ;  Van  Deman  &  Lewis  Co.  r.  Rast,  208 
Fed.,  827  (Fla.,  1913)  ;  Howin  v.  Atlanta,  121  Ga.,  723  (1905)  ;  Com.  i-.  Gibson,  125  Ky., 
401  (1907)  :  O'Keefe  v.  Somerville,  190  Mass..  110  (190G)  ;  Columbia  v.  Lusk,  (Ct.  Com. 
Pleas.  Richland  Co.,  S.  C,  Sept.,  1909)  ;  Merchants  Trading  Stamp  Co.  r.  Memphis,  101 
Tenn.,  181  (1898)  ;  Ex  parte  Hutchinson,  1.37  Fed.,'  949  (1904)  ;  Ex  parte  Hutchinson, 
137  Fed.,  9.50  (1905)  ;  S.  &  H.  Co.  v.  Tacoma,  190  Fed.,  682  (1911)  ;  Little  i;.  Tanner, 
208  Fed.,  605   (Wash.,  1914). 


616  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

cept  in  Washington  ^  and  in  the  Federal  court  in  xVrkansas  mentioned 
above.-  As  thus  applied  these  statutes  are  usually  said  to  infringe 
the  liberty  guaranteed  by  the  Federal  and  State  Constitutions  or  to 
"amount  to  class  legislation.  In  Massachusetts  the  giving  of  stamps 
in  connection  with  sales  of  goods  was  said  not  to  be  a  commodity 
within  the  special  taxing  power,  and  in  Georgia  it  was  said  not  to  be 
"  a  business,"  and  hence  was  not  to  be  reached  under  the  city's  taxing 
power.  The  provisions  that  have  been  upheld  were  declared  to  be 
proper  exercises  of  the  police  power. 

The  conflict  on  tax  statutes  in  Washington  between  State  and  Fed- 
eral courts  was  partly  responsible  for  the  Washington  court  in  1907 
declaring  a  statute  void  that  prohibited  offering  unidentified  or 
chance  premiums  in  exchange  for  trading  stamps.^  In  a  recent  de- 
cision on  trading-stamp  legislation,  however,  the  Washington  court 
expressly  overrules  this  decision,  and  upholds,  as  a  valid  exercise  of 
the  police  power^  a  taxing  statute  conceded  tO'  be  prohibitive  of  the 
use  of  trading  stamps.^ 

Statutes  regulating  the  use  or  trading  stamps. — A  number  of 
statutes  have  been  passed  which  regulate  more  or  less  strictly  the 
trading-stamp  business.  The  restrictions  in  some  of  these  laws  are 
so  onerous  that  they  have  been  regarded  by  the  courts  as  prohibitory 
and  declared  to  be  unconstitutional.  The  most  common  provision 
is  that  which  prohibits  the  issuance  of  stamps  under  such  circumstances 
that  the  purchaser  of  goods  does  not  know  at  the  time  what  articles  he 
is  entitled  to  receive  for  the  stamps.  A  number  of  States  prohibit 
the  issuance  of  stamps  redeemable  in  articles  variously  described  in 
the  laws  as  "  indefinite,"  "  undescribed,"  "  undetermined,"  "  unidenti- 
fied," "  unknown,"  or  "  unselected,"  or  where  the  selection  is  depend- 
ent upon  chance,  hazard,  or  contingency.^  A  number  of  these  laws 
have  been  declared  void  as  in  violation  of  constitutional  provi- 
sions that  no  person  shall  be  deprived  of  life,  liberty,  or  prop- 
erty without  due  process  of  law  or  as  not  a  valid  exercise  of  the 
police  power.*^     The  Washington  decision  was,  however,  expressly 

1  Fleetwood  v.  Read,  21  Wash.,  547  (1899)  ;  Oilure  Mfg.  Co.  v.  Pidduck-Ross  Co.,  38 
Wash.,  137   (1905)  ;  State  v.  Pitney,  79  Wash.,  608   (1914). 

2  Humes  v.  Fort  Smith,  93  Fed.,  857   (1899). 

3  Leonard  v.  Bassindale,  46  Wash.,  301   (1907). 

*  State  V.  Pitney,  79  Wash,,  608  (1914).  This  case  is  pending  in  the  United  States 
Supreme   Court. 

5  California  Laws  (1905),  eh.  69  (Ilenning's  Gen.  Laws  of  Cal.,  1914,  act  No.  5216, 
p.  2092)  ;  Colorado  Laws  (1905),  eh.  110  (Mills'  Ann.  Stats.,  1912,  sees.  4685.  4686,  4687, 
4688)  ;  Georgia  Penal  Code  (1914),  sec.  404  (Laws  1909,  p.  153)  ;  Iowa  Laws  (1909), 
ch.  226;  Maryland  Laws  (1898),  ch.  207  (Laws  1904,  chs.  233,  577;  Laws  1910,  chs.  381, 
p.  95)  ;  Massachusetts  Laws  (1903),  ch.  386  (Supp.  Rev.  Laws  Mass.,  1902-1908,  p. 
1446)  ;  Minnesota  Laws  (1909),  ch.  142  (Gen.  Stats.,  1913,  sees.  8995-8998)  ;  New  Hamp- 
shire Laws  (1905),  ch.  83;  Rhode  Island  Laws  (1901),  ch.  842  (Gen.  Laws  1909,  p. 
1284)  ;  Washington  Laws  (1905).  ch.  179;  and  Laws  of  Hawaii   (1905),  act  85. 

8  Ex  parte  Drexel,  147  Cal.,  763  (1905)  ;  Leonard  v.  Bassindale,  4G  Wash.,  301  (1907)  ; 
Hawaii  v.  Gunst  &  Co.,  18  Hawaii,  196  (1907), 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  517 

overruled  in  1914  in  a  case  holding  a  tax  on  trading  stamps  valid 
even  though  it  was  regarded  as  prohibitive.^  A  ISIaryland  statute 
was  held  valid  in  one  case,  so  far  as  it  prohibited  uncertain,  unde- 
termined, or  unknown  premiums,-  but  in  a  subsequent  case  it  was  held 
valid  only  so  far  as  it  prohibited  an  element  of  chance,  partaking  of 
the  nature  of  a  lottery  and  appealing  to  the  gambling  instinct,  in 
the  determination  of  the  premium.^  The  Georgia  act  was  also  held 
not  to  apply  to  the  trading-stamp  business  as  ordinarily  conducted.* 
Statutes  requiring  articles  in  which  stamps  are  to  be  redeemed  to 
be  described  on  the  stamp,  and  the  character  and  value  thereof  made 
known  to  the  purchaser,  or  requiring  that  the  purchaser  be  furnished 
with  a  list  of  all  articles  given  in  redemption  of  stamps,  have  likewise 
been  held  to  be  practically  prohibitive  of  the  business  and  unconsti- 
tutional as  not  being  a  proper  exercise  of  the  police  power.^  Other 
statutes  of  the  same  general  character  as  those  described  above  appear 
not  to  have  been  passed  upon  by  the  courts.*"  A  number  of  statutes 
require  that  trading  stamps  shall  have  a  redeemable  value  in  money, 
which  shall  be  legibly  shown  on  the  face  of  the  stamp,  that  they 
shall  be  redeemed  at  their  face  value  in  goods  or  money  at  the  option 
of  the  holder,  and  that  the  vendor  of  goods  shall  be  liable  for  the 
redemption  of  the  stamps  upon  the  default  of  the  third  partv  and 
may  be  primarily  liable.^  A  statute  of  this  character  has  been  held 
invalid,^  and  another  of  the  same  general  nature,  but  with  the  added 
requirement  that  each  stamp  should  have  the  value  of  not  less  than  1 
cent  and  should  be  redeemed  even  though  presented  singW,  has  like- 
wise been  held  unconstitutional.^ 

Section  9.  False,  deceptive,  or  misleading  advertising. 

Twenty-eight  States.^"  one  municipality,^^  and  the  Philippine  Is- 
lands prohibit  the  publication  or  circulation  of  false  or  mislead- 

1  state  V.  Pitney.  79  Wash.,  60S   (1914).     Appeal  pending. 

2  State  r.  Hawkins.  9.")  Md..  13.S   (1902). 
estate  V.  Caspare  et  al.,  115  Md.,  7  (1911) 
*Tumlin  V.  State.  141  Ga.,  613   (1914). 

B  State  V.  Friedman,  District  Court,  Wapello  County,  Iowa  (Oct.,  1910)  :  State  v.  Cas- 
pare et  al..  115  Md.,  7  (1911 1  ;  State  r.  Sperry  &  Hutchin.son  Co.,  110  Minn.,  378   (1910K 

"Colorado  Laws  (1905*.  ch.  110  (Mills'  Ann.  Stats.  1912,  sees.  4085-4688);  Massa- 
chusetts Laws  (190.",),  ch.  386  (Supp.  Rev.  Laws,  Mass.,  1902-1908.  p.  1446 1  :  New 
Hampshire  Laws  (1905),  ch.  83;  Rhode  Island  Pub.  Laws  (1901K  ch.  842  (Gen.  Laws, 
1909,  p.  1284). 

'  Indiana  Laws  (1913),  ch.  299  (Bums'  Ann.  Stats.,  1914,  sec.  10403a  to  10463f)  :  Mary- 
land Laws  (1904  1,  chs.  233.  577  (Laws  1910.  ili.  381.  p.  95):  Now  Ilampshirc  Laws 
(1905),  ch.  83;  New  Jersey  Laws  (1905),  vh.  265  (Comp.  St.,  p.  5648)  ;  New  York  Cons. 
Laws,  Penal  Law.  sec.  2361  :  Ohio  Laws  (1904),  p.  277  (General  Code,  sees.  638G  to 
6389)  ;  Washington  Laws  (1907),  ch.  253. 

s  People  v.  Zimmerman,  102  N.  Y.  .Vpp.  Div.,  103   (1905). 

"State  V.  Caspare  et  al.,  115  Md.,  7   (1911  ). 

10  California,  Connecticut,  Idaho.  Illinois.  Indiana.  Iowa.  Kansas,  Louisiana,  Maryland, 
Massachusetts,  Michigan,  Minnesota,  Missouri,  Montana,  Nebraska,  New  .lerscy.  New 
York,  North  Carolina,  North  Dakota,  Ohio,  Oregon,  Pennsylvania,  Rhode  Island,  South 
Dakota,   I'tah.    Washington,    West   Virginia.    Wisconsin. 

^1  Chicago. 


518  REPOKT    OF    THE    COMMISSIONER    OF    CORPOEATIONS. 

ing  advertisements  concerning  property  "which  is  offered  for  sale. 
These  laws  are,  as  a  rule,  of  very  recent  date,  practically  all  of 
them  having  been  passed  in  1913  or  1914.  They  fall  into  two  general 
classes,  first,  those  which  prohibit  any  representation  or  statement  of 
fact  respecting  the  property  offered  for  sale  which  is  nntrue,  decep- 
liA'e,  or  misleading,  and,  second,  those  which  prohibit  imtrne  or  mis- 
leading statements  of  the  kinds  specified  in  the  acts.  These  latter 
statutes  apply  only  to  specific  kinds  of  property  or  services.  Statutes 
of  the  first  class  are  so  nearly  alike  in  scope  and  verbiage  that  a  fair 
idea  of  them  all  may  be  conveyed  by  quoting  a  part  of  the  New  Jersey 
act,^  which  is  as  follows : 

Any  person,  firm,  corporation  or  association  who,  witli  intent  to  sell  or  in  any 
wise  dispose  of  merchandise,  securities,  service,  or  anything  offered  by  such 
person,  firm,  corporation  or  association,  directly  or  indirectly,  to  the  public  for 
sale  or  distribution,  or  with  intent  to  increase  the  consumption  thereof,  or  to  in- 
duce the  public  in  any  manner  to  enter  into  any  obligation  relating  thereto,  or 
to  acquire  title  thereto,  or  an  interest  therein,  maizes,  publishes,  disseminates, 
circulates,  or  places  before  the  public  or  causes,  directly  or  indirectly,  to  be 
made,  published,  disseminated,  circulated,  or  placed  before  the  public,  in  this 
State,  in  a  newspaper  or  other  pul)lication,  or  in  the  form  of  a  book,  notice, 
hand-bill,  poster,  bill,  circular,  pamphlet  or  letter  or  in  any  other  way,  an  ad- 
vertisement of  any  sort  regarding  merchandise,  securities,  service,  or  anything 
so  offered  to  the  public,  which  advertisement  contains  any  assertion,  representa- 
tion or  statement  of  fact  which  is  untrue,  deceptive  or  misleading,  shall  be 
guilty  of  a  misdemeanor. 

A  number  of  States  have  substantially  similar  laws.^  It  may  be 
noted  that  the  Iowa,  Kansas,  Michigan,  Washington,  and  Wisconsin 
acts  expressly  exempt  publishers  of  newspapers  from  liability  for 
the  publication  of  such  advertisements  if  made  in  good  faith. 

A  Chicago  municipal  ordinance  ^  is  similar  to  the  New  Jersey  law, 
except  that  its  application  is  limited  to  advertisements  in  newspapers 
or  other  publications,  or  to  signs,  banners,  handbills,  or  placards, 
offered  for  sale  or  exposed  on  streets,  sidewalks,  or  public  grounds 
over  which  the  city  has  control. 

In  California,  Connecticut,  Indiana,  Maryland,  Massachusetts, 
Montana,  Oregon,  Pennsylvania,  and  South  Dakota  the  statutes* 

iNow  Jersey  Laws  (1913),  ch.  .318. 

2  Idaho  Laws  (1915),  ch.  23:  Iowa  Laws  (1913),  ch.  309;  Kansas  Laws  (191.5),  ch.  2; 
Louisiana  Acts  (1914),  ch.  162;  Michigan  Laws  (1913),  Act  No.  27(5;  Minnesota  Laws 
(1913),  ch.  51;  Missouri  Laws  (1915),  p.  207;  Nebraska  Laws  (1913),  ch.  104;  New 
York  Laws  (1915),  ch.  569;  North  Carolina  Pub.  Laws  (1915),  ch.  218;  North  Dakota 
Laws  (1913),  ch.  3;  Ohio  Laws  (1913),  p.  43;  Acts  of  Third  Philippine  Legislature, 
special  session  (1914),  No.  2333;  Rhode  Island  Laws  (1914),  ch.  1073;  Utah  Laws 
(1913),  ch.  22;  Washington  Laws  (1913),  ch.  34;  West  Virginia  Laws  (1915),  ch.  43; 
Wisconsin  Laws   (1913),  ch.  510. 

"  City  of  Chicago  ordinance  passed  by  city  council,  Decembei",  1913. 

*  California,  Ilenning's  Gen.  Laws  (1914),  ch.  453,  Act  4040;  Connecticut  Pub.  Acts 
(1913),  ch.  65;  Indiana,  Burns'  Ann.  Stats.  (1914),  sec.  2590d  ;  Maryland  Laws  (1914), 
ch.  410;  Massachusetts  Laws  (1914),  ch.  288;  Montana  Laws  (1915),  ch.  117;  Oregon 
Laws  (1909),  eh.  104;  Pennsylvania  Laws  (1913),  Act.  No.  8;  South  Dakota  Laws 
(1913),  ch.  15. 


TEtrST    LAWS   AND    UNFAIR   COMPETITION.  519 

are  limited  to  false  statements  concerning  particular  facts  in  relation 
to  goods  offered  for  sale,  as  follows : 

California. — Concerning  the  quantity,  tlie  quality,  tlie  value,  the  price,  the 
method  of  production  or  manufacture,  or  the  fixing  of  the  price  of  his,  its,  or 
their  merchandise  or  professional  work;  or  the  manner  or  source  of  purchase 
of  such  merchandise,  or  the  possession  of  awards,  prizes  or  distinctions ;  or  the 
motive  or  purpose  of  a  sale,  intended  to  have  the  appearance  of  an  advan- 
tageous offer. 

Connecticut. — Concerning  the  nature,  quality,  method  of  production  or  manu- 
facture, or  cost  of  any  goods  or  merchandise  offered  for  sale. 

Indiana,  Massachusetts,  and  South  Dakota. — Concerning  the  quantity,  the 
quality,  the  method  of  production  or  manufacture,  the  cost  of  production,  the 
cost  to  the  advertiser,  the  present  or  former  price,  or  the  reason  for  the  price 
of  the  merchandise  *  *  * ;  the  manner  or  source  of  purchase  of  such  mer- 
chandise, or  the  possession  of  rewards,  prizes  or  distinctions  conferred  on  ac- 
count of  such  merchandise,  which  statement  or  assertion  has  the  appearance 
of  an  offer  advantageous  to  the  purchaser. 

Maryland. — Concerning  the  quality,  the  quantity,  the  value,  the  method  of 
production  or  manufacture,  or  the  reason  for  the  price  of  his  or  their  mer- 
chandise, or  the  manner  or  source  of  purchase  of  such  merchandise  or  the 
possession  of  awards,  prizes,  or  distinction  conferring  a  gain  of  such  mer- 
chandise, or  the  motive  or  purpose  of  a  sale,  intended  to  give  the  appearance 
of  an  offer  advantageous  to  the  purchaser, 

Montana. — Regarding  the  quality  or  price. 

Oregon. — Concerning  the  quantity,  the  quality,  the  value,  the  price,  the 
method  of  producing  or  manufacture  of  his  merchandise  or  professional  work, 
or  the  manner  or  source  of  purchase  of  such  merchandise,  or  the  motive  or 
purpose  of  any  sale  which  is  luitrue  or  calculated  to  mislead. 

Pennsylvania. — Concerning  the  quantity,  the  quality,  the  value,  the  merit, 
the  use,  the  present  or  former  price,  the  cost,  the  reason  for  the  price,  or  the 
motive  or  purpose  of  a  sale,  of  any  merchandise,  securities,  or  service;  or  con- 
cerning the  method  or  cost  of  production  or  manufacture  of  such  merchandise ; 
or  the  possession  of  rewards,  prizes,  or  distinctions  conferred  on  account  of  such 
merchandise;  or  the  manner  or  source  of  purchase  of  such  merchandise  or 
securities. 

The  statutes  of  the  above  States  vary  Avith  respect  to  the  place  or 
method  of  publication  of  the  statements  as  follows : 

California. — In  the  newspapers  or  other  periodicals  or  in  public  advertise- 
ments, or  in  any  communications  intended  for  a  large  number  of  persons. 

Connecticut. — In  a  newspaper  or  circular,  or  on  any  card,  sign,  billboard, 
label,  or  other  advertising  medium. 

Indiana,  Massachusetts,  and  South  Dakota. — "In  a  newspaper,  circular,  form 
letter  or  other  publication  published,  distributed  or  circulated,"  or  *'  on  any 
billboard,  sign,  card,  label  or  other  advertising  medium  disiihiyed  on,  in  or 
near  a  street,  electric  ear,  showcase,  store  or  other  place."  Massachusetts  omits 
the  word  "  form  "  before  "  letter." 

Maryland. — In  a  newspaper,  circular,  or  circular  or  form  letter  or  other  pub- 
licatioii. 

Montana. — In  any  advertisement,  circular,  letter,  poster,  handbill,  display 
card,  or  other  written  or  printed  matter. 

Oregon. — In  a  newspaper  or  other  periodical,  or  in  public  advertisement,  or 
by  letter  or  circular. 

Pennsylrania. — In  a  newspaper,  periodical,  form  letter,  or  other  publication, 
published,  distributed,  or  circulated. 


520  EEPOKT    OF    THE    COMMISSION EE    OF    COEPOEATTONS. 

The  law  applies  to  merchandise,  securities,  or  services  in  Pennsyl- 
vania ;  to  goods,  v^ares,  or  merchandise  in  Montana ;  to  merchandise 
or  professional  work  in  California  and  Oregon ;  and  to  merchandise 
only  in  Connecticut,  Indiana,  Maryland,  Massachusetts,  and  South 
Dakota. 

An  Illinois  statute  prohibits  any  advertisement,  through  the  me- 
dium of  newspapers,  signs,  placards,  handbills,  circulars  or  pamph- 
lets, by  which  any  goods  are  falsely  represented  to  be  stocks  damaged 
by  fire,  water,  or  otherwise,  or  to  be  bankrupt  or  insolvent  stocks,  or 
to  be  sheriff's,  constable's,  receiver's,  assignee's,  or  other  judicial  sales, 
or  closing  out  or  sacrifice  sales,  if  the  goods  are  represented  to  be  of  . 
greater  value  than  the  price  at  which  they  are  offered  for  sale.^ 

Iowa,  in  addition  to  the  general  statute  already  noted,  has  a  law^ 
applying  to  transient  merchants,  which,  in  effect,  provides  that  no  per- 
son shall  advertise,  represent,  or  hold  out  that  any  sale  of  goods, 
wares,  or  merchandise  is  an  insurance,  bankrupt,  railway  wreck, 
insolvent,  assignee,  trustee,  executor,  administrator,  receiver,  syndi- 
cate, wholesale,  manufacturer,  or  closing-out  sale,  or  a  sale  of  goods, 
Avares,  or  merchandise  damaged  by  smoke,  fire,  water  or  otherwise, 
unless  he  has  filed  with  the  proper  officer  a  statement  setting  forth  the 
names  of  the  persons  from  whom  the  articles  were  obtained,  the  date 
of  delivery  to  him,  the  place  from  which  said  goods  were  last  taken, 
and  all  details  necessary  to  fully  identify  the  articles.  A  number  of 
other  States^  have  similar  laws  relating  to  transient  merchants, 
although  not  all  require  the  filing  of  such  a  detailed  statement. 

False  or  misleading  advertisements  or  newspapers  respecting 
THEIR  circulation. — Four  States  and  Porto  Eico  make  it  a  criminal 
offense  for  the  publishers  of  newspapers  or  periodicals  to  misrepre- 
sent the  circulation  of  their  publications  for  the  purpose  of  securing 
advertising  or  other  patronage.*  The  text  of  the  New  York  law  is 
as  follows : 

Every  proprietor  or  publisher  of  any  newspaper  or  periodical  who  shall  wil- 
fully or  knowingly  misrepresent  the  circulation  of  such  newspaper  or  periodical 
for  the  purpose  of  securing  advertising  or  other  patronage  shall  be  deemed 
guilty  of  a  misdemeanor. 

1  Illinois  Stats.,  Ann.  (J.  cand  A.)  1913,  sees.  3G49,  3650. 

2  Iowa  Laws  (1913),  cli.  02,  sec.  4. 

3  Connecticut  Gen.  Stats.  (1902),  sec.  4GG5 ;  Delaware  Laws  (1895),  ch.  71;  Illinois 
Laws  (1911),  p.  291;  Indiana,  Burns'  Ann.  Stats.  (1914),  sec.  82.'?7  ;  Kentucky,  Carroll's 
Stats.  (1915),  sec.  4217a;  Maine  Rev.  Stats.,  oh.  45,  sec.  10;  Massachusetts  Rev.  Laws 
(1902),  ch.  G5,  sec.  8;  Maryland  Code,  art.  27,  sec.  174  ;  Michigan,  Howell's  Stats.  (1913), 
sees.  5304-530G;  Minnesota  Gen.  Stats.  (1913),  sec.  GlOO  ;  New  Hampshire  Laws  (1897), 
ch.  4G ;  New  Jersey  Comp.  Stats.,  p.  2942 ;  New  York  Cousol.  Laws,  ch.  24,  sec.  85 ;  North 
Dakota  Comp.  Laws  (1913),  sees.  3037,  3038;  Ohio  Gen.  Code  (1910),  sec.  6357;  Penn- 
sylvania Laws  (1913),  Act  161;  Rhode  Island  Gen.  Laws  (1909),  ch.  192;  Wisconsin 
Stats.  (1913),  sees.  1584  (a),  (b)  ;  and  Wyoming  Laws  (1915),  ch.  68. 

*  Colorado  Laws  (1911),  ch.  178;  Kansas  Gen.  Stats.  (1909),  see.  2851;  New  York 
Consol.  Laws,  Penal  Law,  sec.  946;  Porto  Rico  Rev.  Stats.  (1911),  see.  5931;  Rhode 
Island  Gen.  Laws  (1909),  ch.  349,  see.  43. 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  521 

In  one  instance,  in  addition  to  the  criminal  penalty  imposed  for 
"  any  false  affidavit  in  regard  to  circulation,"  it  is  provided  that  if 
any  false  or  fraudulent  representation  that  the  circulation  is  greater 
than  the  actual  paid  circulation  is  made  to  an  advertiser  the  latter 
may  recover  the  sum  paid  for  advertising ;  ^  and  in  another  the  ad- 
vertiser may  recover  the  amount  paid  in  excess  of  what  the  charge 
would  have  been  based  on  the  actual  circulation.^ 

In  at  least  three  States  there  is  a  statute  prohibiting  the  editor  or 
proprietor  of  any  newspaper  from  publishing  in  such  paper  "  as 
true,  any  statement  which  he  has  not  good  reason  to  believe  to  be 
true,  with  intent  to  increase  thereby  the  sales  of  copies  of  such 
paper."  ^ 

Section  10.  Misbranding  or  falsely  marking'  goods. 

General  statement. — There  are  a  number  of  State  statutes  which 
prohibit  the  false  marking  of  manufactured  articles  or  other  goods, 
or  require  that  such  articles,  which  include  in  some  instances  prod- 
ucts of  the  soil,  shall  be  marked  in  such  manner  that  the  purchaser 
may  be  correctly  advised  as  to  their  quantity,  quality,  ingredients, 
or  place  of  manufacture.  In  most  instances,  the  primary  object  of 
these  statutes  is  unquestionably  to  prevent  the  purchasing  public 
from  being  deceived  respecting  goods  or  products  offered  for  sale. 
Some  of  these  laws  are  general  in  their  character,  prohibiting  mis- 
representation by  false  marking  or  branding  respecting  certain  at- 
tributes of  any  goods  offered  for  sale,  or  requiring  that  their  quantity, 
number,  or  ingredients  be  marked  on  wrappings  or  containers. 
Others  prohibit  such  misrepresentation,  or  require  the  marking  only 
of  certain  kinds  or  classes  of  goods  specified  in  the  act.  In  some  in- 
stances, the  laws  are  restricted  in  their  application  to  marks  on  con- 
tainers or  labels,  in  others  they  apparently  apply  to  any  false  brand- 
ing. Very  generally,  misrepresentation  of  this  character  is  prohibited 
when  done  with  intent  to  defraud  or  deceive  the  public.  In  some 
cases  public  officials  are  required  to  mark  goods  with  their  weight, 
measure,  quantity  or  ingredients,  and  the  alteration  or  imitation 
of  such  marks  is  prohibited. 

Statutes  applying  to  all  goods. — A  number  of  States  prohibit  the 
false  marking  of  any  goods  with  respect  to  some  one  or  more  of  the 
following:  Kind,  number,  quantity,  weight,  measure,  quality,  grade, 
or  ]ilace  of  manufacture  or  production.* 

1  Kansas  Gen.  Stats.  (1909),  sees.  2851,  2852. 

2  Colorado  Laws   (1911),  ch.  178. 

3  North  Dakota  Comp.  Laws  (1913),  sec.  9788;  Oklahoma  Rev.  Laws  (1910J,  sec.  2542; 
South  Dakota  Penal  Code  (1903),  sec.  487. 

<New  York  Cons.  Laws  (1909),  ch.  40,  sees.  4.'?5,  241G,  2354,  subsec.  5,  as  amended  by 
laws,  1914,  ch.  :!.'.2,  p.  9:!1  :  Pennsylvania  Laws  (1913),  No.  445;  Tennessee  Acts  (1909), 
ch.   54S;   Iowa  Code    (1897),   sees.  4871,   5048. 


522  REPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

A  Kentucky  law  is  more  general,  apparently  prohibiting  the  use  of 
a  false  brand  of  any  description.^ 

Falsely  altering  or  imitating  the  mark  of  any  public  officer  de- 
noting quality,  weight,  or  quantity  is  also  prohibited  in  some  in- 
stances.- A  number  of  the  States  also  prohibit  the  marking  of  false 
weight  or  tare,^  and  several  affirmatively  require  goods  to  be  marked 
with  the  weight,  or  measure,  or  numerical  contents,*  or  that  the  gross, 
tare,  and  net  weights  shall  be  shown.^  Others  do  not  specifically 
require  that  the  goods  shall  be  marked,  but  provide  that  if  so  marked 
the  markings  shall  be  accurate.*' 

In  a  number  of  States  the  sealer  of  weights  and  measures,  or  a 
similar  officer,  is  authorized  to  test  the  weight  or  measure  of  merchan- 
dise sold  to  determine  the  accuracy  of  representations  or  marks  re- 
specting weight  or  quantity.^  It  is  likewise  a  common  prohibition 
that  foreign  substances  or  inferior  goods  shall  not  be  placed  in  pack- 
ages of  merchandise  with  intent  to  defraud.  Some  of  these  statutes 
are  apparently  of  general  application  while  others  cover  only  speci- 
fied commodities  such  as  cotton,  tobacco,  hay,  and  straw.^ 

Statutes  applying  to  particular  articles  or  commodities. — The 
false  marking  of  gold  and  silverware  or  articles  plated  with  the  prec- 
ious metals  has  been  the  subject  of  frequent  legislation.  A  number  of 
States  prohibit  the  marking  of  articles  as  gold  or  gold  alloy,  or  silver, 
sterling  silver,  coin  or  coin  silver,  unless  they  are  of  the  fineness  pre- 
scribed in  the  acts,  and  forbid  the  use  of  the  mark  "  sterling "  or 
"  coin "  on  silver-plated  ware.     They  also  require  that  where  any 

1  Kentucky  Stats.   (1915),  sees.  1280,  1280a. 

2  Iowa  Code  (1897),  sec.  5046;  Massachusetts  Rev.  Laws  (1902),  ch.  56,  sec.  2; 
Tennessee  Code   (1896),  sees.  6736,   (1)  and   (2). 

3  California  Penal  Code,  sec.  554;  Idaho  Rev.  Code  (1908),  sees.  1544,  7108;  Idaho 
Laws  (1913),  ch.  84,  sec.  22;  Montana  Rev.  Code  (1907),  sec.  8702;  New  Jersey  Laws 
(1911),  ch.  201,  sec.  28;  Now  Mexico  Laws  (1913),  ch.  82,  sec.  31;  North  Dakota  Comp. 
Laws  (1913),  sec.  9988;  Oklahoma  Rev.  Laws  (1910),  sec.  2741;  South  Dakota  Penal 
Code,  sec.  664. 

*  Montana  Laws  (1913),  ch.  83,  sec  12;  Nevada  Rev.  Laws  (1912),  sec.  4809;  Penn- 
sylvania Laws  (1913),  No.  445;  Utah  Laws  (1915),  ch.  104,  sec.  21;  Wyoming  Comp. 
Stats.   (1910),  sec.  3061. 

5  Nebraska  Rev.  Stats.  (1913),  sees.  8885-8887;  Ohio  Gen.  Code  (1910),  sec.  13128. 

"Arkansas  Acts  (1913),  No.  252. 

'Arizona  Rev.  Stats.  (1913),  Civil  Code,  sec.  5516;  California,  Ilenning's  Gen.  Laws 
(1914),  ch.  600,  act  5556,  see.  29;  Connecticut  Pub.  Acts  (1911),  ch.  280,  sec.  5;  Illi- 
nois Laws  (1913),  p.  614;  Louisiana  Acts  (1912),  Act  No.  146,  sec.  9;  Maine  P.  L. 
(1913),  ch.  116,  sec.  6;  Michigan  Pub.  Acts  (1913),  No.  168,  sec.  5;  Montana  Laws 
(1913),  ch.  83,  sec.  10;  Nevada  Rev.  Laws  (1912),  sec.  4815;  Utah  Laws  (1915),  ch.  104, 
sec.  8;  Vermont  Laws  (1912),  No.  175,  sec.  3;  Washington  Laws  (1913),  ch.  52,  sec.  4. 

8 Alabama  Code  (1907),  sec.  6683;  Arizona  Rev.  Stats.  (1913),  Penal  Code,  sec.  388; 
California  Penal  Code,  sec.  381;  Florida  Comp.  Laws  (1914),  sec.  3703;  Georgia,  Park's 
Ann.  Penal  Code  (1014),  see.  709;  Montana  Revised  Codes  (1907),  sec.  8489;  New  Mexico 
Laws  (1913),  ch.  82,  sec.  28;  New  York  Cons.  Laws  (1909),  ch.  40,  sec.  434;  North 
Dakota  Comp.  Laws  (1913),  sec.  9764;  Oklahoma  Rev.  Laws  (1910),  see.  2693;  Penn- 
sylvania P.  &  L.  Digest  (1700-1907),  col.  7467,  see.  97;  Rhode  Island  Gen.  Laws  (1909), 
ch.  179;  South  Carolina  Crim.  Code,  sec.  453;  South  Dakota  Penal  Code,  sec.  466;  Ten- 
nessee Code  (1896),  sees.  6740-6742;  Texas  Rev.  Crim.  Stats.  (1911),  Arts.  965,  966; 
Washington  Laws   (1909),  ch.  249,  sec.  366;  Wyoming  Comp.  Stats.   (1910),  see.  6000. 


TEUST   LAWS   AND    UNFAIR    COMPETITION.  523 

marks  ai^  used  on  gold-plated  articles  to  indicate  the  fineness  of  the 
plate,  the  fact  that  the  articles  are  only  plated  shall  also  be  clearly 
shown.  The  statutes  vary  in  the  scope  of  their  application,  some 
covering  gold  and  silver,  and  gold  and  silver  plated  ware,  others  not 
applying  to  plated  ware,  and  still  others  covering  only  articles  made 
of  silver.^ 

Considerable  legislation  of  a  similar  nature  respecting  other  arti- 
cles or  commodities  has  been  enacted.  Several  States  provide  for  the 
inspection  of  lumber,  and,  in  some  instances,  of  lumber  products, 
such  as  shingles,  staves,  hoops,  and  clapboards,  and  require  variously 
that  when  inspected  they  shall  be  marked  to  show  the  State  and 
county  where  inspected,  the  kind  and  quality  of  the  products  or  the 
contents.-  The  false  marking  of  dry  goods  with  respect  to  quantity 
or  number  of  yards  has  also  been  prohibited,^  and  in  one  instance  it 
is  provided  that  when  the  contents  of  this  class  of  goods  in  yards 
or  pounds  is  indicated  thereon  such  marking  shall  be  accurate,  and 
in  case  of  error  the  seller  or  manufacturer  shall  be  liable  to  the  pur- 
chaser for  double  the  amount  of  the  deficiency.*  Several  States  re- 
quire the  contents  in  yards  to  be  marked  on  sewing  thread,^  and  in 
one  State  the  number  of  yards  or  the  weight  is  required  to  be  marked 
on  other  threads  as  well,  such  as  darning,  crocheting,  and  embroidery 
thread.^  Some  of  these  statutes  impose  a  penalty  for  omitting  to 
mark  the  thread  as  required  or  for  falsely  marking  it.  Cotton  duck 
or  canvas,  and  articles  other  than  wearing  apparel  made  of  this  ma- 
terial, are  sometimes  required  to  be  marked  with  the  accurate  weight 
per  yard  of  material,  together  with  a  description  of  the  filler.  A 
misrepresentation  or  concealment  as  to  these  requirements  or  with 
respect  to  the  dimensions  of  certain  specified  articles  made  of  canvas 
is  prohibited.'^  The  use  of  the  words  "  linen,"  "  pure  linen,"  or  "  all 
linen"  on  collars  and  cuffs  has,  in  one  instance,  been  prohibited 

— ^ — — 1  ■  ■■  ■ 

1  Colorado,  Mills'  Ann.  Stats.  (1912),  sees.  1998-2002;  Iowa  Gen.  Acts  (1911),  ch.  181  ; 
Laws  of  Maryland  (1912),  ch.  639,  p.  941;  Minnesota  Gen.  Stats.  (1913),  sees.  8864- 
8869;  North  Carolina  Tub.  Laws  (1907),  ch.  331;  New  Jersey  Comp.  Stats.,  pp.  1806- 
1809;  Rhode  Island  Gen.  Laws  (1909),  ch.  199;  Wisconsin  Stats.  (1913),  sees.  4432-1 
to  8:  Massachusetts  Siippl.  Rev.  Laws  (1902-1908),  p.  1431;  Connecticut  Gen.  Stats., 
Rev.  of  1902,  sees.  1380-1384  ;  Illinois  Rev.  Stats.,  eh.  38,  sees.  531-533  ;  New  York  Cons. 
Laws  (1909),  ch.  40,  sees.  422-429;  Pennsylvania,  V.  &  L.  Digest  (1700-1907),  cols. 
2341-43,  sees.  171-176;  Comp.  Laws  of  Utah  (1907),  sees.  44S7x  14  to  18;  Virginia  Code 
(1904),  sec.  3722a;  Laws  of  Washington  (1909),  eh.  249,  sees.  428-433;  Arkansas  Acts 
(1895),  Act  116;  Florida  Comp.  Laws  (1914),  sees.  3351,  3352;  Maine  Rev.  Stats.  (1903), 
ch.  127,  sec.  12;  Michigan,  Howeirs  Stats.  (1913),  sees.  4303,  4304;  Missouri  Rev.  Stats. 
(1909),  sees.  4882,  4883;  New  Hampshire  P.  S.,  ch.  126,  p.  397;  Ohio  Gen.  Code  (1910), 
sees.  13112,  13113;  South  Carolina  Cr.  Code  (1912),  sec.  510. 

=  Iowa  Code  (1897),  sec.  3032;  New  Hampshire  P.  S.  (1901),  eh.  128,  p.  403;  Maine 
Rev.  Stats.   (190:'.),  ch.  42,  sees.  14-22. 

3  Laws  of  Maryland  (1914),  eh.  802,  sec.  26  ;  Utah  Laws  (1915),  ch,.  104,  .sec.  22. 

*  Pennsylvania,  P.  &  L.  Digest  (1700-1907),  col.  7453. 

li  Connecticut  Gen.  Stats.  (1902),  see.  4SS5  ;  Massachusetts  Rev.  Laws  (1902),  ch.  57, 
sees.  61-64;  New  Jersey  Comp.  Stats.  (1910),  p.  5395;  New  York  Cons.  Laws  (1909), 
ch.  20.  sec.  394  :  Rhode  Island  Gen.  Laws   (1909),  ch.  167. 

8  New  York  Cons.  Laws  (1909i,  ch.  20,  sec.  394. 

■'Minnesota  Gen.  Stats.  (1913),  sees.  3772  to  3778;  Wisconsin  Stats.  (1913),  sec.  1070t. 


524  REPORT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

unless  the  materials  used  contain  one  ply  having  a  flax  thread  in 
both  warp  and  filling.^  One  State  prohibits  the  sale  of  boots  and 
shoes  made  in  whole  or  in  part  of  imitation  leather  unless  the  articles 
bear  the  name  of  the  manufacturer  and  place  of  manufacture,  the 
substitute  used,  and  in  what  part  of  the  article  used.-  In  another 
State  the  law  requires  these  articles,  when  made  in  whole  or  in  part 
of  imitation  leather,  to  be  marked  with  the  words  "  imitation 
leather."  ^  The  laws  of  other  States  provide  that  the  manufacturers 
of  these  goods  shall  have  the  exclusive  right  of  stamping  their  name 
and  place  of  manufacture  on  them,  that  the  goods  shall  not  be  mer- 
chantable unless  so  stamped,  or  that  such  stamp  shall  be  deemed  a 
warranty  that  the  merchandise  is  of  good  material  and  well  manu- 
factured.* It  is  a  somewhat  common  requirement  also  that  mattresses 
or  stuffed  furniture,  and  in  some  instances  lounges,  sofas,  pillows, 
cushions,  down  quilts,  or  comforts  containing  down,  hair  or  feathers 
shall  be  marked  in  such  manner  as  to  show  the  materials  of  which 
they  are  composed,  the  percentage  of  each,  their  kind,  quality,  and 
quantity,  and  in  particular  whether  they  are  new  or  second-hand.^ 
Occasionally  these  requirements  apply  only  to  mattresses  made  of 
second-hand  material.^  There  is  little  uniformity  in  the  require- 
ments, but  some  of  those  enumerated  above  appear  in  all  the  statutes. 
The  use  of  the  word  "  felt,"  or  words  of  like  import,  unless  the 
materials  of  which  the  mattresses  are  composed  have  been  felted,  is 
prohibited,  as  is  also  removing,  defacing,  or  concealing  the  marks. 
Somewhat  extensive  legislation  has  been  enacted  regarding  the 
marking  or  branding  of  paints,  linseed  oil,  and  turpentine.  A  num- 
ber of  the  States  have  one  or  more  of  the  following  requirements 
respecting  paints;  viz,  that  they  shall  bear  the  name  and  address  of 
the  manufacturer  or  distributor,  the  name,  the  quantity,  the  per- 
centage of  each  ingredient,  or  each  mineral  constituent,  the  names 
of  oils  substituted  for  linseed  oil,  and  the  percentage  of  such  substi- 
tute or  the  net  measure  or  weight.''  Any  marks  tending  to  deceive 
the  purchaser  as  to  the  nature  or  composition  of  paint  are  sometimes 
prohibited.^     Requirements  of  similar  general  character  respecting 

iNew  York  Cons.  Laws  (1909^  ch.  40,  sec.  430. 

2  Louisiana  Acts  (1912),  Act  No.  179. 

3  Michigan,  Howell's  Stats.   (1913),  sec.  4312. 

*  Massachusetts  Rev.  Laws  (1902),  ch.  72;  Maine  Rev.  Stats.  (1903),  ch.  40,  sec.  17. 

■s  Indiana,  Burns'  Ann.  Stats.  (1914),  sees.  7048q-7648z  ;  Maryland,  Bagb.v's  Ann.  Code 
(1910),  art.  43,  sees.  51,  52;  Minnesota  Gen.  Stats.  (1913),  sees.  3779-3782;  New  Jersey 
Laws  (1912),  ch.  171;  New  York  Laws  (1913),  ch.  503;  Ohio  Laws  (1911),  p.  519; 
Pennsylvania  Laws  (1913),  No.  90;  Wisconsin  Rev.  Stats.   (1913),  sec.  1418s. 

"California,  Ilenning's  Gen.  Laws  (1914),  ch.  309,  Act  2682. 

'North  Dakota  Comp.  Laws  (1913),  sec.  2923;  Ohio  Gen.  Code  (1910),  sees.  G331- 
6334,  13168;  Iowa  Code,  Suppl.  (1907),  sees.  2510a  to  d;  Minnesota  Gen.  Stats.  (1913), 
sees.  3734  to  3742;  Nebraska  Rev.  Stats.  (1913),  sees.  5759-5766;  South  Dakota  Laws 
(1907),  ch.  196;  Vermont  Laws  (190S),  No.  123. 

8  Massachusetts,  Suppl.  to  Rev.  Laws  (1902-8),  p.  539;  Minnesota  Gen.  Stats.  (1913), 
sec.  3741;  Nebraska  Rev.  Stats.  (1913),  sec.  5759;  Ohio  Gen.  Code  (1910),  sees.  6331, 
13168. 


TRUST    LAWS    AND    UNFAIE    COMPETITION.  525 

linseed  oil  and  turpentine  are  found  in  a  number  of  States.^  In 
particular,  adulterations,  substitutions  or  imitations  of  these  com- 
modities are  required  to  be  clearly  marked,  and,  in  some  instances, 
with  the  name  and  percentage  of  each  ingredient.-  The  sale  of  sub- 
stitutes or  adulterations  is  sometimes  prohibited  entirely.^ 

Other  commodities,  the  subject  of  legislation  prohibiting  mis- 
branding or  requiring  that  containers,  wrappings,  labels,  etc.,  shall 
be  properly  marked,  are  lime,*  cotton,^  hay  and  straw,^  tobacco,^  mill 
products,^  explosives,^  matches,^"  automobile  tires,^^  binder  twine,^^ 

1  Florida  Comp.  Laws  (1914),  sec.  3802;  Georgia  Pol.  Code,  sees,  1839-1841;  Indiana, 
Burns'  Ann.  Stats.  (1914),  sees.  9664-9668;  Iowa  G.  A.  (1911).  ehs.  110-111;  Kansas 
Laws  (1911),  cli.  179;  Kentueky  Stats.  (1915),  sec.  1373;  Massachusetts,  Suppl.  Rev. 
Laws  (1902-8),  p.  539;  Micliigan  Pub.  Acts  (1909),  No.  110,  Pub.  Acts  (1911),  No.  175; 
Minnesota  Gen.  Laws  (1913),  see.  3733;  Nebraska  Rev.  Stats.  (1913),  sec.  5763;  New 
Jersey  Comp.  Stats.  (1910),  p.  2595;  New  York  Cons.  Laws  (1909),  ch.  1,  sees.  240-243, 
as  amended  by  Laws  (1911),  cli.  816;  Nortli  Dakota  Comp.  Laws  (1913),  sees.  2875, 
2876;  Ohio  Gen.  Code  (1910),  sees.  6331  to  6334,  12792,  12793,  13168;  Pennsylvania 
Laws  (1913),  No.  82;  South  Carolina  Civil  Code  (1912),  sees.  2401-2405;  South  Dakota 
Laws  (1909),  ch.  20,  and  Laws  (1911),  ch.  191;  Vermont  Laws  (1908),  No.  123;  Wis- 
consin  Stats.    (1913),    see.    1636-?. 

2  Connecticut  Pub.  Acts  (1911),  ch.  274;  Georgia,  Park's  Ann.  Code  (1914),  Vol.  I. 
sees.  1821-1824,  1839,  and  Vol,  II,  sees.  650-656;  Florida  Comp.  Laws  (1914),  sees.  3801- 
3808;  Iowa  G.  A.  (1911),  chs.  110-111;  Kansas  Laws  (1911),  ch.  179;  Massachusetts 
Acts  (1911),  eh.  266;  Michigan  Pub.  Acts  (1909),  No,  110,  Pub.  Acts  (1911),  No.  175; 
Nebraska  Rev.  Stats  (1913),  sec.  5763;  Ohio  Gen.  Code  (1910),  sees.  6331-6334,  13168; 
Pennsylvania  Laws  (1913),  No.  82;  South  Dakota  Laws  (1909),  eh.  20,  and  Laws  (1911), 
ch.  191  ;  Vermont  Laws  (1908),  No.  123;  Wisconsin  Stats.   (1913),  sec.  IGSQ-l. 

3  Indiana,  Burns'  Ann.  Stats.  (1914),  sees.  9664-9668. 

*  Maine  Laws  (1913),  eh.  164;  Maryland  Ann.  Code,  art.  48,  sec.  89;  Kansas  Laws 
(1913),  ch,  334;  Massachusetts  Rev.  Laws  (1902),  eh.  57,  sees.  47  to  53;  New  Jersey 
Laws  (1913),  ch.  178;  Ohio  Laws  (1913),  p.  151;  Rhode  Island  Gen.  Laws  (1909),  ch. 
159;  Vermont  Pub.  Stats.  (1906),  sees.  4918  to  4920;  Virginia  Code  Ann.,  Suppl.  (1910), 
p.  883. 

6  New  Hampshire  Pub.  Stats.  (1901),  p.  394,  sees.  17  to  19;  Rhode  Island  Gen.  Laws 
(1909),  eh,  166;  Texas  Gen.  Laws  (1911),  ch.  34. 

'Kansas  Laws  (1913),  ch.  334;  Massachusetts  Rev.  Laws  (1902),  eh.  57,  sees,  35-39; 
New  Hampshire  Pub,  Stats.  (1901),  ch,  126,  see.  4;  New  Jersey  Comp,  Stats.  (1910), 
p.  1806;  New  York  Cons.  Laws  (1909),  eh,  20,  see.  255,  ch.  40,  sec.  2417,  and  Laws  of 
1913,  ch.  96;  Pennsylvania,  P.  &  L.  Digest  (1700-1907),  col,  7466,  see.  93;  Rhode  Island 
Gen.  Laws  (1909),  eh.  179. 

T  Missouri  Rev,  Stats.  (1909),  sees,  6861-6870;  Virginia  Code  (1904),  sees.  1803,  1806, 
1807.  1833;  Indiana,  Burns'  Ann.  Stats.   (1914),  see.  7925, 

8 Alabama  Laws  (1911),  p.  104;  Arkansas  Acts  (1911),  No,  161;  Florida  Comp.  Laws 
(1914  1,  sec.  1143u;  Illinois,  J.  &  A.  Ann.  Stats.,  see.  10786;  Indiana,  Burns'  Stats. 
(1914),  sec,  7940;  Iowa  Code  Suppl..  sees,  5077-a,  5077-6;  Kansas  Laws  (1913),  ch,  188, 
as  amended  by  Laws  1915;  Kentueky,  Carroll's  Stats,  (1915 j,  eh.  46a;  Louisiana  Acts 
(1914),  No,  25;  Maine  Laws  (1911),  ch.  119,  sec.  4;  Massachusetts  Suppl.  to  Rev.  Laws 
(1902-1908),  p.  531;  Michigan,  Howell's  Stats.  (1913),  sec.  2661;  Minnesota  Gen.  Stats. 
(1913),  sees.  3706-3710;  Mississippi  Laws  (1912),  ch.  139,  sec.  2;  Missouri  Stats.,  sees. 
8501-8506;  Nebraska  Laws  (1915),  eh.  192;  New  Mexico  Laws  (1913),  ch.  82,  sec.  30; 
North  Carolina  Laws  (1909),  ch.  149;  North  Dakota  Comp.  Laws  (1913),  see,  2911;  Ohio 
Gen.  Code  (1910),  sec.  1129;  Pennsylvania,  P,  &  L.  Digest,  col,  265,  sec.  138;  Rhode 
Island  Pub,  Laws  (1910),  eh.  182;  South  Carolina  Civil  Code  (1912),  sec,  2420;  Texas 
Rev,  Civ.  Stats,  (1911),  sec.  5894;  Vermont  Pub.  Acts  (1012),  No.  183;  Virginia  Acts 
(1910),  ch.  151,  sec,  6;  Washington,  Remington  and  Ballingcr's  Code  (1910),  sec.  6013; 
Wisconsin  Stats.   (1913),  sec.  5548g-?. 

"Colorado,  Mills'  Ann,  Stats,  (1912),  sec,  5925;  Connecticut  Pub,  Stats.  (1902),  sec. 
2623;  Idaho  Rev.  Codes  (1908),  sees.  1555-1557;  Massachusetts  Rev.  Laws  (1902),  ch. 
57,  sees.  32-34;  Michigan,  Howell's  Stats,  (1913),  sees.  4257-4262;  Utah  Comp.  Laws 
(1907),  sees.  4280x,  3  to  5. 

10  Louisiana  Acts  (1912),  Act  No.  137;  Minnesota  Gen,  Stats.  (1913),  sees.  5162-5165; 
Wisconsin  Stats.   (1913),  sec,  1636b, 

"Minnesota  Gen.  Stats.  (1913),  sees.  2647,  2648. 

12  Michigan  Pub.  Acts  (1909),  No.  55;  Iowa  Code  Suppl.  (1907),  sees,  5077-a25 ; 
Nebraska  Rev.  Stats.   (1913),  sees.  590,  591  ;  Ohio  Gen.  Code   (1910),  sec.  13165, 


526  REPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

leather/   scythe   stones,-   calcium   carbide,^    chain   cables/    nails   or 
brads/  and  plastering  hair.^ 

Section  11.  Conducting  business  under  an  assumed  or  fictitious  name. 

A  number  of  States  make  it  an  offense  for  any  person  or  persons  to 
transact  business  within  the  State  under  any  assumed  name,  or 
under  any  designation  or  name,  corporate  or  otherwise,  other  than 
the  real  name  or  names  of  the  individuals  conducting  the  business, 
unless  such  person  or  persons  record  in  the  clerk's  office  of  the  town 
or  city  wherein  the  principal  place  of  business  is  located,  a  return  set- 
ting forth  the  name  under  which  such  business  is  conducted,  a  brief 
description  of  the  business,  and  the  names  and  residences  of  all  per- 
sons doing  business  under  the  assumed  name.  In  Vermont  it  is  ex- 
pressly provided  that  the  laws  shall  apply  to  corporations  doing 
business  under  any  name  other  than  that  of  the  corporation,  and  the 
Massachusetts  act  provides  that  the  law  shall  not  apply  to  any  cor- 
poration doing  business  under  its  true  corporate  name. 

A  portion  of  the  Vermont  law  is  as  follows : 

Sec.  1.  A  person  doing  business  in  this  State  on  tlie  first  day  of  April,  1909, 
under  any  name  other  than  liis  own,  and  every  copartnersliip  or  association  of 
individuals  except  corporations  doing  business  in  this  State  on  said  last  named 
date  under  any  name  which  does  not  contain  the  surnames  of  all  copartners  or 
members  thereof  without  any  other  descriptive  or  designating  words  except  tlie 
Christian  names  or  initials  of  such  copartners  or  members,  shall  on  or  before 
the  first  day  of  June,  1909,  cause  to  be  recorded  in  the  clerk's  office  in  the  town 
or  city  wherein  the  principal  place  of  business  of  such  person,  copartnership 
or  association  is  located,  a  return  setting  forth  the  name  under  which  such 
business  is  carried  on,  the  name  of  the  town  or  city  wherein  such  place  of 
business  is  located,  a  brief  description  of  the  kind  of  business  to  be  transacted 
under  said  name,  and  the  individual  names  and  residences  of  all  persons,  co- 
partners or  members  so  doing  business  thereunder ;  and  shall  on  or  before 
said  last  named  date  file  with  the  commissioner  of  state  taxes  a  like  return. 
The  aforesaid  return  shall  be  subscribed  and  sworn  to  by  one  or  more  of  the 
persons  so  doing  business. 

Sec.  2.  A  corporation  doing  business  in  this  State  under  any  name  other  than 
that  of  the  corporation  shall  be  subject  to  all  the  provisions  of  this 
Act.     *     *     * ' 

While  the  primary  object  of  statutes  of  this  character  is  probably 
to  make  it  possible  to  secure  service  of  process  on  the  persons  con- 
ducting a  business  under  a  company  name,  it  appears  possible  that  the 
use  of  a  "  bogus  independent "  company  by  a  corporation  or  firm  as 

iNew  Hampshire  Pub.  Stats.  (1901),  ch.  126,  sec.  12;  Maine  Rev.  Stats.  (1903),  ch.  40, 
sec.  17;  Massachusetts  Rev.  Laws  (1902),  ch.  59;  Rhode  Island  Gen.  Laws  (1909), 
ch.  158. 

2  Rhode  Island  Gen.  Laws  (1909),  ch.  163. 

3  Iowa  Laws   (1913),  ch.  200. 

*  Rhode  Island  Gen.  Laws  (1909),  ch.  168. 

'^  Massachusetts  Rev.  Laws  (1902),  ch.  57,  sees.  56-59, 

6  Kansas  Laws  (1913),  ch.  334. 

^  Laws  of  1908,  No.  117. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  527 

a  method  of  competition,  might  be  punished  or  restrained  in  the 
event  that  they  neglected  or  refused  to  make  the  proper  return  to  the 
clerk's  office  which  would  disclose  the  control  of  the  company  em- 
ploying a  fictitious  name. 

Laws  having  the  same  objects  and  in  some  respects  similar  in 
verbiage  are  in  force  in  several  other  States.^  In  Arizona,  Montana, 
North  Dakota,  Ohio,  Oklahoma,  and  South  Dakota  the  law  applies 
only  to  partnerships.  Two  sections  of  the  Ehode  Island  law  are  as 
follows : 

Sec.  1.  No  person  or  persons  shall  hereafter  carry  on  or  conduct  or  transact 
business  in  this  State  luider  any  assumed  name,  or  under  any  designation,  name, 
or  style,  corporate  or  otherwise,  other  than  the  real  name  or  names  of  the  in- 
dividual or  individuals  conducting  or  transacting  such  business,  unless  such 
person  or  persons  shall  file,  in  the  office  of  the  town  or  city  clerli  in  the  town 
or  city  in  which  such  person  or  persons  conduct  or  transact,  or  intend  to  con- 
duct or  transact,  such  business,  a  certificate  setting  forth  the  name  under  which 
such  business  is,  or  is  to  be,  conducted  or  transacted,  and  the  true  or  real  full 
name  or  names,  both  Christian  and  surname,  of  the  person  or  persons  conduct- 
ing or  transacting  the  same,  with  the  postoffice  address  or  addresses  of  said 
person  or  persons.  Said  certificate  shall  be  executed  and  duly  acknowledged 
before  some  person  authorized  to  administer  oaths  by  the  person  or  persons  so 
conducting  or  intending  to  conduct  such  business. 

Sec.  4.  This  Act  shall  in  no  way  affect  or  apply  to  any  corporation  duly 
organized  under  the  laws  of  this  State,  or  to  any  corporation  organized  under 
the  laws  of  any  other  State  and  lawfully  doing  business  in  this  State,  nor  shall 
this  act  be  deemed  or  construed  to  prevent  the  lawful  use  of  a  partnership 
name  or  designation,  provided  that  such  partnership  name  or  designation  shall 
include  the  true  and  real  surname  of  at  least  one  such  person  transacting  such 
business. 

It  will  be  observed  that  this  statute  expressly  provides  that  it  shall 
in  no  way  affect  or  apply  to  corporations.  A  similar  provision  is 
found  in  all  of  these  statutes,  except  those  of  California  and  Massa- 
chusetts. In  Delaware,  Indiana,  Kentucky,  Massachusetts,  Michi- 
gan, Minnesota,  Nevada,  New  Jersey,  New  York,  Ehode  Island,  and 
Utah,  a  violation  of  these  statutes  is  punishable  as  a  misdemeanor; 
in  Vermont,  the  chancery  courts  are  authorized  to  restrain  violations 
of  the  law,  while  in  Arizona,  California,  Minnesota,  Montana,  North 
Dakota,  Ohio,  Oklahoma,  South  Dakota,  Vermont,  and  Washington 
the  offending  parties  are  deprived  of  the  right  to  enforce  their  con- 
tracts in  the  State  courts. 

1  Arizona  Rev.  Stats.,  sees.  4350-4355;  California  Laws  (1911),  cb.  262,  263;  Delaware 
Laws  (inOOK  ch  14G  ;  Indiana.  Burns'  Ann.  Stats.  (1014),  sees.  0"11a-0711e:  K(MitTu-k.v. 
Carroll's  Stats.  (1015),  sec.  1091) ;  Massachusetts  Supp.  to  Rev.  Laws  (1 002-1008 ),  ch. 
72:  Michigan,  Howell's  Stats.,  sees.  2626-2030;  Minnesota  «cn.  Stats.  (1913).  sees. 
6107-6113;  Montana  Rev.  Codes,  sees.  5504-5509;  New  Jersey  Comp.  Stats.,  p.  3686; 
New  York  Penal  Law,  sec.  440 ;  Nevada  Rev.  Laws,  sees.  6728-6731  ;  North  Dakota  Comp. 
Laws  (1913),  sees.  6426-6420;  Ohio  Gen.  Code,  sees.  8009-8105;  Oklahoma  Rev.  Laws, 
sees.  4469-4474;  Rhode  Island  Laws  (1909-10),  ch.  538;  South  Dakota  Civil  Code, 
sees.  176-2-1767;  Utah  Laws  (1913),  ch.  25;  Washington,  Remington  &  Ballinger's  Code 
(1910),  sec.  8369. 


528  REPORT   OF    THE    COMMISSIONER    OF    CORPORATIONS. 

Section  12.  Placing^  handbills,  circulars,  etc.,  in  newspapers  and  maga- 
zines without  the  consent  of  the  publisher. 

The  placing  of  advertisements  in  the  nature  of  handbills,  circu- 
lars, cards,  etc.,  in  a  newspaper  or  magazine,  without  the  consent 
of  the  publisher,  has  been  made  a  criminal  offense  in  New  York,  New 
Jersey,  and  Pennsylvania.^  Such  advertisements  are  frequently  in- 
serted between  the  leaves.  The  New  York  statute  provides  as 
follows : 

Any  person  who,  with  intent  to  profit,  directly  or  indirectly  thereby,  places 
or  causes  or  produces  an  advertisement  to  be  placed  in  or  affixes  or  causes  the 
same  to  be  affixed  to  a  newspaper  without  the  consent  of  the  publisher  of  said 
newspaper,  or  who  directly  or  indirectly  places  or  causes  or  procures  an  adver- 
tisement to  be  placed  in,  or  affixes  or  causes  the  same  to  be  affixed  to  a  maga- 
zine or  periodical  without  the  consent  of  the  publisher  of  such  magazine  or 
periodical,  and  in  a  way  calculated  to  lead  the  readers  thereof  to  believe  that 
such  advertisement  was  circulated  by  such  publisher,  is  guilty  of  a  misdemeanor. 

The  placing  of  an  advertisement,  notice,  circular,  pamphlet,  card,  handbill, 
printed  notice  of  any  kind  in,  or  the  affixing  thereof  to,  a  newspaper,  magazine, 
or  periodical  is  presumptive  evidence  that  the  person  or  persons  or  corporation 
or  corporations  whose  name  or  names  appear  therein  as  proprietor,  advertiser, 
vender,  or  exhibitor,  or  whose  goods,  wares,  and  merchandise  are  advertised 
therein,  caused  or  procured  the  same  to  be  so  placed  or  affixed  with  the  in- 
tent to  profit  thereby. 

iNew  York  Laws  (1914),  ch.  113;  New  Jersey  Laws  (1913),  ch.  322;  PL-nnsylvania 
Laws  (1913),  Act  No.  312.     See  Collins  v.  American  News  Co.  et  al.,  p.  458. 


CHAPTER  X. 

UNFAIR  COMPETITION  IN  FOREIGN  COUNTRIES. 
Section  1.  Introductory. 

The  term  "unfair  competition"  as  known  in  the  laws  and  juris- 
prudence of  the  United  States  finds  its  counterpart  in  most  European 
coimtries  and  has  also  been  the  subject  matter  of  treaty  among  various 
nations,  including  the  United  States. 

The  terms  used  for  unfair  competition  are  found  in  the  judicial 
decisions  rather  than  in  the  statutes.  They  are  generally  similar,  and 
in  many  countries  are  described  by  phrases  having  the  same  Latin 
derivation,  represented  by  the  French  term  "  concurrence  deloyale," 
or  disloyal  competition.  Countries  which  do  not  use  this  term,  but  one 
substantially  similar  to  it  (e.  g.,  "  unlauterer  Wettbewerb  "  in  Ger- 
many and  "oneerlijke  concurrentie "  in  the  Netherlands),  recognize 
in  the  French  phrase,  nevertheless,  an  equivalent  meaning.  This  fact 
has  facilitated  international  agreements  on  this  subject.  In  some 
countries  a  distinction  is  made  between  disloyal  competition  and 
illegal  competition  (concurrence  illicite),  though  both  would,  appa- 
rently, be  covered  by  the  phrase  "  unfair  competition." 

The  primary  idea  of  unfair  competition  as  developed  in  judicial 
decisions  in  European  countries  is  "  passing  off  "  or  "  confusion,"  but 
several  other  distinct  kinds  of  acts  are  included  therein,  such  as  dis- 
paragement of  competitors,  etc.  "\^liile  the  fundamental  principles 
of  the  law  of  unfair  competition  in  European  comitries  have  been 
developed  without  special  reference  to  practices  to  suppress  competi- 
tion generally  or  to  maintain  monopoly,  the  latter  idea  is  found  in 
certain  English  colonies. 

The  present  discussion  aims  to  set  forth  as  clearly  as  practicable  in 
brief  space  not  only  the  meaning  and  legal  application  of  the  term 
"  unfair  competition"  in  foreign  countries,  but  also  any  legislation  or 
judicial  decisions  to  prevent  that  which  under  any  other  name  has 
apparently  been  treated  as  unfair  competition.  It  should  be  clearly 
understood,  however,  that  no  conclusion  is  drawn  therefrom  as  to  the 
meaning  of  this  term  in  the  laws  of  the  United  States. 

Character  of  ttie  law. — The  law  regarding  unfair  competition  in 
most  European  coimtries  is  to  be  found  both  in  the  civil  and  penal 
codes  and  in  particular  statutes.  The  civil-code  provisions  on  this 
subject  contain  brief  statements  of  legal  principles  without  use  of  the 
term  unfair  competition,  from  which  the  coui'ts,  in  several  countries 
30035°— 1(5 34  529 


530  REPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

at  least,  have  developed  an  elaborate  jurisprudence  under  tliis  title. 
The  particular  statutes  have  been  enacted  regarding  specific  forms 
of  unfair  competition,  also  without  designating  them  as  such,  but  in 
some  countries  the  effort  has  been  made  to  combine  in  a  single  statute 
the  chief  provisions  of  this  sort,  either  with  or  without  this  specific 
title. 

The  present  tendency  of  the  law  seems  to  be  to  combine  these  two 
methods  of  preventing  unfair  competition,  i.  e.,  to  have  a  broad  gen- 
eral provision  of  the  civil  law  applicable  to  the  ever- varying  forms 
of  unfair  competitive  practices,  and  to  supplement  this  by  special 
provisions  making  unlawful  the  more  easily  defined  *or  more  ob- 
noxious unfair  practices  and  sometimes  imposing  penalties.  Espe- 
cially where  international  treaties  are  concerned,  or  where  reciprocity 
provisions  regarding  the  protection  granted  to  foreigners  are  incor- 
porated in  the  statutes,  the  prohibition  by  statute  of  specific  acts 
of  unfair  competition  seems  to  have  certain  advantages. 

Forms  of  unfair  competition. — The  European  civil-code  provi- 
sions, some  of  which  are  of  recent  and  some  of  comparatively  early 
date, generally  establish  civil  liability  for  unjustifiable  injury  or  for 
injury  by  an  act  which  is  against  good  morals  (contra  boiios  mores). 
These  have  been  given  a  broad  application  with  reference  to  unfair 
practices  by  competitors,  such  as  misappropriation  of  firm  names, 
false  designation  of  provenance  or  quality  of  goods,  disparagement 
of  competitors,  enticing  employees  to  leave,  etc.  Almost  all  recog- 
nized methods  of  unfair  competition  have  been  attacked  under  such 
general  code  provisions. 

European  penal-code  provisions  on  this  subject  sometimes  spe- 
cifically prohibit  similar  practices. 

The  provisions  of  earlier  special  statutes,  furthermore,  generally 
relate  particularly  to  the  misaf)propriation  of  firm  names,  false 
designation  of  provenance  of  goods,  unauthorized  use  of  trade-marks, 
or  of  awards  at  expositions,  etc.  Violation  of  such  statutory  provisions 
is  often  made  a  criminal  oifense  as  well  as  a  ground  for  civil  dam- 
ages. It  should  be  noted  that  these  laws  relate  particularly  to  com- 
mercial good  will  or,  according  to  the  usual  descriptive  phrase  of 
this  special  subject,  they  relate  to  "  industrial  property." 

More  recent  legislation  relating  to  unfair  or  unlawful  methods  of 
competition  embraces  prohibitions  regarding  other  matters,  and  es- 
pecially with  respect  to  false  advertisements,  bogus  clearance  sales, 
espionage,  corruption  of  employees,  betrayal  of  business  secrets, 
rebating,  trading  stamps,  and,  in  certain  British  colonies,  to 
practices  of  a  recognized  monopolistic  tendency,  such  as  combina- 
tions of  competitors,  exclusive  dealing,  tying  contracts,  dumping,  etc. 

Basic  legal  ideas. — From  an  historical  point  of  view,  and,  broadly 
speaking,  unfair  competition  in  European  countries  relates  to  unfair 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  531 

practices  to  injure  a  competitor.  The  effect  on  the  consumer  is  not 
generally  considered  except  as  it  concerns  a  competitor.  Thus,  de- 
ception practiced  on  a  consumer  in  regard  to  the  identity  of  a  com- 
pany or  of  the  origin  or  provenance  of  the  goods  it  sells  is  not  an 
offense  because  the  consumer  may  be  injured,  but  because  an  unfair 
advantage  has  been  taken  of  a  competitor  or  his  special  property 
rights  have  been  invaded. 

Various  other  laws  are  found  Avliich  aim  to  protect  the  pur- 
chaser by  i^rohibiting  the  sale  of  deleterious  articles  or  cheating 
with  regard  to  weights,  measures,  etc.  Especially  in  recent  years 
laws  against  such  cheating  have  sometimes  been  incorporated  with 
laws  dealing  with  unfair  competition  in  the  original  sense  so  that 
it  is  now  more  difficult  to  draw  the  line  between  them.  It  indicates 
perhaps  a  broadening  tendency  with  respect  to  the  proof  of  an  unfair 
act  of  competition  or  with  respect  to  the  parties  who  are  protected 
against  unfair  acts.  One  explanation  or  the  other  is  necessary,  ap- 
parently, if  unity  of  principle  is  to  exist.  Thus,  injury  to  the  con- 
sumer by  certain  unfair  methods  of  commercial  dealing  might  be  re- 
garded as  conclusive  evidence  of  the  existence  of  unfair  competition 
without  inquiry  as  to  its  actual  effect  on  competitors.  On  the  other 
hand,  certain  commercial  practices  which  are  injurious  to  the  con- 
sumer might  be  defined  as  unfair  competition  in  every  case  whether 
used  by  all  competitors  or  by  a  monopoly  and  without  respect  to 
actual  or  presumed  effects  on  competitors.  This,  of  course,  would 
involve  a  change  in  the  original  principle. 

This  point  of  view  seems  especially  important  in  connection  with 
certain  monopolistic  practices.  Such  practices  might  obviously  in- 
jure competitors,  but  where  all  competitors  combine  the  persons  in- 
jured would  not  be  actual  competitors,  but  consumers,  emploA^ees, 
persons  who  sell  to  the  combination  or  the  traders  who  buy  from  it. 
So  far  as  competitors  are  concerned  only  potential  competitors  ap- 
parently would  be  injured.  Recent  laws  in  certain  British  colonies 
apparently  are  based  on  the  principle  that  certain  monopolistic  prac- 
tices injurious  to  consumers,  emploj^ees,  noncompeting  traders,  and 
potential  competitors  are  unfair  methods  of  competition.  It  is  note- 
worthy that  precisely  in  these  countries  both  the  legal  institutions 
and  the  political  and  social  conceptions  are  most  nearly  like  those  in 
the  United  States. 

Method  of  puesentatiox. — The  laAv  regarding  unfair  competition 
has  been  developed  chiefly  during  the  last  hundred  years,  and  is  of 
considerable  extent  and  complexit3\  In  some  countries  the  judicial 
decisions  are  very  numerous.  It  was  not  practicable  for  the  Bureau 
to  make  an  exhaustive  investigation  into  this  subject,  as  not  all  of  the 
sources  of  legal  information  were  available.  It  is  thought,  however, 
that  a  fairly  comprehensive  view  is  given  of  the  most  pertinent  parts 


532  REPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

of  the  codes  and  statutes.  Many  judicial  decisions  have  been  used 
for  ilhistration.  On  some  topics,  at  least,  for  some  countries,  many 
similar  cases  might  be  cited,  especially  with  relation  to  questions  of 
confusion.  On  other  topics,  which  are  perhaps  of  more  peculiar 
interest  in  this  connection,  only  a  few  cases  have  been  found,  and 
sometimes  none  at  all.  There  is  doubtless  a  considerable  number  of 
practices  which  the  courts  have  declared  to  be  unfair  competition, 
particularly  under  code  provisions,  that  it  would  be  desirable  to 
notice  in  this  connection,  but  which  the  necessarily  limited  research 
of  the  Bureau  has  not  discovered.  The  laws  and  judicial  decisions 
are  described  for  each  country  separately,  generally  on  the  basis  of 
an  examination  of  the  original  texts.  The  w^orks  of  legal  writers 
have  been  largely  used  as  guides,  however,  and  sometimes  even  the 
texts  of  laws  and  judicial  decisions  have  been  derived  from  them. 
By  following  as  closely  as  possible  the  original  material,  and  treating 
different  countries  separately,  it  is  thought  that  the  risk  of  inaccu- 
rate statement  is  very  much  less  than  it  would  be  if  the  material  were 
rearranged  in  a  comparative  form.  Such  treatment  would  also 
involve  to  a  much  greater  extent  conclusions  as  to  the  similarity  or 
dissimilarity  of  laws,  for  which  no  conclusive  legal  authority  could 
be  cited  and  with  respect  to  which  the  Bureau  does  not  deem  it  desir- 
able to  give  its  own  opinion.  The  comparative  form  of  treatment, 
moreover,  would  give  an  impression  of  completeness  of  statement 
with  regard  to  the  existence  or  absence  of  particular  i-ules  of  law  in 
each  country  greater  than  is  furnished  by  the  present  discussion. 

Countries  considered. — The  countries  which  are  considered  in 
this  chapter  are  as  follows:  England  and  its  principal  colonies  and 
dependencies  (including  Canada,  Australia,  New  Zealand,  South 
Africa^  India,  and  Egypt),  France,  Belgium,  Italy,  Spain,  Portugal, 
the  Netherlands,  Germany,  Austria,  Switzerland,  Denmark,  Norway, 
Sweden,  Russia,  Greece,  Bulgaria,  Eoumania,  Turkey,  Brazil,  Argen- 
tina, Chile,  Peru,  and  Japan.  France  and  Germany  are  treated  in 
more  detail  than  any  of  the  others,  because  they  are  the  best  repre- 
sentatives of  the  two  principal  methods  of  legislating  against  unfair 
competition  and  each  has  an  especially  well-developed  jurisprudence 
on  this  subject.  The  most  recent  legislation  of  special  interest  is 
that  of  Greece,  Denmark,  and  certain  Swiss  Cantons. 

General  comparison  or  European  systems  of  law. — Two  distinct 
systems,  the  French  and  the  German,  have  been  followed  more  or 
less  closely  by  the  other  countries  of  continental  Europe.  The  Ger- 
man, or  casuistic  system,  is  the  more  rigid.  It  provides  a  special 
law  against  specific  kinds  of  unfair  competition  which  contains  also 
a  provision  of  general  application.  In  a  general  way  it  has  served  as 
a  type  for  the  legislation  of  Austria,  Denmark,  Greece,  Spain,  Portu- 
gal, and  certain  Swiss  Cantons.     The  French  method  is  more  flexible. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  533 

On  the  basis  of  certain  articles  of  the  Civil  Code  a  far-sighted  and 
extensive  system  of  jurisprudence  has  been  developed  b}'^  the  French 
courts,  which  has  been  followed,  more  or  less  closely,  by  Belgium, 
Holland,  Italy,  and  the  Swiss  federal  court  at  Lausanne. 

Two  fundamentally  different  views  also  underlie  the  German  and 
the  French  conceptions  of  what  constitutes  the  essence  of  unfair  com- 
petition. According  to  the  theory  of  French  jurists,^  the  relations 
between  a  business  man  and  his  customers  constitute  a  commercial 
property  right,  or  good  will,  known  as  "  achalandage,"  and  whoever 
knowingly  injures  it  commits  an  unlawful  act  and  makes  himself 
liable  for  damages.  A  violation  of  such  a  right  constitutes  unfair 
competition  (concurrence  deloyale)  if  it  involves  intent,  and  unlaw- 
ful competition  (concurrence  illicite)  if  it  involves  negligence.- 

According  to  the  view  largely  prevalent  among  German  jurists 
unfair  competition  (unlauterer  Wettbewerb)  constitutes  a  violation 
of  the  rights  which  every  individual  has  to  his  physical  and  intellec- 
tual property,  the  so-called  "Personlichkeitsrecht."  ^ 

An  important  point  as  to  which  the  German  and  the  French 
views  concerning  unfair  competition  coincide  is  that  the  deciding 
and  controlling  viewpoint  for  legislative  suppression  of  unfair  com- 
petition is  not  the  protection  of  the  public  or  consumers,  but  the 
protection  of  fellow  tradesmen  or  competitors.* 

International  law. — The  final  section  of  this  chapter  deals  with 
international  treaties  respecting  unfair  competition  and  various 
efforts  to  develop  a  common  international  law  on  this  subject.  The 
principal  aim  of  such  treaties  and  the  international*  propaganda  re- 
ferred to,  is  the  protection  of  the  names  of  commercial  concerns, 
trade-marks,  designations  of  provenance,  etc. — in  other  words,  the 
protection  of  "  industrial  property." 

Section  2.  England  and  Colonies. 

The  English  common-law  decisions  respecting  unfair  or  unlawful 
methods  of  competition,  and  a  limited  number  of  colonial  cases  have 
been  considered  with  American  cases  of  this  character  in  Chapter 
VII.  The  English  decisions  are  discussed  there  in  order  to  show  in 
one  place  the  common  law  on  the  subjects  treated,  the  decisions  of 
the  English  and  American  courts  being  usually  grounded  on  the  same 
legal  principles.  In  this  section  therefore  statutory  provisions  only 
will  be  considered.  The  subjects  covered  are  bribery  of  emjiloyees; 
exclusive  contracts;  intimidation  by  threats  of  infringement  suits; 
trading-stamp  laws;  misbranding  or  falsely  marking  goods;  false  or 
misleading  advertisements;   and  dumping.     The  provisions  of  the 


»  Rosenthal,  in  "  Ilanflwortprbuch  d.  Stantswissonscliafton,"  M  od.,  vol.  S.  p.  793. 

»LoIk',  "  Die  I'.elviinipfiing  d.  uulaiileron  Wet tbcwa-rbs."  ti)OT.  I,  p.  SO. 

*.Tosef  Kohler,  "Dor  Unlautere  Wettbewerb,"  1914,  p.  17  fol. 

*  C.  Weiss,  "  Gesetz  gegen  d.  unlauteren  Wettbewerb,"  1910,  p.  3  fol. 


534  EEPORT    OF    THE    COMMISSIONEE    OP    COEPOEATIONS. 

Australian  Industries  Preservation  Act  respecting  unfair  competi- 
tion, while  among  the  most  important  in  this  section,  are  considered 
separately  for  the  reason  that  the  act  is  somewhat  long  and  intricate, 
and  does  not  readily  lend  itself  to  a  topical  treatment.  The  laws 
regarding  unfair  competition  in  Egypt,  which  was  recently  declared  a 
dependency  of  England,  are  also  treated  separately,  since  the  juris- 
prudence of  that  country  has  had  an  independent  development. 

Bribery  of  employees. — In  1898  a  special  committee  of  the  Lon- 
don Chamber  of  Commerce  (representing  20  trade  sections  of  that 
organization)  made  an  investigation  to  determine  the  prevalence  of 
the  practice  of  paying  secret  commissions  and  bribes  in  the  various 
trades  and  submitted  an  exhaustive  report  from  which  the  following 
is  an  excerpt : 

Tour  committee  conclude  from  the  evidence  before  tliem  that  secret  com- 
missions in  various  forms  are  prevalent  in  almost  all  trades  and  professions  to 
a  great  extent,  and  that  in  some  trades  the  practice  has  increased,  and  is  in- 
creasing, and  they  are  of  opinion  that  the  practice  is  producing  great  e\il, 
alike  to  the  morals  of  the  commercial  community  and  to  the  profits  of  honest 
traders. 

Bribes  in  all  forms,  including  secret  commissions,  owe  their  existence  some- 
times to  the  desire  of  the  donor  to  obtain  the  assistance  of  the  donee;  some- 
times to  the  demand  expressed  or  implied  of  the  donee  that  the  bribe  shall  be 
given. 

In  the  first  class  of  cases  your  committee  have  reason  to  believe  that  the  bribe 
is  often  given  unwillingly  and  with  a  pang  of  conscience,  as  the  result  of  the 
keen  competition  in  trade,  and  in  the  fear,  too  often  well  founded,  that  unless 
given  other  less  scrupulous  rivals  will  obtain  an  advantage ;  many  cases  have 
come  before  your  committee  in  which  traders  have  believed  (often,  though  not 
perhaps  always,  without  reason)  that  their  entire  failure  to  obtain  orders  has 
been  due  to  the  want  of  a  bribe. 

The  second  class  of  cases  are  those  in  which  the  recipient  extorts  the  bribe 
from  those  who  have  established  business  relations  with  his  principal.  This 
practice  is  rendered  more  effective  and  oppressive  by  a  combination  between  the 
blackmailers.  The  servant  or  agent  who  demands  a  commission  and  fails  to 
receive  it,  not  Infrequently  warns  his  fellows  in  the  same  position  in  the  trade 
against  the  honest  trader,  who  thus  finds  himself  shut  out  from  dealings  with 
a  whole  circle  of  firms.^ 

In  1899  Lord  Eussell  of  Killowen,  then  Lord  Chief  Justice,  intro- 
duced a  bill  which  he  had  drafted  in  conjunction  with  Sir  Edward  Fry, 
the  object  of  which  was  "  to  check,  by  making  them  criminal,  a  large 
number  of  inequitable  and  illegal  secret  payments,  all  of  which  are 
dishonest,  and  tend  to  shake  confidence  between  man  and  man,  and 
to  discourage  honest  trade  and  enterprise."  -  The  bill  was  not  passed, 
but  an  act  having  a  similar  object  was  assented  to  in  190G.  This  act 
provides  that  it  shall  be  a  misdemeanor,  punishable  by  imprisonment 

1  London  Chamber  of  Commerce,  Annual  Report,  1898,  p.  117;  Great  Britain,  Parlia- 
mentary Debates,  Apr.  20,  1899,  pp.  14-1.5. 

-Great  Britain,  Parliamentary  Debates,  4tli  series,  vol.  70  (1899),  pp.  14,  21. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  535 

with  or  without  hard  hibor,  for  not  exceeding  two  years,  or  by  a  fine 
not  exceeding  £500,  or  both — 

If  any  agent  corruptly  accepts  or  obtains,  or  agrees  to  accept  or  attempts  to 
obtain,  from  any  person,  for  himself  or  for  any  other  person,  any  gift  or  con- 
sideration as  an  inducement  or  reward  for  doing  or  forbearing  to  do,  or  for 
having  after  the  passing  of  this  act  done  or  forborne  to  do,  any  act  in  rela- 
tion to  his  principal's  affairs  or  business,  or  for  showing  or  forbearing  to 
show  favor  or  disfavor  to  any  person  in  relation  to  his  principal's  affairs  or 
business;  or 

If  any  person  corruptly  gives  or  agrees  to  give  or  offers  any  gift  or  con- 
sideration to  any  agent  as  an  inducement  or  reward  for  doing  or  forbearing 
to  do,  or  for  having  after  the  passing  of  this  act  done  or  foi'borne  to  do,  any  act 
in  relation  to  his  principal's  affairs  or  business,  or  for  showing  or  forbearing 
to  show  favor  or  disfavor  to  any  person  in  relation  to  his  principal's  affairs  or 
business;  or 

If  any  person  knowingly  gives  to  any  agent,  or  if  any  agent  knowingly  uses 
with  intent  to  deceive  his  principal,  any  receipt,  account,  or  other  document  in 
respect  of  which  the  principal  is  interested  and  which  contains  any  statement 
which  is  false  or  erroneous  or  defective  in  any  material  particular  and  which 
to  his  knowledge  is  intended  to  mislead  the  principal/ 

Prosecutions  for  offenses  under  this  act  may  not  be  instituted  with- 
out the  consent  in  Enghind  of  the  attorney  general  or  solicitor  gen- 
eral, and  in  Ireland  of  the  attorney  general  or  solicitor  general  for 

Ireland.- 
This  law  checks  not  only  the  practice  of  bribing  buyers  or  other 

emploj^ees  for  the  purpose  of  obtaining  orders,  but  the  bribery  of 
employees  to  induce  the  disclosure  of  confidential  information  re- 
specting their  employers'  business.  Shortly  before  the  act  became 
effective  the  Secret  Commissions  and  Bribery  Prevention  League  ^  was 
organized  for  the  purpose,  among  other  things,  of  creating  public 
opinion  adverse  to  corrupt  trading  in  any  form,  of  publishing  litera- 
ture, including  the  setting  forth  of  the  results  of  trials  and  convic- 
tions under  the  prevention  of  corruption  act,  and  of  inquiring  into 
cases  involving  the  payment  of  secret  commissions,  blackmail,  brib- 
ery or  corruption,  and  initiating  prosecutions  under  the  act.  The 
membership  of  this  organization  includes  leading  commercial  firms, 
and  a  number  of  trade  associations  are  affiliated  with  it.  Since  this 
law  became  effective  there  have  been  some  130  prosecutions,  of  which 
87  have  resulted  in  conviction.  Of  these,  12  involved  the  disclosure 
of  confidential  information. 

1  The  Prevention  of  Corruption  Act,  G  Edw.  VII,  ch.  34. 

-An  unsuccessful  attempt  to  repeal  this  provision  was  made  in  1012.  It  has  been 
urgecl,  on  the  one  hand,  that  it  diminishes  the  possibility  of  blackmail,  and,  on  the  other, 
that  It  seriously  interferes  with  the  successful  operation  of  the  act.  Sir  Edward  Fry  ex- 
pressed the  belief  that  "  attempts  to  put  the  act  in  force  should  be  relieved  from  the 
burden  of  two  trials,  the  one  in  camera  before  the  law  officer  of  the  Crown  and  the  other 
before  the  justices,  with  the  possibility  of  a  committal  to  the  assizes.  The  necessity  of 
puttinjr  evidence  before  the  law  officer  increases  the  expense  and  also  causes  delay,  which 
in  this  case  is  especially  serious." 

'  Compare  Vereiu  gegen  das  liestechungsunwesen  in  (Jermany,  see  p.  636. 


536  EEPOET    OF    THE    COMMISSIONER    OF    COEPORATIONS. 

The  following  references  to  convictions  under  this  law  have  been 
selected  from  "  The  War  Against  Bribery,"  ^  Crew  on  Secret  Com- 
missions and  Bribes,^  and  a  publication  of  the  Secret  Commissions 
and  Bribery  Prevention  League :  ^ 

The  managing  director  of  a  London  printing  company  was  in  tlie  habit  of 
paying  a  secret  commission  to  a  clerk  employed  by  the  Gramophone  &  Type- 
writer Co.  (Ltd.),  whose  monthly  account  for  printing  averaged  at  the  time 
upward  of  £100.  The  clerk  took  the  printing  from  one  firm  and  gave  it  to  the 
company  whose  principal  bribed  him,  and  it  was  stated  that  the  Gramophone  & 
Typewriter  Co.  effected  a  saving  by  the  change.  The  clerk  himself  received 
some  £40.  When  the  case  came  before  the  magistrate  at  Old  Street  Police 
Court  the  magistrate  pointed  out  that  the  payments  to  the  clerk  were  fraudulent 
before  the  passing  of  the  act,  and  he  expressed  his  regret  that  he  was  compelled 
to  impose  so  very  inadequate  a  penalty.  He  fined  the  printer  the  maximum, 
£50,  with  £10  10s.  costs,  and  ordered  the  clerk  to  pay  £50  and  £2  2s.  costs. 

The  secretary  of  a  boot  manufacturing  company  in  the  country  for  attempting 
to  bribe  the  manager  of  the  boot  department  of  some  stores  in  London  with  a 
view  to  obtaining  orders  was  fined  £10  and  £5  5s.  costs. 

A  commercial  traveler  at  Leicester  employed  by  soap  manufactui^ers  sent 
10s.  6d.  to  an  employee  at  [certain]  dye  works.  He  was  fined  £20  and  £5  5s., 
court  costs  and  witnesses'  costs. 

At  the  central  criminal  court  a  blouse  manufacturer  (female)  was  indicted 
for  offering  as  an  inducement  to  obtain  work  a  share  of  profits  to  the  employees 
of  a  firm  of  drapers.  She  was  released  on  entering  into  recognizances  to  come 
up  for  judgment  if  called  upon.* 

The  managing  director  of  a  chemical  manufacturing  company  in  Switzerland 
sought  to  obtain  secrets  in  connection  with  the  manufacture  of  silica,  offering 
bribes  to  the  employees  of  a  British  company  engaged  in  the  industry.  He  was 
sentenced  to  six  months'  hard  labor,  and  a  friend  who  aided  him  and  one  of  his 
commercial  travelers  were  also  sent  to  prison — the  former  for  four  months  and 
the  latter  for  one  month,  hard  labor  being  ordered  in  each  case.  The  trial  took 
place  at  Newcastle  Assizes,  and  both  the  longer  sentences  were  appealed  against 
unsuccessfully.^  The  appellants  were  also  further  convicted  on  an  additional 
charge  of  corruptly  offering  employment  to  an  agent  of  the  Thermal  Syndicate, 
in  order  to  induce  him  to  disclose  the  method. of  manufacturing  silica  employed 
by  his  principals.  The  appeal  was  brought  before  the  lord  chief  justice,  Mr. 
Justice  Bray,  and  Mr.  Justice  Coleridge.  In  affirming  the  judgment  the  court 
said  in  part : 

"  Mr.  Justice  Horridge  directed  the  jury  quite  correctly  on  the  law ;  he  told 
them  they  could  not  convict  if  the  alleged  bribes  were  given  simply  to  induce 
the  men  to  leave  their  present  employment  and  enter  the  service  of  the  appli- 
cant, Huessener,  or  his  company,  Silicaware  (Ltd.),  who  were  rivals  of  the 
Thermal  Syndicate  (Ltd.),  but  they  must  convict  if  they  are  satisfied  that  the 
bribes  were  given  to  induce  the  men  to  disclose  their  master's  secret  methods  of 
manufacturing  silica  and  the  names  of  the  persons  supplying  molds  to  them.  He 
also  pointed  out,  and  quite  correctly,  that  if  the  jury  were  satisfied  that  the 
bribes  were  given  for  the  above-mentioned  purpose  they  were  bound  to  convict, 

iRy  R.  M.  Leonard,  London,  1013,  pp.  39^0. 

2  London,  191.3,  pp.  91-03. 

3  News  Sheet  No.  34,  Nov.,  1014. 
*  Rex  V.  Walz,  C.  C.  C,  621. 

■^  Appeal  of  Huessener  and  Schroeder,  6  Cr.  App.  Rep.,  173. 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  537 

even  if  they  were  also  satisfied  tliat  the  applicants  wished  in  addition  to 
secure  the  services  of  these  meu  for  their  company  at  Zurich." 

A  young  German  was  charged  at  Manchester  with  giving  money  to  the  em- 
ployees of  some  textile  printers  and  velvet  embossers  carrying  on  business  at 
Leeds,  in  order  to  discover  a  secret  process  of  printing  velvet.  He  was  fined 
£50  and  costs,  in  addition  to  £100  which  he  offered  as  compensation  to  the 
Leeds  company. 

A  chemical  worker  was  fined  at  Northwich  £20  or  two  months'  imprison- 
ment for  offering  bribes  to  obtain  trade  secrets  and  drawings  of  apparatus. 
For  receiving  stolen  documents  he  was  also  fined  £5  or  one  month's  imprison- 
ment. 

At  Reading  a  quantity  clerk  formerly  employed  by  a  firm  of  boiler  setters 
asked  a  contractor  eni])loyed  by  the  firm  for  information  as  to  any  new  trade 
inquiries  made  by  liis  former  employers,  so  that  he  also  might  tender  in  com- 
petition for  the  work.    A  fine  of  £5  and  £5  costs  was  imposed. 

At  Hull  a  commercial  traveler  was  fined  £10  for  offering  bribes  to  a  boy  to 
give  him  confidential  information  about  his  employer's  business. 

A  youth  employed  by  a  clean-towel  company  for  promising  to  pay  boys  for  a 
list  of  the  customers  of  a  rival  company  was  found  by  the  magistrate  at  West- 
minster to  have  committed  a  breach  of  the  act.  He  was  ordered  to  pay  £2  2s. 
costs, 

A  bottle  manufacturer  at  London  for  offering  a  clerk  in  the  bottle  trade  a 
bribe  (£5)  for  information  concerning  his  employer's  business  was  fined  £20  and 
£10  10s.  costs. 

An  emigration  agent  at  Liverpool  for  attempting  to  bribe  (offering  £2  to  £25) 
u  ship's  doctor  to  pass  unhealthy  emigrants  was  fined  £50  and  one  month's  im- 
prisonment, to  be  followed  by  deportation,  and  £10  10s.  or  three  months' 
additional  imprisonment. 

A  motor  agent  at  London  for  offering  "compensation"  to  the  motor  expert 
of  a  soap  manufacturing  firm,  in  order  to  obtain  a  contract  for  lorries,  was 
fined  £15  and  £5  5s.  costs. 

A  timber  merchant  at  Nuneaton  for  sending  £1  to  an  agent  of  a  colliery  com- 
pany as  an  inducement  to  measure  poles  wrongly  was  fined  £50. 

An  act  of  the  Canadian  Parliament  assented  to  May  19, 1909,^  pro- 
hibits the  giving  or  offering  of  bribes  and  the  giving  or  using  of 
false  or  misleading  documents.  This  act  is  substantially  similar  to 
the  English  statute  previously  discussed.  It  is,  however,  unneces- 
sary to  obtain  the  consent  of  the  attorney  general  before  instituting 
a  prosecution.^ 

Legislation  prohibiting  the  giving  or  offering  of  bribes,  and  the 
giving  or  using  of  false  or  misleading  receipts  or  other  documents, 

18-9  Edw.  VII,   ch.   .3.3. 

=  In  The  KinR  r.  Vici,  18  Canadian  Crim.  Casos,  .51  (1911),  the  defendant  was  charged 
with  liaving  received  a  secret  commission  of  $.5,000  as  a  reward  for  undertaking  to  make 
a  favorable  report  respecting  certain  mining  land.s.  In  the  language  of  the  court,  "  the 
accused  was  employed  for  a  fixed  sum.  namely,  .$400,  to  do  certain  intellectual  work — 
the  examination  of  mining  lands.  That  is  an  independent  contract — a  hiring  of  personal 
services,  and  nothing  more.  lie  was  then  neither  the  '  agent  '  nor  the  '  employee ' 
*      *      *     within  the  meaning  of  the  act."     The  defendant  was  discharged. 

See  also  Winnipeg  Steel  Granary  &  Culvert  Co.  (Ltd.>  r.  Canada  Ingot  Iron  Culvert 
Co.  (Ltd.)  et  al.,  7  Dominion  Law  Reps.,  707  (Manitoba  Ct.  of  Appeals,  1912). 


538  REPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

has  been  passed  by  the  Commonwealth  of  Australia  and  four  of  the 
Australian  States.^ 

Although  more  elaborate  than  the  English  Prevention  of  Corrup- 
tion Act,-  these  statutes  were  intended  to  accomplish  the  same  results. 
The  passage  of  these  laws  was  largely  due  to  the  disclosures  of  the 
Royal  Commission  on  the  Butter  Industry,  which  reported,  among 
other  things,  that  the  practice  of  making  secret  payments  prevailed 
to  an  alarming  extent  in  the  dairying  industry,  and  that  "  the  busi- 
ness of  traders  and  agents  who  have  withstood  the  solicitations  for 
commissions  has  consequently  suffered  from  such  refusal  to  make 
secret  payments."^  In  urging  the  passage  of  the  Commonwealth 
bill  the  attorney  general  expressed  the  belief  that  the  majority  of 
agents  adhered  rigidly  to  the  honest  course,  but  these,  he  stated, 
"  had  to  submit  to  the  result  which  followed  their  adherence  to  that 
course,  because  there  were  others  less  scrupulous,  who  did  not  hesi- 
tate to  do  what  the  courts,  as  well  as  common  sense  and  moral  sense, 
designate  as  unfair,  unjust,  and  improper."* 

An  act  for  the  prohibition  of  secret  commissions,  passed  by  the 
General  Assembly  of  Ncav  Zealand  in  December,  1910,^  is  substan- 
tially similar  to  the  Australian  statutes  referred  to  above.  Briefly, 
it  prohibits  gifts  to  an  agent  without  the  consent  of  the  princij^al, 
requires  agents  to  disclose  any  pecuniary  interest  they  may  have  in 
contracts  made  on  behalf  of  their  principal,  penalizes  the  giving  of 
false  receipts,  invoices,  etc.,  to  agents,  the  delivery  of  such  false 
documents  to  the  principal,  and  provides  for  the  punishment  of 

1  Commonwpalth  Act  No.  10  of  1005 ;  Victoria,  5  Edw.  VII,  No.  1974.  In  Rex  v. 
Scott  (1907),  Victorian  Law  Reps.,  471,  tlie  defendant,  a  paint  manufacturer,  was  con- 
victed of  having  corruptly  given  money  to  an  employee  of  the  Melbourne  Hospital  in 
charge  of  certain  painting  for  the  purpose  of  influencing  the  latter  to  show  favor  to  the 
defendant  in  connection  with  the  purchase  of  material.  The  representative  of  another 
paint  manufacturer  was  accused  of  a  similar  offense  and  acquitted.  (Rex  v.  Stevenson 
(1907),  Victorian  Law  Reps.,  475)  ;  Western  Australia,  5  Edw.  VII,  No.  13;  Tasmania, 
6  Edw.  VII,  No.  21 ;  South  Australia,  1  Geo.  V,  No.  1006. 

2  See  p.  5.S5. 

3 Report  of  Royal  Commission  on  the  Butter  Industry,  Australian  (Commonwealth), 
Parliamentary  Papons,  1905,  vol.  IT,  p.  1219,  1250. 

*  Australian  (Commonwealth)  Parliamentary  Debates,  1905,  vol.  XXV,  p.  494,  495. 

At  a  conference  of  Federal  and  State  ministers,  held  at  Hobart  in  February,  1905,  it 
was  resolved  "  that  each  State  government  bring  in  a  bill  dealing  with  secret  commis- 
sions, and  that  the  premier  of  Victoria  be  asked  to  draft  such  a  bill."  At  the  premiers' 
conference  at  Brisbane  in  .Tune,  1907,  it  was  resolved  "  that  those  States  which  have  not 
yet  passed  legislation  on  the  lines  of  the  Victorian  secret  commissions  act  be  urged  to  do 
so  without  any  undue  delay."  (See  South  Australian  Debates,  1909,  Legislative  Council, 
p.  64  ;  ib.,  1910,  p.  3.''.6  ;  House  of  Assembly,  1910,  p.  400.) 

For  additional  information  respecting  the  prevalence  and  effect  of  these  practices,  see 
Australian  (Commonwealth)  Parliamentary  Debates,  vol.  XXV,  p.  494  et  seq. ;  Report  of 
Royal  Commission  on  the  Butter  Industry,  Australian  (Commonwealth)  Parliamentary 
Papers,  session  1905,  vol.  II,  p.  1225  ;  Western  Australia,  Parliamentary  Debates,  1905, 
vol.  XXVIII  (n.  s.),  pp.  256,  608;  New  Zealand,  Parliamentary  Debates,  vol.  15.3,  p.  452; 
South  Australia,  Parliamentary  Debates,  Legislative  Council,  1909,  p.  64 ;  ib.,  1910, 
p.  336 ;  House  of  Assembly,  1910,  p.  400 ;  Canada,  Debates  of  the  House  of  Commons, 
1909,  pp.   1484,   1490. 

»  Act  No.  40,  of  1910. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  539 

those  aiding  and  abetting  offenses  against  the  act.  Except  as  ex- 
pressly provided  for  by  the  act,  proof  of  custom  is  no  defense.  As 
in  Enghmd  and  the  Australian  States,  no  prosecution  for  an  offense 
against  the  act  may  be  commenced  without  the  consent  of  the  attor- 
ney general. 

Similar  legislation  has  been  enacted  in  the  Isle  of  Man^  and 
Sierra  Leone.^ 

Exclusive  contracts  (tying  clauses). — In  1907  the  English 
Parliament  passed  the  Patents  and  Designs  (amendment)  Act  and 
for  the  first  time  made  unlawful  certain  restrictions  attached  to  the 
sale,  lease,  or  use  of  patented  articles  or  processes,  declaring  them 
to  be  in  restraint  of  trade  and  contrary  to  public  policy.  The  act 
provides  in  part  as  follows:  ^ 

It  shall  not  be  lawful  in  any  contract  made  after  the  passing  of  this  act  in 
relation  to  the  sale  or  lease  of,  or  license  to  use  or  work,  any  article  or  process 
protected  by  a  patent  to  insert  a  condition  the  effect  of  which  will  be — 

(a)  To  prohibit  or  restrict  the  purchaser,  lessee,  or  licensee  from  using  any 
article  or  class  of  articles,  whether  patented  or  not,  or  any  patented  process, 
supplied  or  owned  by  any  person  other  than  the  seller,  lessor,  or  licensor,  or 
his  nominees ;  or 

(h)  To  require  the  purchaser,  lessee,  or  licensee  to  acquire  from  the  seller, 
lessor,  or  licensor,  or  his  nominees,  any  article  or  class  of  articles  not  protected 
by  the  patent; 

and  any  such  condition  shall  be  null  and  void,  as  being  in  restraint  of  trade 
and  contrary  to  public  policy:  Provided,  That  this  subsection  shall  not 
apply  if— 

(j)  The  seller,  lessor,  or  licensor  proves  tliat  at  the  time  the  contract  was 
enteretl  into  the  purchaser,  lessee,  or  licensee  had  the  option  of  inirchasing  the 
article  or  obtaining  a  lease  or  license  on  reasonable  terms  without  such  con- 
ditions as  aforesaid;  and 

(ii)  The  contract  entitles  the  purchaser,  lessee,  or  licensee  to  relieve  himself 
of  his  liability  to  observe  any  such  condition  on  giving  the  other  party  three 
months  notice  in  writing  and  on  payment  in  compensation  for  such  I'elief  in 
the  case  of  a  purchase  of  such  sum,  or  in  the  case  of  a  lease  or  license  of  such 
rent  or  royalty  for  the  residue  of  the  term  of  the  contract,  as  may  be  fixed 
by  an  arbitrator  appointed  by  the  Board  of  Trade. 

*  i)i  *  *  *  *  * 

The  insertion  by  the  patentee  in  a  contract,  made  after  the  passing  of  this 
act  of  any  condition  which  l)y  virtue  of  this  section  is  null  and  void  shall 
be  availalde  as  a  defense  to  an  action  for  infringemont  of  the  patent  to  which 
the  contract  relates,  brought  while  that  contract  is  in  force. 

Nothing  in  this  section  shall — 

(a)  AflVct  any  condition  in  a  contract  whereby  a  person  is  prohibited  from 
selling  any  goods  other  than  those  of  a  ]>articular  iierson  ;  or 

(6)  Be  construed  as  validating  any  contract  which  would,  apart  from  this 
section,  be  invalid ;  or 

lApr.  14,  1908. 

2  Ordinance  Xo.  11,  of  1907. 

3  Patents  and  Desiirns  (amendment)  Acl,  190",  cli.  28,  sec.  24  (1),  (4).  (.'ii;  and  see 
ch.  29,  sec.  38  (1),  (4),  (5). 


540  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

(c)  Affect  any  right  of  determining  a  contract  or  condition  in  a  contract 
exercisable  independently  of  this  section ;  or 

(d)  Affect  any  condition  in  a  contract  for  the  lease  of  or  license  to  use  a 
patented  article,  whereby  the  lessor  or  licensor  reserves  to  himself  or  his 
nominees  the  right  to  supply  such  new  parts  of  the  patented  article  as  may  be 
required  to  put  or  keep  it  in  repair. 

With  minor  changes,  these  proyisions  were  adopted  in  Australia.* 
The  objectionable  conditions,  however,  were  not  declared  to  be  in 
restraint  of  trade.  The  Australian  patents  act  provides  also  that  any 
person  may,  after  the  expiration  of  two  years  from  the  granting  of  a 
patent,  present  a  petition  alleging  that  the  reasonable  requirements  of 
the  public  with  respect  to  the  invention  have  not  been  satisfied  and 
praying  for  the  grant  of  a  compulsory  license  or,  in  the  alternative, 
for  the  revocation  of  the  patent.  The  reasonable  requirements  of  the 
public  are  not  deemed  to  have  been  satisfied  if,  among  other  things, 
by  reason  of  the  default  of  the  patentee  "  to  grant  licenses  on  reason- 
able terms;  any  existing  trade  or  industry,  or  the  establishment  of 
any  new  trade  or  industry,  in  Australia  is  unfairly  prejudiced; "  or, 
"if  any  trade  or  industry  in  Australia  is  unfairly  prejudiced  by  the 
conditions  attached  by  the  patentee  *  *  *  to  the  purchase,  hire, 
or  use  of  the  patented  article,  or  to  the  using  or  working  of  the 
patented  process."  ^ 

Other  provisions  relating  to  exclusive  dealing  are  contained  in  the 
Australian  Industries  Preservation  Act,  which  is  separately  consid- 
ered below.^     (See  p.  551.) 

In  1911  New  Zealand  adopted  legislation  similar  to  the  English 
patent  act  quoted  above,  and,  unlike  Australia,  retained  the  declara- 
tion that  such  conditions  are  in  restraint  of  trade  and  contrary  to 
public  policy.* 

In  Canada  an  act  to  amend  the  inland  revenue  act^  provides  that 
the  license  of  any  manufacturer  of  goods  subject  to  a  duty  of  excise 
may  be  revoked  by  the  Minister  of  Inland  Revenue  if  the  licensee — 

(1)  Makes  a  sale  of  such  goods,  or  consigns  them  for  sale  upon  com- 
mission, subject  to  the  condition  that  the  purchaser  or  consignee 

1  Commonwealth  Acts,  1909,  The  Patents  Act,  Pt.  V,  sec.  87b  (1),  (5),  (6). 

2  lb.,  sec.  87   (1),   (6).     See  p.  247. 

*  In  Victoria  the  minister  of  mines  in  December,  191.3,  introduced  a  bill  which  pro- 
vided, among  other  things,  that  any  person  who  conspires  or  agrees  to  refuse  to  sell  goods 
for  cash  to  any  other  person,  either  absolutely  or  except  upon  disadvantageous  and  op- 
pressive terms  or  conditions,  shall  be  guilty  of  a  misdemeanor.  It  was  further  provided 
that  "  the  terms  and  conditions  upon  which  goods  are  sold  or  offered  for  sale  or  at- 
tempted to  be  sold  sliall  be  deemed  to  lie  disadvantageous  and  oppressive  when  either  ex- 
pressly or  by  implication  they  provide  that  the  buyer  of  any  goods  referred  to  or  specified 
in  the  schedule  to  this  act  shall  not  buy  such  goods  from  any  other  person  or  class  of 
persons  than  the  seller  of  such  goods  or  from  persons  or  classes  of  persons  indicated  by 
the  said  seller."  The  consideration  of  this  bill  was  postponed.  Victoria,  Parliamentary 
Debates,  session  1913-14,  pp.  3;;4!>,  33.50,  3887. 

"New  Zealand  Stats.,  1911,  Act  No.  17,  sec.  40  (1),  (4),  (5). 

6  Act  of  Aug.  10,  1004.     See  p.  240. 


TEUST    LAWS   AND    UNFAIR    COMPETITION.  541 

shall  not  sell  or  deal  in  similar  goods  produced  by  or  obtained  from 
any  other  manufacturer  or  dealer ;  or 

(2)  Makes  a  sale  of  such  goods,  or  consigns  them  for  sale  upon  com- 
mission, to  another  person  upon  such  terms  as  would  in  their  applica- 
tion give  more  profit  to  the  purchaser  or  consignee  if  he  should  not 
sell  or  deal  in  goods  of  a  like  kind  produced  by  or  obtained  from  any 
other  manufacturer  or  dealer. 

The  decision  of  the  minister  of  inland  revenue  is  final  as  to  the 
facts  in  the  case.  Distillers,  rectifiers,  compounders,  brewers  or 
malsters,  manufacturers  of  tobacco  or  cigars,  or  bonded  manufac- 
turers are  subject  to  license. 

This  act  was  passed  as  a  result  of  an  investigation  by  a  royal  com- 
mission appointed  for  the  purpose  of  inquiring  into  an  exclusive 
contract  system  alleged  to  be  then  employed  by  the  American  To- 
bacco Co.  of  Canada  and  the  Empire  Tobacco  Co.  (Ltd.).  It  was 
charged  that  the  object  and  effect  of  the  system  was  to  prevent  those 
who  dealt  in  goods  made  by  these  companies  from  selling  those  of 
other  manufacturers,  thus  creating  a  monopoly.  The  commission 
reported  that  such  a  contract  system  existed  in  the  cigarette  and 
tobacco  trade  in  Canada ;  that  such  contracts  were  not  illegal  either 
under  the  common  law  or  any  then  existing  statutes,  and  that  other 
manufacturers  were  at  a  disadvantage  as  a  result.^ 

The  Canadian  Combines  Investigation  Act  has  been  described  in 
Chapter  V.^  Although  not  specifically  prohibiting  contracts  for  ex- 
clusive dealing,  it  ma}^  be  noted  that  a  board,  appointed  under  the 
authority  of  that  act  to  investigate  the  United  Shoe  Machinery  Co. 
of  Canada,  after  considering  the  form  of  certain  leases  adopted  by 
that  company  and  the  effect  of  tying  clauses  contained  therein,  ar- 
rived at  the  conclusion  that: 

The  United  Shoe  Machinery  Co.  of  Canada  is  a  combine  and  by  the  operation 
of  tlie  clauses  of  the  leases,  quoted  in  the  foregoing,  which  restrict  the  use  of  the 
leased  machines  in  the  way  therein  set  forth,  competition  in  the  manufacture, 
production,  purchase,  sale,  and  supply  of  shoe  machinery  in  Canada  has  been 
and  is  unduly  restricted  and  prevented.' 

The  Commercial  Trusts  Act  of  New  Zealand,  which  has  been  de- 
scribed in  Chapter  V,*  forbids  certain  forms  of  rebating  in  consid- 
eration of  exclusive  dealing.  Perhaps  the  most  striking  provision  of 
this  act,  however,  is  that  which  also  makes  illegal,  under  certain  con- 

1  Sec  rroceedings  of  the  House  of  Commons,  Apr.  12,  1910,  session  1900-10,  vol.  IV, 
column  6853. 

=  Spo  p.  241. 

« In  re  N.  Drouin  et  al.  and  The  United  Shoe  Machinery  Co.  of  Canada,  The  Canada 
Gazette,  Oct.  20,  1912,  pp.  1.319,  i;523. 

*  See  p.  251. 


542  REPORT    Oi-^    THE    COMMISSIONER    OF    CORPORATIONS. 

ditions,  the  refusal  to  deal  with  another.    These  provisions  are  found 
in  sections  3  and  4,  the  language  of  which  is  as  follows : 

3.  Every  persou  commits  an  offense  who,  either  as  principal  or  agent,  in  re- 
spect of  dealings  in  any  goods,  gives,  offers,  or  agrees  to  give  to  any  other  per- 
son any  rebate,  refund,  discount,  concession,  allowance,  reward,  or  other  val- 
uable consideration  for  the  reason  or  upon  the  express  or  implied  condition 
that  the  latter  person — 

(a)  Deals  or  has  dealt  or  will  deal,  or  intends  or  undertal^es  or  has  under- 
taken or  will  undertake  to  deal,  exclusively  or  principally,  or  to  such  an  extent 
as  amounts  to  exclusive  or  principal  dealing,  with  any  person  or  class  of  per- 
sons, either  in  relation  to  any  particular  goods  or  generally ;  or 

(&)  Does  not  deal  or  has  not  dealt  or  will  not  deal,  or  intends  or  undertakes 
or  has  undertaken  or  will  undertake  not  to  deal,  with  any  person  or  class  of 
persons,  either  in  relation  to  any  particular  goods  or  genex'ally;  or 

(c)  Restricts  or  has  restricted  or  will  restrict,  or  intends  or  undertakes  or 
has  undertaken  or  will  imdertake  to  restrict,  his  dealing  with  any  person  or 
class  of  persons,  either  in  relation  to  any  particular  goods  or  generally;  or 

(il)  Is  or  becomes  or  has  been,  or  has  undertaken  or  will  undertake  to  be- 
come, a  member  of  a  commercial  trust ;  or 

(e)  Acts  or  has  acted  or  will  act,  or  intends  or  undertakes  or  has  undertalven 
or  will  undertake  to  act,  in  obedience  to  or  in  conformity  with  the  determina- 
tions, directions,  suggestions,  or  requests  of  any  commex'cial  trust  with  respect 
to  the  sale,  purchase,  or  supply  of  any  goods. 

4.  Every  person  commits  an  offense  who,  either  as  principal  or  agent,  refuses 
either  absolutely  or  except  upon  disadvantageous  or  relatively  disadvantageous 
conditions,  to  sell  or  suiii)ly  to  any  other  person,  or  to  purchase  from  any  other 
person,  any  goods  for  the  reason  that  the  latter  person — 

(a)  Deals  or  has  dealt  or  will  deal,  or  intends  to  deal,  or  has  not  undertaken 
or  will  not  undertake  not  to  deal,  with  any  person  or  class  of  persons,  either 
in  relation  to  any  particular  goods  or  generally ;  or 

(6)  Is  not  or  has  not  been,  or  will  not  become  or  undertake  to  become  or 
has  not  undertaken. to  become,  a  member  of  a  commercial  trust;  or 

(c)  Does  not  act  or  has  not  acted  or  will  not  act,  or  does  not  intend  to  act, 
or  has  not  undertaken  or  will  not  undertake  to  act,  in  obedience  to  or  in  con- 
formity with  the  determinations,  directions,  suggestions,  or  requests  of  any 
commercial  trust  with  respect  to  the  sale,  purchase,  or  supply  of  any  goods. 

It  should  be  noted  that  this  act  applies  only  to  certain  classes  of 
goods.^  The  reason  assigned  by  the  Prime  Minister  for  limiting  the 
operation  of  this  act  to  the  articles  mentioned  was  that  it  was  de- 
sired to  interfere  as  little  as  possible  with  trade  generally,  and  if  the 
act  were  made  one  of  general  application  a  modification  of  the  drastic 
provisions  would  be  necessary .^ 

In  1911  the  governor  general  of  the  Union  of  South  Africa  was 
authorized  by  law  to  enter  into  ocean-mail  contracts,  but  it  was  pro- 
vided that  he  should  not  enter  into  any  such  contract  with  any  person 
who  "  gives,  offers,  or  promises  to  any  person  any  rebate,  refund, 

1  AgricuUural  implements,  coal,  meat,  fish,  flour,  oatmeal,  and  the  other  products  or  by- 
products of  the  milling  of  wheat  or  oats,  petroleum  or  other  mineral  oil  (inchuling  kero- 
sene, naphtha,  and  the  other  products  or  by-products  of  any  such  oil),  sugar,  and  tobacco 
(including  cigars  and  cigarettes). 

2  New  Zealand  Parliamentary  Debates,  Oct.  120,  1910,  vol.  152,  p.  650. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  543 

discount,  or  reward  upon  condition  that  such  person  shall  ship,  or 
in  consideration  of  such  person  having  shipped,  goods  by  vessels  of 
particular  lines  to  the  exclusion  of  any  others.^ 

Intimidation  by  Threats  of  Infringement  Suits. — The  English 
Patents,  Designs,  and  Trade-Marks  Act  of  1883  provides  for  the 
recovery  of  damages  from  a  patentee  who  circulates  threats  of  in- 
fringement suits,  unless  he  prove  that  there  has  been  an  actual 
infringement  or,  with  due  diligence,  commence  and  prosecute  an 
action  to  determine  the  question  of  infringement.  The  text  of  the 
provision  as  slightly  changed  in  1907  is  as  follows : 

Where  any  person  claiming  to  be  tlae  patentee  of  an  invention,  by  circulars, 
advertisements,  or  otlierwise,  threatens  any  other  person  with  any  legal  pro- 
ceedings or  liability  in  respect  of  any  alleged  infringement  of  the  patent,  any 
person  aggrieved  thereby  nniy  bring  an  action  against  him,  and  may  obtain  an 
injunction  against  the  continuance  of  such  threats,  and  may  recover  such 
damage  (if  any)  as  he  has  sustained  thereby,  if  the  alleged  infringement  to 
which  the  threats  i-elated  was  not,  in  fact,  an  infringement  of  any  legal  rights 
of  the  person  making  such  threats: 

Provided  that  this  section  shall  not  apply  if  the  person  making  such  threats 
with  due  diligence  commences  and  prosecutes  an  action  for  infringement  of  his 
patent.^ 

A  defendant  sued  under  this  statute  has  two  defenses,  viz:  (1) 
That  he  had  a  valid  patent  which  was,  in  fact,  infringed  by  the 
plaintiff;  that  is,  that  the  statements  respecting  infringement  were 
true;  (2)  that  he  instituted  and  prosecuted  with  due  diligence  a  suit 
to  test  the  question  of  infringement.  The  prevalence  in  England  of 
this  method  of  competition  is  shown  by  the  large  number  of  actions 
that  have  been  brought  under  this  statute.^  The  statutory  remedy  is 
cumulative  and  the  injured  party  may,  in  the  same  proceeding,  claim 

1  Union  of  South  Africa,  Post  Office  Administration  and  Sliipping  Combinations  Dis- 
couraspment  Act,  1911,  sec.  6.     See  p.  254. 

On  February  27,  1912,  in  the  House  of  Assembly  of  the  Union  of  South  Africa,  the  min- 
ister of  commerce  and  industries  was  asked  whether  it  was  tlie  intention  of  the  Govern- 
ment to  malve  tlie  retiulations  framed  under  this  act  "  apply  to  persons  or  companies 
giving  deferred  rebates  on  articles  of  commerce  to  the  exclusion  of  competitive  articles, 
such,  for  instance,  as  the  Nestle  Co.  on  their  milk,  the  Vacuum  Oil  Co.  on  the  Standard 
Oil  Co.'s  paraffin,  and  other  companies  on  different  articles  of  necessity  "  ;  and  if  not, 
whether  the  Government  was  prepared  to  bring  in  a  bill  "  to  make  unlawful  such  practice 
as  being  in  resti-aint  of  trade  on  the  lines  of  like  legislation  in  the  United  States,  Australia, 
New  Zealand,  and  other  countries."  In  reply  it  was  stated  that  it  was  not  possible  to 
make  such  regulations  applicable  to  the  cases  mentioned,  and  the  Government  was  not  at 
that  time  prepared  to  introduce  legislation  on  the  Hues  indicated.  On  JIar.  12,  1912, 
"  a  bill  to  prohibit  the  giving  of  reliates  and  secret  commissions  in  mercantile  transac- 
tions "  was  introduced.  This  bill  provided  in  part  that  it  shall  not  be  lawful  for  any 
person  "to  give,  offer,  or  promise,  whether  acting  as  principal  or  agent,  to  any  other 
person  any  rebate,  refund,  discount,  or  reward  upon  condition  that  such  other  person 
shall  purchase  or  otherwise  obtain,  or  In  consideration  of  such  other  person  having  pur- 
chased or  otherwise  obtained,  goods,  wares,  or  merchandise  from  any  particular  person 
to  the  exclusion  of  any  other  persons."  This  bill  was  not  passed.  (House  of  Assembly 
Debates,  1912.  pp.  7<>:?,  10.34-55,  Gazette  Extraordinary,  vol.  VI,  No.  214,  Mar.  20, 
1912,  p.  Ixi.) 

-40  and  47  Victoria,  ch.  57,  sec.  ;j2,  and  7  Kdw.  ^■I1,  cli.  29,  sec.  oG. 

3  The  cases  down  to  1912  arc  collected,  and  the  construction  of  the  statute  briefly  set 
forth  in  22  Ilalsl)ury's  Laws  of  England,  227,  228.' 


544  REPORT    OF    THE    COMMISSIONER    OE    CORPORATIONS. 

under  the  statute  and  under  the  common  hiw,  the  latter  chiim  being 
based  on  the  malicious  injury  to  his  business  by  the  circulation  of 
threats  where  there  was  clearly  no  foundation  for  the  charge  of 
infringement.^ 

The  Canadian  patent  act  does  not  contain  any  provision  similar  to 
section  32  of  the  English  Patents,  Designs,  and  Trade-Marks  Act  of 
1883.  The  only  remedy,  therefore,  for  threats  of  suit  for  infringe- 
ment is  such  as  could  be  had  under  the  English  common  law.^  The 
Australian  and  New  Zealand  laws  contain  provisions  practically 
identical  with  section  36  of  the  English  law  of  1907.^ 

Legislation  affecting  the  use  of  trading  stamps. — Although  the 
trading-stamp  system  has  been  in  extensive  operation  in  Great 
Britain,  no  legislation  affecting  it  has  been  enacted,  though  in  1912 
the  Admiralty  forbade  the  sale  by  canteens  of  any  kind  of  goods  with 
which  prize  coupons  are  given.^ 

Several  of  the  British  colonies  have  enacted  laws  prohibiting  in 
some  instances  and  in  others  regulating  the  issuance  or  use  of  trading 
stamps.  Somewhat  lengthy  parliamentary  debates  attended  the 
enactment  of  this  legislation.  The  advocates  of  the  measures  urged 
that  the  sale  of  such  stamps  to  merchants  by  trading-stamp  com- 
panies, w^hich  subsequently  redeemed  them,  tended  to  create  monopr 
dies  and  to  restrain  trade  by  restricting  the  use  of  the  stamps 
to  particular  traders ;  that  it  was  an  unfair  method  of  competition, 
and  that  it  diverted  business  from  its  accustomed  channels.  They 
further  urged  that  it  was  neither  a  desirable  nor  a  fair  method  of  ad- 
vertising and  not  a  satisfactory  method  of  giving  discounts.  On  the 
other  hand,  the  opponents  of  the  legislation  urged  that  the  system 
afforded  a  novel  method  of  advertising  at  a  low  cost,  particularly 
adapted  to  small  traders,  and  an  effective  means  of  giving  discounts 

1  Dredge  v.  Parnell,  13  R.  P.  C,  392  (1896)  ;  Lycett  Saclclle,  etc.,  Co.  v.  Brooks  &  Co., 
21  R.  P.  C,  6.56  (1904)  ;  Alfred  Appleby's  Twin  Roller  Chain  (Ltd.)  v.  Albert  Eadie 
Chain  (Ltd.),  16  R.  P.  C,  318  (1899). 

-  Audette's  Practice  of  the  Exchequer  Court,  p.  508. 

3  Australia  Commonwealth  Acts,  1909,  Act  No.  17,  sec.  IG ;  New  Zealand  Stats.,  2 
Geo.  V,  No.  17,  sec.  38. 

For  substantially  similar  legislation,  see  also  Leeward  Islands,  patents  act,  1906,  sec. 
34;  India,  patents  and  designs  act,  1911,  sec.  30;  Barbadoes,  patents  act,  1903,  sec.  35; 
Transvaal,  patents  proclamation  No.  22,  1902,  sec.  48 ;  Southern  Rhodesia,  patents  ordi- 
nance, 1904,  sec.  49 ;  Gold  Coast  Colony,  patents  ordinance,  1900  (as  amended  in  1902  and 
1903),  soc.  35;  Seychelles  Islands,  patents  ordinance,  1901,  sec.  36;  Mauritius,  patents 
(amendment)  and  designs  ordinance,  1913,  sec.  15;  British  Central  Africa  Protectorate, 
patents,  designs,  and  trade-marks  ordinance,  1903 ;  Gambia,  patents  ordinance,  1900  (as 
amended,  1904),  sec.  36;  Northern  Nigeria,  patents  proclamation,  1902,  sec.  35;  Ceylon, 
patents  ordinance,  1906,  sec.  37 ;  Hongkong,  patents  ordinance,  1892,  sec.  5 ;  Uganda 
Protectorate,  African  order  in  council,  1889,  art.  55  ;  Nyasaland,  patents,  designs,  and 
trade-marks  ordinance,  1903  ;  the  China,  Japan,  and  Korea  order  in  council,  1899  ;  the 
Siam  order  in  council,  1899 ;  Falkland  Islands,  patents  ordinance,  1903  ;  Gibraltar  order 
in  council,  1884,  and  patents  ordinance,  1913  ;  St.  Lucia,  patents  ordinance,  1899,  sec. 
88 ;  St.  Vincent,  patents  ordinance,  1898,  sec.  37 ;  Grenada,  patents  ordinance,  1898, 
sec.  37  ;  British  Guiana,  patents  ordinance,  1902,  sec.  34. 

*Crew  on  Secret  Commissions  and  Bribes,  p.  115n. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  545 

on  small  purchases.  They  further  asserted  that  it  did  not  tend  to 
monopoly,  as  any  number  of  trading-stamp  companies  might  enter  the 
business;  that,  in  fact,  the  stamps  furnished  an  ell'ective  weapon  with 
which  the  small  trader  could  fight  his  larger  competitors,  particularly 
the  so-called  chain  stores;  and  tliat  the  principal  opponents  of  the 
use  of  the  stamps  were  the  large  dealers.  Finally,  they  urged  that 
prohibitive  legislation  would  protect  one  class  against  the  legitimate 
competition  of  another,  and  that  it  was  not  unfair  competition  to 
attract  trade  from  a  business  rival  by  such  methods. 

A  Canadian  statute  prohibits  the  issuance  of  trading  stamps  by 
parties  other  than  merchants  or  manufacturers,^  thus,  in  effect, 
abolishing  trading-stamp  companies.^  The  issuer,  giver,  and  re- 
cei^■er  of  stamps  issued  in  violation  of  the  act  are  all  subject  to 
punishment.  An  offer  by  a  manufacturer  upon  a  wrapper,  box,  or 
receptacle  of  a  premium  or  rew^ard  is  exempted  from  the  operation 
of  the  statute. 

Prior  to  the  passage  of  the  Canadian  general  law,  Ontario  and 
Quebec  authorized  cities,  towns,  and  villages  to  forbid  the  issu- 
ance of  stamps  by  trading-stamp  companies.  By-law^s  passed  under 
the  authority  of  the  Quebec  act  were  declared  unconstitutional,  but 
those  passed  in  Ontario  were  held  valid.^ 

The  Australian  Commonwealth  appears  not  to  have  passed  any 
law  regarding  trading  stamps,  but  several  of  the  States  have  statutes 
on  the  subject.  Victoria,  Tasmania,  and  Western  Australia  prohibit 
the  issuance  or  giving  of  trading  stamps  by.  any  stamp  company, 
trader,  or  other  person.*  In  order,  however,  to  provide  a  ready  and 
simple  means  by  which  merchants  can  give  a  discount  with  cash  pur- 
chases the  Tasmanian  Goverrjuent  sells  discount  stamps  to  business 
men  at  their  face  value  and  redeems  them  w^lien  presented  in  quanti- 
ties aggregating  in  value  not  less  than  1  shilling.  South  Australia 
prohibits  the  issuance  of  any  trading  stamp  not  "  redeemable  at  the 
particular  shop  or  warehouse  at  which  the  goods  in  respect  of  which 
such  stamp  was  issued  were  purchased."  ^ 

New  Zealand  prohibits  the  issuing  or  giving  of  trading  stamps 
by  either  trading-stamp  companies,  tradesmen,  or  other  persons,*^ 
As  in  the  case  of  Tasmania,  however,  the  New  Zealand  Government 

1  Rev.  Stat,  of  Canada,  1006,  ch.  146,  sees.  335,  505-508. 

*  Similar  legislation  has  been  enacted  in  Jersey.  Recueil  des  Lois,  Tome  7  (1907),  p.  G16. 

*  Senate  Debates,  Dominion  of  Canada,  session  of  1005,  pp.  005-Olii ;  Ontario  Stats., 
1  Edw.  VII,  ch.  26,  sec.  2(5;  Quebec  Stats.   (1903),  ch.  39. 

*  Victoria  Acts  of  Parliament,  Acts  No.  1750  (1901)  and  No.  1794  (1902)  ;  Tasmania 
Acts  of  Parliament,  Act  No.  50  (190()i  ;  Western  Australia  Acts  of  I'arliameiit,  1st  and 
2d  Edw.  VII,  1901-2,  pp.  654a-654b. 

■^  South  Australia,  Acts  1904,  No.  859. 

*  New  Zealand,  Cons.  Stats.,  vol.  5,  Act  No.  197  of  1908,  reenactment  of  Act  Xo.  05  of 
1900. 

30035°— 16 35 


546  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

sells  discount  stamps  to  tradesmen  and  redeems  tliem  when  presented 
in  specified  quantities.^ 

Confusion  of  corporate  names. — An  English  statute  prohibits  the 
registration  of  a  company  name  identical  with  that  of  an  existing 
registered  company  or  so  nearly  resembling  it  as  to  be  calculated  to 
deceive,  unless  the  company  previously  registered  is  being  dissolved 
and  signifies  its  consent  to  the  adoption  of  the  name  in  such  manner 
as  the  registrar  requires.  Provision  is  made  for  a  change  of  name 
in  case  of  the  inadvertent  registration  of  a  company  in  contravention 
of  the  foregoing  enactment.- 

Substantially  similar  prohibitions  are  found  in  the  statutes  of  the 
various  States  of  the  Australian  Commonwealth,^  though  in  South 
Australia  and  Western  Australia  no  specific  provision  is  made  for  a 
change  of  name  in  case  that  of  some  other  corporation  is  inad- 
vertently adopted.  The  statutory  requirements  in  New  Zealand  are 
similar  to  those  in  the  Australian  States.*  The  Canadian  law  on  this 
subject  is  practically  the  same  as  the  English.^ 

Misbranding  or  falsely  marking  goods. — The  English  Merchan- 
dise Marks  Act  of  1887  ^  makes  it  an  offense  for  any  person  to  apply 
any  false  trade  description  to  goods'^  respecting  their  number, 
quantity,  measure,  gauge,  or  weight,  or  the  place  or  country  of  their 
origin,  or  the  mode  of  manufacturing  or  producing  them,  or  the 
material  of  which  they  are  composed,  or  to  make  any  false  descrip- 
tion, statement,  or  other  indication  respecting  any  goods  being  the 
subject  of  an  existing  patent,  privilege,  or  copyright.  It  is  a  defense 
to  this  part  of  the  act,  however,  if  the  person  accused  prove  that  he 

1  In  Bermuda  trading  stamps  issued  by  parties  other  than  merchants  or  tradesmen  are 
required  to  have  a  redeemable  value  in  money  printed  thereon,  which  shall  not  be  less 
than  one-fifth  of  a  penny,  and  must  be  redeemed  In  money  when  presented  in  numbers 
aggregating  in  face  value  not  less  than  3  pence,  but  it  is  not  required  that  any  trading 
stamps,  the  face  value  of  which  is  a  fractional  part  of  a  penny,  be  redeemed.  Merchants 
or  tradesmen  who  redeem  their  own  stamps,  aud  foreign  merchants  or  manufacturers,  as 
well  as  local  merchants  or  tradesmen  who  place  coupons,  etc.,  in  or  upon  any  wrappers 
or  goods  which  are  supplied  by  them  in  that  condition  to  others  for  sale  are  exempted 
from  the  provisions  of  the  act  (Bermuda  Acts,  1905,  Act  No.  7).  Natal,  Union  of  South 
Africa,  has  extended  its  lottery  acts  to  prohibit  tlie  offer  of  any  prize,  reward,  or  gain 
in  connection  witli  the  purchase  or  sale  of  tobacco  or  intoxicating  liquors  (Natal,  Acts, 
1909,  No.  yi,  sec.  5 1. 

2  Companies  (Consolidation)  Act,  1908,  sec.  8. 

s  New  South  Wales,  Stats.  1899,  No.  40,  sec.  234 ;  Queensland  Stats.,  vol.  I,  p.  148 ; 
South  Australia  Laws,  1892,  No.  557,  sec.  23  ;  Tasmanian  Stats.,  vol.  1,  p.  373  ;  llorwitz's 
yicturian  Stats.,  vol.  I,  p.  194  ;  Western  Australia  Stats.,  vol.  HI,  p.  29. 

«  New  Zealand  Cons.  Stats.,  vol.  1,  p.  361. 

^Canada  Rev.  Stats.,  1906,  ch.  79,  sees.  7a,  21;  British  Columbia  Rev.  Stats.  (1911), 
vol.  1,  p.  307;  Manitoba  Rev.  Stats.  (1913),  vol.  1,  p.  228;  New  Brunswick  Con.  Stats. 
(1903),  vol.  I.  p.  788;  Northwest  Territories  Ordinances  (1911),  p.  137;  Nova  Scotia 
Stats.  (IUOOk  ch.  11,  sec.  21;  Ontario  Rev.  Stats.,  vol.  2,  pp.  1867-1868;  Quebec  Rev. 
Stats.,  vol.  2,  art.  6015;  Saskatchewan  Rev.  Stats.  (1909),  p.  735;  Yukon  Cons.  Ordi- 
nances (1914),  ch.  18,  sec.  18. 

6  50  and  51  Vict.,  ch.  28;  Kerly  on  Merchandise  Marks  (Ed.  1909).  See  also  Special 
Report  on  Merchandise  Marks  Act  (1S(J2)  Amendment  Bill  (London,  1887)  ;  and  Annual 
Report  of  the  Commercial  Control  Branch  of  the  Board  of  Agriculture  and  Fisheries, 
1913.      [Cd.   7354.] 

■^ "  Goods "  are  defined  as  anything  which  is  the  subject  of  trade,  manufacture,  or 
merchandise. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  517 

acted  without  intent  to  defraud.  It  is  also  an  offense  for  any  person 
to  sell,  expose  for  sale,  or  have  in  his  possession  for  sale  or  any  other 
purpose  of  trade  or  manufacture  any  goods  or  things  to  which  any 
false  trade  description  is  applied,  imless  he  proves  that,  having  taken 
all  reasonable  precautions,  he  had  no  reason  to  suspect  the  genuineness 
of  the  trade  description,  and  that  he  gave  the  prosecutor,  on  demand, 
all  the  information  in  his  power  with  respect  to  the  persons  from 
whom  he  obtained  the  goods,  or  that  otherwise  he  acted  innocently. 

The  act  of  1887  also  prohibits  any  peison  from  falsely  represent- 
ing that  any  goods  are  made  by  a  person  holding  a  royal  warrant,  or 
for  the  service  of  Her  Majesty,  or  any  of  the  royal  family,  or  any 
other  Government  department.^  And  iu  1905,  at  the  suggestion  of 
the  Association  of  Koyal  Warrant  Holders,  it  was  provided  that  any 
person  who,  without  the  authority  of  His  Majesty  or  of  a  member  of 
the  royal  family,  uses  in  connection  with  any  business  or  profession 
the  royal  arms  in  such  a  manner  as  to  lead  others  to  believe  that  he 
is  duly  authorized  to  use  the  same  may  be  restrained  by  injunction 
at  the  suit  of  any  person  authorized  to  use  such  arms,  or  is  authorized 
by  the  Lord  Chamberlain  to  take  proceedings  in  that  behalf.- 

The  Canadian  Criminal  Code^  prohibits  any  person  from  putting 
a  "false  trade  description"  upon  any  goods  or  from  selling  or  ex- 
posing for  sale  goods  knowing  them  to  be  falsely  described.  The 
law  applies  to  any  materially  false  description,  statement,  or  other 
indication,  direct  or  indirect,  as  to  the  number,  quantity,  measure, 
gauge,  or  weight  of  any  goods,  the  place  or  country  in  which  made 
or  produced,  the  mode  of  manufacturing  or  producing,  and  the  mate- 
rial of  which  composed,  as  well  as  to  any  goods  being  the  subject  of 
an  existing  patent,  privilege,  or  copyright.  It  also  forbids  the  use 
of  any  figures,  words,  or  marks  to  induce  persons  to  believe  that  the 
goods  are  the  manufacture  or  merchandise  of  some  other  person, 
and  the  use  of  any  false  names  or  initials  of  any  person. 

The  Commonwealth  of  Australia  and  the  States  of  New  South 
Wales,  Queensland,  South  Australia,  Tasmania,  Victoria,  and  West- 
ern Australia*  have  statutes  prohibiting  any  person  from  putting 
any  false  description  upon  any  goods.  These  acts  are  similar  to  the 
Canadian  law.  The  Commonwealth  and  Queensland  acts,  how- 
ever, do  not  include  a  specific  prohibition  applying  to  the  use  of 
figures,  words,  or  marks  to  induce  persons  to  believe  that  the  goods 

1  lb.,  sec.  20.     See  also  Patent  and  Designs  Act,  1907,  ch.  29,  sec.  90. 

-  Trade-Maiks  Act,  1905,  ch.  15,  sec.  68.  See  also  Royal  Warrant  Holders  Assn.  /-. 
Slado  &  Co.  (Ltd.),  25  U.  P.  C,  245  (Ch.  IViv.,  1908,1,  and  Royal  Warrant  Holders  Assn. 
i;.  Kitson,  2G  R.  P.  C,  157  (Ch.  Div.,  1909). 

3  Rev.  Stals.  of  Canada,  19(i(!,  ch.  14(;.  sees.  :5:V--:::)7,  .^4L  4S8,  489. 

1  Commerce  (Trade  Descriptions)  Act,  1905,  Consol.  Laws  of  Commonwealth  of  Australia, 
1901-1911,  vol.  n,  p.  1031  ;  Stats,  of  New  South  Wales,  1900,  Act  No.  19,  sees.  13,  19-21, 
31;  Queensland  Stats.,  vol.  II,  p.  1715,  trade-marks  act,  18ti4,  sees.  13-15  and  2G ;  Acts 
of  Parlianient  of  Soutli  Australia,  1892,  No.  551;  Acts  of  Parliament  of  Tasmania,  1893. 
57  Vic,  No.  G;  llorwitz's  Vie.  Stats.,  vol.  9,  p.  14,  54  Vie..  No.  114f. ;  Stats,  of  Westeia 
Australia,  1913,  No.  28  (Criminal  Code),  sees.  496,  497,  499,  501,  and  507. 


548  EEPOKT    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

are  the  manufacture  or  merchandise  of  some  other  person  or  to  the 
use  of  any  false  names  or  initials  of  a  person.  The  Commonwealth 
act  applies  only  to  exports  and  imports,  while  the  State  laws  apply 
to  merchandise  or  anything  which  is  the  subject  of  local  trade  or 
manufacture. 

New  Zealand  and  India  have  statutes/  similar  to  the  Canadian  law, 
prohibiting  any  person  from  putting  an}'^  false  description  upon  any 
goods.  xVs  in  Canada,  the  laws  cover  the  use  of  any  figures,  words, 
or  marks  to  induce  persons  to  believe  that  the  goods  are  the  manu- 
facture or  merchandise  of  some  other  person  and  the  use  of  any 
false  names  or  initials  of  any  person. 

Falsely  marking  gold  ware. — By  an  act  passed  in  England  in  1854,=^ 
it  is  provided  that  if  any  assayer,  officer,  or  employee  of  any  company 
or  corporation  authorized  to  assay  and  mark  gold  vessels,  plate,  or 
manufactures  of  gold,  shall  mark  or  suffer  to  be  marked  any  gold 
vessel,  plate,  or  manufacture  of  gold  of  a  lower  standard  with  any  die 
or  other  instrument  used  by  such  company  or  corporation  for  marking 
such  manufactures  of  gold  of  a  higher  standard,  the  company  shall 
forfeit  a  specified  sum.  It  is  further  provided  tliat  any  officer  or 
employee  convicted  of  such  offense  shall  be  discharged  from  his  office 
with  said  corporation  and  shall  thereafter  be  incapable  of  holding 
any  office  or  employment  in  or  under  the  same  or  any  other  such  com- 
pany or  corporation.  Provision  is  made,  by  reference  to  the  act  of  7 
and  8  Victoria,  chapter  22,  for  the  seizure,  defacement,  and  in  cer- 
tain instances  the  melting  of  such  falsely  marked  plate,  and  for  the 
disposition  of  the  proceeds  thereof. 

Canada's  Gold  and  Silver  Marking  Act^  requires,  where  any  mark 
is  used,  a  registered  trade-mark  on  all  plated  articles  and  all  flat 
and  hollow  ware,  and  both  the  trade-mark  and  a  quality  mark  on  all 
gold  and  silver  articles  not  stamped  under  the  laws  of  another  Gov- 
ernment. Any  additional  mark  not  calculated  to  mislead  or  deceive 
may  be  used  except  on  plated  articles.  On  these  the  only  other  marks 
allowed  are  an  identification  number  and  the  name  or  initials  of  a 
dealer.  Articles  are  not  to  be  described  as  gold  or  silver  unless  they 
are  of  a  fineness  required  by  statute,  and  the  use  of  any  guaranty 
marks  on  plated  waie  as  to  its  durability  is  prohibited. 

Mwcellcmeous  sUdutes  regarding  false  markmg. — There  are  sev- 
eral special  English  statutes  which  prohibit  the  misbranding  or  al- 
teration of  marks  on  fabrics  and  cutlery.  The  linen  trade-marks  acts 
of  1743  and  1744*  imposed  a  penalty  for  the  erasure  of  marks  re- 
quired on  Irish  linen  or  for  indicating  by  false  marks  that  other  linen 
is  made  in  Ireland.     Wlien  made  in  Ireland  by  hand  loom  weavers, 

1  New  Zealand  Consol.  Stats.,  1908,  vol.  IV,  No.  140 ;  Indian  Merchandise  Marks  Act, 
Act  IV,  1889. 

2  17  and  18  Vic.  (1854),  ch.  96,  sec.  5. 
2  Canada,  Stats.,  1013,  ch.  19. 

«  17  Geo.  II,  ch.  30  ;  18  Geo.  II,  ch.  24,  sec.  3. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  549 

linen  damasks  must  have  woven  into  the  selvage  "  Irish  hand-woven 
linen  damask,"  and  cambric  or  linen  diaper  goods  must  have  stamped 
or  printed  on  it  "  Irish  hand-woven,"  ^  By  the  Fabrics  (Misdescrip- 
tion) Act  of  1913,-  it  is  an  offense  to  sell  or  have  in  possession  for  the 
purpose  of  sale,  any  textile  fabric  or  article  made  thereof,  described 
verbally  or  otherwise  as  noninflammable,  unless  it  conforms  to  certain 
standards  prescribed  by  regulations.  If  a  defendant  under  this  act 
shows  that  such  fabric  was  bought  by  a  person  resident  within  the 
United  Kingdom,  who  sold  under  warranty,  and  that  he  has  taken 
reasonable  steps  to  ascertain  the  truth  of,  and  in  fact  believes,  the 
statement  contained  in  the  description,  he  may  lay  an  information 
against  such  person  and  thus  escape  the  penalty. 

An  act  passed  in  1819  ^  provides  that  only  articles  of  cutlery  forged 
or  made  by  means  of  a  hammer  may  be  marked  with  a  hammer. 

A  Canadian  statute  requires  the  number  of  feet  per  pound,  to- 
gether with  the  name  of  the  dealer,  to  be  marked  on  balls  of  binder 
twine,  unless  manufactured  for  export  only.* 

The  statutes  of  India  provide  that  piece  goods  such  as  are  ordi- 
narily sold  by  length  or  by  the  piece  shall  not  be  removed  from  the 
factor}^  without  having  the  length  conspicuously  stamped  thereon.^ 

The  Statutes  of  Queensland  and  Western  Australia  "^  forbid  the 
mixing  of  uncertified  goods  with  goods  which  have  been  marked  or 
certified  as  to  their  quality  under  the  authority  of  any  statute. 

A  South  Australian  statute  ^  prohibits  any  person  from  removing 
or  altering  or  attempting  to  remove  or  alter  any  stamp,  stain,  brand, 
or  impression  on  any  furniture  made  in  or  imported  into  the  State. 

Statutes  of  South  Australia  and  New  Zealand^  forbid  any  person 
to  manufacture,  sell,  or  expose  for  sale  boots  or  shoes  the  soles  of 
which  are  partly  leather  or  imitation  leather  without  stamping  on 
such  soles  a  statement  of  the  component  materials. 

False  or  misleading  advertisements. — Apparently  the  only  Eng- 
lish statute  which  touches  the  subject  of  false  or  misleading  adver- 
tisements is  the  Exhibition  Medals  Act  of  1803."  This  act  forbids 
any  trader  to  falsely  represent  that  he  obtained  a  medal  or  certificate 
from  the  commissioners  for  the  expositions  of  1851  or  1862  in  respect 
of  any  article  or  process  for  which  there  was  an  award,  or  falsely  to 
represent  that  an}-  other  trader  has  obtained  a  medal  or  certificate, 
laiowing  such  representations  to  be  false,  or  falsely  to  represent  that 

in  Edw.  VII,  ch.  21. 

2  r,  ami  4  (;(-o.  V,  ch.  17. 

3  59  Ooo.  Ill,  ch.  7. 

*  Canada,  Rev.  Stats.,  lOOG,  ch.  85,  sees.  .S4(>-n54,  as  amended  :  1!U  t.  eli.  10.  p.  ^()r,. 
0  Indian  Merchandise  Marks  Act,  Act  IV,  ISSO,  soc.  12. 

•>  Queensland  Stats.,  vol.  VIII.  p.  7010  (Criminal  (.'ode,  ISOO)  :  Western  Australia.  Stats. 
1913,  No.  2.S  (Criminal  Code),  sec.  549. 

7  South  .\nstralia.  Ac(s  1904,  No.  856,  sees.  2,  n,  0. 

8  South  Australia.  Acts  1911-12,  No.  1046,  sec.  4;  New  Zealind  Stals.  1012,  No.  4:;. 
8  26  and  27  Vic,  ch.  119. 


550  REPORT    OF    THE    COMMISSIONER    OP    CORPORATIONS. 

any  article  sold  or  exposed  for  sale  has  been  made  by,  or  by  any 
process  invented  by,  a  person  who  has  obtahied  in  respect  of  such 
article  a  medal  or  certificate  from  the  said  exhibition  commissioners.^ 
Dumping. — The  practice  of  manufacturers  or  exporters  selling 
goods  abroad  at  prices  lower  than  the  fair  market  value  of  such  goods 
when  sold  for  home  consumption  has  been  the  subject  of  special  legis- 
lation in  Canada,  the  Union  of  South  Africa,  New  Zealand,  and 
Australia.  An  act  passed  in  Canada  in  190-i  and  amended  in  1007, 
provides  in  part  as  follows: 

In  the  case  of  nrticles  exported  to  Canada  of  a  class  or  kind  made  or  pro- 
duced in  Canada,  if  tlie  export  or  actual  selling  price  to  an  importer  in 
Canada  is  less  tlian  the  fair  marljet  value  of  the  same  article  when  sold  for 
home  consumption  in  the  usual  and  ordinary  course  in  the  country  whence  ex- 
ported to  Canada  at  the  time  of  its  exportation  to  Canada,  there  shall,  in  addi- 
tion to  tlie  duties  otlun-wise  estaltllslied,  he  levied,  collected  and  paid  on  such 
article,  on  its  importation  into  Canada,  a  special  duty  (or  dumping  duty)  equal 
to  the  difference  between  the  said  selling  price  of  the  article  for  export  and  the 
said  fair  market  value  thereof  for  home  consumption;  and  such  siiecial  duty 
(or  dumi)iiig  duty)  shall  be  levied,  collected  and  paid  on  such  article,  although 
it  is  not  otherwise  dutiable. 

Provided  that  the  said  special  duty  shall  not  exceed  1.5  per  cent  ad  valorem 
in  any  case.^ 

iThis  act  was  passed  partly  as  a  result  of  the  case  of  Batty  v.  Hill  (1  H.  &  M.  Ch. 
cases,  264  (1803),  see  p.  388),  in  which  it  was  held  that  an  injunction  would  not  lie  to 
restrain  a  trader  from  falsely  representing  that  his  goods  had  been  awarded  a  medal  at  the 
exposition  of  1802,  when,  in  fact,  the  medal  had  been  awarded  another. 

2  Edw.  VII,  ch.  11,  sec.  19  ;  6-7  Edw.  VII,  ch.  11,  sec.  6. 

In  addition  to  the  above  the  act  provides  as  follows  : 

Provided  also  that  the  following  goods  shall  be  exempt  from  such  special   duty,   viz  : 

(a)  goods  whereon  the  duties  othei-wise  established  are  equal  to  50  per  cent  ad  valorem  ; 

(b)  goods  of  a  class  suliject  to  excise  duty  in  Canada;  (c)  sugar  refined  in  the  United 
Kingdom  ;  (d)  binder  twine  or  twine  for  harvest  binders  manufactured  from  New  Zealand 
hemp,  istle,  or  tampico  fiber,  sisal  grass,  or  sunn,  or  a  mixture  of  any  two  or  more  of 
them,  of  single  ply,  and  measuring  not  exceeding  000  feet  to  tlie  pound. 

Provided  further  that  excise  duties  shall  be  disregarded  in  estimating  the  market  value 
of  goods  for  the  purposes  of  special  duty  when  the  goods  are  entitled  to  entry  undrr  llie 
British   preferential   tariff. 

"  Export  price  "  or  "  selling  price  "  in  this  section  shall  be  held  to  mean  and  include 
the  exporter's  price  for  the  goods,  exclusive  of  all  charges  thereon  after  their  shipment 
from  the  place  whence  exported  directly  to  Canada. 

If  at  any  time  it  appears  to  the  satisfaction  of  tlie  governor  in  council,  on  a  report 
from  the  minister  of  customs,  that  the  payment  of  the  special  duty  by  this  section  pro- 
vided for  is  ibeing  evaded  by  the  shipment  of  goods  on  consignment  without  sale  prior  to 
such  shipment,  the  governor  in  council  may  in  any  case  or  class  of  cases  authorize  such 
action  as  is  deemed  necessary  to  collect  on  sucli  goods,  or  any  of  them,  the  same  special 
duty  as  if  the  goods  had  been  sold  to  an  importer  in  Canada  prior  to  their  shipment  to 
Canada. 

If  the  full  amount  of  any  special  duly  of  customs  is  not  paid  on  goods  imported,  the 
customs  entry  thereof  shall  be  amended  and  the  deficiency  paid  upon  the  demand  of  the 
collector  of  customs. 

The  minister  of  customs  may  make  such  regulations  as  are  deemed  necessary  for 
carrying  out  the  provisions  of  this  section  and  for  the  enforcement  thereof. 

Such  i-egulations  may  provide  for  the  temporary  exemption  from  special  duty  of  any 
article  or  class  of  articles  when  it  is  established  to  the  satisfaction  of  the  minister  of 
customs  that  such  articles  are  not  made  or  sold  in  Canada  in  substantial  quantities  and 
offered  for  sale  to  all  purchasers  on  equal  terms  under  like  conditions,  having  regard  to 
the  custom  and  usage  of  trade. 

Such  regulations  may  also  provide  for  the  exemption  from  special  duty  of  any  article 
when  the  difference  between  tlie  fair  market  value  and  the  selling  price  thereof  to  the 
importer  as  aforesaid  amounts  only  to  a  small  percentage  of  its  fair  market  value. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  551 

The  Union  of  South  Africa  provided  for  the  collection  of  a  dump- 
ing duty  in  1914.    The  act  provides  in  part  as  follows : 

In  the  case  of  goods  imported  into  tlie  Union  of  a  class  or  kind  made  or  pro- 
duced in  tlie  Union,  if  tlie  export  or  actual  selling  price  to  an  importer  in  the 
Union  be  less  than  the  true  current  value  (as  defined  in  this  Act)  of  the  same 
goods  when  sold  for  home  consiunption  in  the  usual  and  ordinary  course  in  the 
country  from  which  they  were  exported  to  the  Union  at  the  time  of  their 
exportation  thereto,  there  may,  in  addition  to  the  duties  otherwise  prescribed, 
be  charged,  levied,  collected,  and  paid  on  those  goods  on  importation  into  the 
Union  a  special  customs  duty  (or  dumping  duty)  equal  to  the  difference  be- 
tween the  said  selling  price  of  the  goods  for  export  and  the  true  current  value 
thereof  for  home  consumption  as  defined  in  this  Act:  rrovided,  That  the  special 
customs  duty  (or  dumping  duty)  shall  not  in  any  case  exceed  fifteen  per  cent 
ad  valorem.^ 

The  act  also  provides  that  additional  countervailing  duties  may  be 
collected  to  offset  any  bounties  granted  in  the  country  of  origin,  that 
the  goods  subject  to  either  such  dumping  or  countervailing  duty  shall 
be  determined  by  the  Governor  General,  and  that  notice  of  such 
action  shall  be  published  in  the  Gazette.^ 

These  acts  do  not,  as  in  the  Australian  Industries  Preservation  Act, 
expressly  declare  dumping  to  be  luifair  competition.  The  provisions 
of  the  Australian  act  respecting  dumping  are  considered  below.  (See 
p.  555.) 

In  New  Zealand  the  Agricultural  Implement  INIanufacture,  Impor- 
tation, and  Sale  Act,  1905,  contains  certain  provisions  respecting  un- 
fair competition  in  the  sale  of  agricultural  implements.  Where  com- 
plaint is  made  that  competition  on  "  unfair  lines  "  is  being  carried  on 
by  importers  of  implements  from  foreign  countries,  a  remedy  is  pro- 
vided by  law  in  the  form  of  bonuses  to  the  manufacturers  of  imple- 
ments in  New  Zealand,  to  be  granted  upon  the  recommendation  of 
an  administrative  board.^  This  act  was  subsequently  consolidated 
with  other  laws  and  constitutes  Part  I  of  the  Monopoly  Prevention 
Act,  1908.* 

The  Australian  Industries  Preservation  Act,  1906-1910. — The 
Australian  Industries  Preservation  Act  relates  to  unfair  competition 
as  well  as  to  combinations  or  trusts.     The  parts  of  this  law  relating  to 

1  Union  of  Soutli  Africa,  Stats.,  1014,  Act  No.  26,  sec.  S  (1). 

2  11).,  soc.  8   (2)   and    (:'.). 

s  According  to  the  information  available,  no  lionus  was  ever  granted  under  this  act. 
In  1008  tho  ministor  of  trado  and  ciisloins  stahMl  tliat  the  board  had  met  but  once  since 
it  was  created.  A  comphiint  aj^ainst  an  American  concern,  investit;ated  in  1007,  re- 
sulted in  the  hoard  report  iim'  that  the  cimiiihiint  was  nut  Justilii'd  and  recommending; 
that  no  bonus  should  be  granted,  (rarliameutary  Debates,  Oct.  fl,  1008,  vol.  145,  p. 
912  ;  Nov.  7,  1912,  vol.  ICl,  p.  i:?80;  Reports  of  the  Agricultural  Implement  Inquiry  Hoard. 
Oct.  12,  1007.  Appendix  to  .Tournals  of  N.nv  Zealand  House  of  Uepi'i'S'^ntatives,  1007, 
vol.  IV,  11.  40.1 

'  It  was  provided  that  Part  I  of  the  Monopol.v  Trevention  .Vet  should  expire  by  limita- 
tion Dec.  .".I.  l!ins,  but  by  various  anicndmiiits  it  has  bc-i'u  coulinufd  in  force,  and  in  lOi:} 
it  was  further  extended  to  Dec.  :U,  101.".    (Act  Xo.  7:;  of  ll»i:;). 


552  RiSt'OET   OP   THE    COMMISSIONER   OP    CORPORATIONS^. 

unfair  competition  are  considered  here,  althong-li  this  necessarily  in- 
volves some  repetition  of  what  has  been  discussed  in  connection  with 
trust  law,^. 

The  act  is  divided  into  three  parts,  namely,  (1)  "preliminary," 
(2)  "repression  of  monopolies,"  and  (3)  "prevention  of  dumping." 
Unfair  competition  is  dealt  with  in  both  the  second  and  third  parts. 
The  fact  that  provisions  regarding  unfair  competition  are  included 
with  the  provisions  regarding  "repression  of  monopolies"  is  itself 
a  significant  fact  and  characteristic  of  the  Australian  viewpoint  re- 
garding unfair  competition.  The  sections  of  the  law  referred  to  in 
the  discussion  immediately  following  are  found  in  this  second  part 
of  the  act. 

Section  4  declares  it  an  offense  for  any  person  to  make  a  contract 
or  enter  into  a  combination  in  relation  to  interstate  or  foreign  com- 
merce "to  the  destruction  or  injury  of  or  with  intent  to  destroy  or 
injure  by  means  of  unfair  competition  any  Australian  industry  the 
preservation  of  which  is  advantageous  to  the  Commonwealth,  having 
clue  regard  to  the  interests  of  producers,  workers,  and  consumers," 
and  declares  further  that  every  such  contract  shall  be  illegal  and 
void. 

Section  0  defines  unfair  competition  as  follows: 

(1)  For  the  ]>iivposps  of  section  4  and  section  10  of  this  act,  unfair  competi- 
tion means  competition  which  is  nnfair  in  tlie  circumstances;  and  in  the  folU)\v- 
ing  cases  the  competition  shall  be  deemed  to  be  unfair  unless  the  contrary  is 
proved : 

■   («)   If  the  defendant  is  a  commercial  trust. 

(ft)  If  the  competition  would  ])robabl.v  or  does  in  fact  result  in  an  inadequate 
renunieration  for  labor  in  tlie  Australian  industry. 

(e)  If  the  competition  wonhl  pro)»alily  or  d(tes  in  fact  result  in  creating  sub- 
stantial disorganization  in  Australian  industry  or  throwing  workers  out  of 
employment. 

(d)  If  the  defendant,  with  respect  to  any  goods  or  services  which  are  the 
subject  of  the  competition,  gives,  offers,  or  promises  to  any  person  any  rebate, 
refund,  discount,  or  reward  upon  condition  that  that  person  deals,  or  in  con- 
sideration of  that  person  having  dealt,  with  the  defendant  to  the  exclusion  of 
other  per.wns  dealing  in  similar  goods  or  services. 

(2)  In  determining  whether  the  competition  is  unfair,  regard  shall  be  had  to 
the  management,  the  processes,  the  plant,  and  the  machinery  employed  or 
adopted  in  the  Australian  industry  affected  by  the  competition  being  reasonably 
etficient,  elfective,  and  up  to  date. 

It  should  be  noted  in  the  first  place  that  unfair  competition  is  pre- 
sumed if  the  defendant  is  a  member  of  a  "  commercial  trust,"  by 
which  term  is  meant  substantially  every  form  of  combination  to  re- 
strict competition,  whether  liy  agreement  or  by  combining  control 
of  competitors  through  stock  ownership,  or  some  similar  means.^ 

1  See  p.  24."^. 


I'EUST    LAWS   AND    UNFAIR    COMPETITION.  553 

In  other  words,  the  attempt  to  restrict  competition  or  to  procure  a 
monopoly  is  prima  facie  evidence  of  unfair  competition. 

In  the  second  place,  if  the  competition  is  of  such  a  character  as  to 
probably  result  in  inadequate  remuneration  for  labor  in  Australian 
industry  it  is  presumed  to  be  unfair.  Thus  not  unjustifiable  damage 
to  competitors,  but  indirect  injury  to  the  emploj^ees  of  competitors, 
is  made  a  prima  facie  test  of  unfair  competition. 

Third,  the  specific  practice  of  offering  a  rebate  for  exclusive  deal- 
ing is  presumptively  unfair  competition.  This  practice  is  obviously 
often  directly  connected  with  attempts  to  restrain  or  monopolize 
trade. 

Section  7A  provides  furthermore  that  giving  or  promising  rebates, 
etc.,  for  exclusive  dealing  or  for  refraining  from  dealing  with  cer- 
tain persons  in  relation  to  interstate  or  foreign  commerce  is  an 
offense  and  that  every  contract  to  such  ends  is  void,  unless  the  de- 
fendant proves  that  the  practice  complained  of  was  not  to  the  detri- 
ment of  the  public,  did  not  constitute  unfair  competition  under  the 
circumstances,  and  was  not  destructive  of  or  injurious  to  any  Aus- 
tralian industry. 

7A.  (1)  Any  person  who,  in  relation  to  trade  or  commerce  with  other  coun- 
tries or  among  the  States,  either  as  principal  or  agent,  in  respect  of  dealings 
in  any  goods  or  services  gives,  offers,  or  promises  to  any  other  person  any  re- 
bate, refund,  dist-ount,  concession,  or  reward  for  the  reason,  or  upon  the  condi- 
tion, express  or  implied,  tliat  the  latter  person  (a)  deals,  or  has  dealt,  or  will 
deal,  or  intends  to  deal  exclusively  with  any  person,  either  in  relation  to  any 
particular  goods  or  services  or  generally;  or  (h)  deals,  or  has  dealt,  or  will 
deal,  or  intends  to  deal  excUisively  with  members  of  a  commercial  trust,  either 
in  relation  to  any  particular  goods  or  services  or  generally;  or  (c)  does  not 
deal,  or  has  not  dealt,  or  will  not  deal,  or  does  not  intend  to  deal  with  certain 
persons,  either  in  relation  lo  any  particular  goods  or  services  or  generally;  or 
id)  is  or  becomes  a  niemiK'r  of  a  coumierelal  trust;  is  guilty  of  an  offense. 

Penalty,  ffitX). 

(2)  Every  contract  made  or  entered  into  in  contravention  of  this  section 
shall  be  absolutely  illegal  and  void. 

(3)  It  shall  be  a  defense  to  a  iirosecution  under  this  section,  and  an  answer 
to  an  allegation  that  a  contract  was  made  or  entered  into  in  contravention  of 
this  section,  if  the  party  alleged  to  have  contravened  this  section  proves  that  the 
matler  or  thing  alleged  to  have  been  done  in  contravention  of  this  section  was 
not  to  the  detriment  of  the  public,  and  did  not  constitute  con.petilion  which  was 
unfair  in  the  circumstance.-^,  and  was  nut  destructive  of  or  injurious  to  any 
Australian  industry. 

The  language  of  this  section  also  shows  that  a  dii"ect  relation  is 
assumed  to  exist  between  practices  of  a  monopolistic  character  and 
unfair  competition. 

Section  TB  provides  that  anyone  who  refuses  to  sell  goods  or 
services  to  any  person,  either  absolutely  or  except  on  disadvantageous 


554  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

conditions,  because  the  latter  deals  with  another  person,  or  because 
the  latter  is  not  a  commercial  trust,  is  guilty  of  an  offense. 

This  section  condemns  practices  which  have  a  monopolistic  tend- 
ency. Although  such  acts  are  not  specifically  characterized  as  "  un- 
fair," the  analogy  to  those  prohibited  in  section  7A  is  so  close  that 
this  provision  should  be  noted  in  this  connection. 

The  remedial  provisions  with  regard  to  the  foregoing  acts  of 
unfair  competition  have  been  outlined  in  Chapter  V,^  and  are,  there- 
fore, not  repeated  here  in  detail.  Not  only  are  the  acts  of  unfair 
competition  which  are  prohil)ited  in  sections  4  and  TA  made  criminal 
offenses  punishable  by  fine,  but,  fiu-thermore,  it  is  provided  in  section 
10  that  such  acts  of  unfair  competition  may  be  enjoined  by  the  courts 
in  proceedings  instituted  by  the  attorney  general.  Disobedience  to 
such  injunction  is  made  punishable  by  fine  in  section  lOA.  Further- 
more, it  is  provided  in  section  11  that  any  person  injured  in  person 
or  property  by  such  acts  of  unfair  competition  prohibited  by  the  law 
or  in  contravention  to  an  injunction  made  in  accordance  therewith 
may  sue  for  and  recover  treble  damages  for  injury  sustained. 

Finally,  section  15  provides  that  where  a  person  has  filed  with  the 
Attorney  General  and  published  in  the  Gazette  a  statutory  declara- 
tion regarding  a  particular  contract  or  combination  he  is  not  to  be 
deemed  to  have  intentionally  violated  the  law  unless  such  person 
shall  have  been  notified  by  the  attorney  general  that  he  considers  the 
contract  or  combination  likely  to  restrain  trade  or  commerce  to  the 
detriment  of  the  public  or  to  destroy  or  injure  an  Australian  industry 
by  unfair  competition. 

The  third  part  of  this  act,  relating  to  the  "  prevention  of  dump- 
ing," as  noted  above,  contains  prohibitions  against  unfair  compe- 
tition. 

The  general  purpose  of  this  part  of  the  law  is  to  prevent  or  re- 
strict the  importation  of  goods  into  Australia  under  certain  condi- 
tions and  in  particular  where  such  importation  is  regarded  as  creating 
unfair  competition. 

Section  17  of  the  law  defines  tlie  general  circumstances  under  which 
the  question  of  unfair  competition  may  be  raised  as  follows: 

Unfair  competition  has  in  all  cases  reference  to  competition  with  those  Aus- 
tralian industries,  the  preservation  of  which,  in  the  opinion  of  the  comptroller 
general  or  a  justice  as  the  case  may  be,  is  advantageous  to  the  Conunonwealth, 
having  due  regard  to  the  interests  of  producers,  workers,  and  consumers. 

The  legality  of  a  given  practice  might  be  affected  by  this  law  with 
respect  to  one  industry  and  not  with  respect  to  another,  depending 
largely  on  economic  conditions  and  without  regard  apparently  to 
general  principles  of  jurisprudence. 

1  Soo  p.  243. 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  555 

Section  18  of  the  law  defines  unfair  competition  for  the  purposes 
of  this  act  substantially  as  follows:  Competition  shall  be  deemed 
unfair,  unless  the  contrary  is  proved;  (1)  if  it  would  probably  result 
in  stopping  the  production  of  Australian  goods  or  in  their  being 
sold  at  a  loss,  unless  produced  at  an  inadequate  remuneration  for 
labor,  or  if  it  would  probably  result  in  an  inadequate  remuneration  for 
labor  in  Australian  industry,  or  in  disorganizing  such  labor,  or  throw- 
ing it  out  of  employment;  (2)  if  the  methods  of  importation  are 
unfair,  under  the  circumstances,  in  the  opinion  of  the  constituted 
authorities,  or  if  the  importer  has  purchased  the  goods  imported  at 
prices  below  the  cost  of  production,  or  if  such  goods  are  being  sold 
at  prices  which  do  not  give  a  fair  profit  to  the  importer  on  the  basis 
of  their  fair  foreign  market  value  or  selling  value,  if  sold  in  the 
country  of  production,  allowance  being  also  made  for  freight  charges 
to  Australia  and  customs  duties;  (3)  but,  in  determining  whether 
the  competition  is  unfair,  regard  must  be  had  to  whether  the  Austra- 
lian industry  is  reasonably  "  efficient "  and  "  up-to-date." 

IS.  (1)  For  the  purposes  of  this  part  of  this  act,  competition  shall  be  deemed 
to  be  unfair,  unless  the  contrary  is  proved,  if  (a)  under  ordinary  circumstances 
of  trade  it  would  probably  lead  to  the  Australian  goods  being  no  longer  pro- 
duced or  being  withdrawn  from  the  market  or  being  sold  at  a  loss  unless  pro- 
duced at  an  inadequate  remuneration  for  labor;  or  (&)  the  means  adopted  by 
the  person  importing  or  selling  the  imiwrted  goods  are,  in  the  opinion  of  the 
comptroller  general  or  a  justice  as  the  case  may  be,  unfair  in  the  circum- 
stances; or  (r)  the  competition  would  iirobably  or  doc^s  in  fact  result  in  an 
inadequate  remuneration  for  labor  in  the  Australian  industry;  or  (d)  the 
competition  would  probably  or  does  in  fact  result  in  creating  any  substantial 
disorganization  in  Australian  industry  or  throwing  workers  out  of  employ- 
ment; or  (e)  the  imported  goods  have  been  purchased  abroad  by  or  for  the 
im]»ortei',  from  the  manufacturer  or  some  person  acting  for  or  in  coml)ination 
with  him  or  accounting  to  him,  at  prices  greatly  below  their  ordinary  cost 
of  production  where  produced  or  market  price  where  purchased;  or  (/)  the 
imported  goods  are  imported  by  or  for  the  manufacturer  or  some  person  acting 
for  or  in  combination  with  him  or  accounting  to  him,  and  are  being  sold  in 
Australia  at  a  price  which  is  less  than  gives  the  person  importing  or  selling 
them  a  fair  profit  upon  their  fair  foreign  market  value,  or  their  fair  selling 
\alue  if  sold  in  the  country  of  production,  together  with  all  charges  after 
shipment  from  the  place  whence  the  goods  are  exported  directly  to  Australia 
(including  customs  duty). 

(2)  In  determining  whether  the  competition  is  unfair  regard  shall  be  had 
to  the  management,  the  processes,  the  i>lant,  and  the  machinery  emjiloyed  or 
adopted  in  the  Australian  industry  affected  by  the  comi)ctition  being  reason- 
ably efficient,  effective,  and  up-to-date. 

A  peculiar  procedure  is  established  for  the  enforcement  of  these 
provisions  regarding  "  dumping,"  the  principal  features  of  which, 
briefly  stated,  are  as  follows:  Complaints  are  first  made  to  the  comp- 
troller general,  who,  if  he  has  reason  to  believe  that  any  person  is 
importing  goods  "with  intent  to  destroy  or  injure  any  Australian 


556  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

industry  by  their  sale  or  disposal  within  the  Commonwealth  in  unfair 
competition  with  any  Australian  goods  "  shall,  after  giving  hearing 
to  the  importer,  issue  a  certificate  regarding  the  facts  in  the  case 
to  the  minister,  who  in  turn  may  refer  it  to  a  justice  of  the  High 
Court  for  determining  whether  such  importation  should  be  pro- 
hibited or  limited.  The  justice  may  investigate  the  matter  alone  or 
refer  it  to  the  full  court.  The  proceedings  are  informal  and  the 
decision  final.  The  governor  general,  however,  may  immediately  or 
subsequently  rescind  either  prohibition  or  restriction,  and  such 
orders  must  be  laid  before  both  houses  of  Parliament. 

Egypt.— xlrticles  212  and  213  of  the  Civil  Code  of  Egypt  for  Mixed 
Tribunals^  are  somewhat  similar  to  articles  1382  and  1383  of  the 
French  Ci^il  Code.  There  are  also  several  provisions  of  the  Penal 
Code  that  are  of  interest  in  connection  with  the  subject  of  unfair 
competition. 

Penal  T^^e.— Article  311  of  the  Penal  Code  for  Mixed  Tribunals - 
provides  against  deceiving  purchasers  as  to  the  quality  of  goods. 

Art.  311.  Whosoever  shall  have  deceived  a  purchaser  as  to  the  standard 
qiiality  of  articles  of  gold  and  silver,  or  the  quality  of  a  sham  stone  sold  as 
genuine,  or  the  character  of  any  other  goods,  and  whosoever,  hy  using  false 
weights  or  false  measures,  shall  have  deceived  the  purchaser  as  to  the  qimntity 
of  the  thing  sold,  shall  be  sentenced  to  imprisonment  for  a  period  of  from  one 
month  to  one  year  and  a  fine  which  may  not  exceed  one-fourth  of  the  restitution 
to  lie  made  nor  be  in  any  case  less  than  30  P.  T.^  The  false  weights  and  false 
measures  shall,  in  addition,  be  broken  up  and  destroyed. 

Article  302  of  the  Penal  Code  for  Native  Tribunals*  contains  a 
similar  provision. 

Articles  312  to  315  of  the  Penal  Code  for  Mixed  Tril)unals  relate 
to  the  infringement  of  copyrights,  the  counterfeiting  of  works  of 
art  and  musical  productions,  and  the  sale  of  works  or  goods  bearing 
false  trade-marks.    The  language  of  these  articles  is  as  follows : 

Art.  312.  Any  person  shall  be  guilty  of  the  misdemeanor  of  infringement 
who  shall  have  printed  or  caused  to  be  printed  any  books  in  breach  of  the  laws 
find  rules  and  regulations  relating  to  the  property  of  authors,  or  who  shall 
have  manufactiu'ed  or  caused  to  be  manufactured  any  article  whatsoever  for 
which  an  exclusive  privilege  has  been  granted  either  to  a  private  individual 
or  an  association. 

Art.  313.  Any  works  or  articles  ^^'hich  constitute  an  infringement  shall  be 
cf>nfiscated  in  favor  of  the  person  posst'ssing  the  privilege,  and  the  party  guilty 
of  the  infringement  shall  be  pmiished  with  a  fine  of  from  .'lOO  to  10,000  P.  T. 
The  introduction  into  Egyptian  territory  of  productions  of  that  character  made 

^  Codes  Egyptions,  Alpxandric,  1S75,  p.  Vl^^. 

-  The  Esyptian  Codes,  Trans.  London,  1892 ;  see  also  Codes  dos  Tribunanx  Mixtes 
d'Egypte,  Alexandrie,   ]f?07. 

^  Turkish  pounds. 

■*  Code  I'enal  des  Triltunaiix  Indiuenes,  T,e  Caire,  1007  ;  see  also  Tlic  Tonal  Code  of  the 
Egyptian  Native  Tribunals,  Trans.  Cairo,  1000. 


TRUST    LAWS    AND    UNFAIR   COMPETITION.  557 

in  imitation  abroad  sliall  likewise  l)e  punislied  witli  a  fine  of  from  500  to  10,000 
P.  T.,  anil  the  penalty  against  anyone  who  shall  have  sold  or  offered  for  sale 
any  books  or  articles  which  constitute  an  infringement,  knowing  them  to  be 
such,  shall  be  a  fine  of  from  100  to  2,500  P.  T. 

Akt.  314.  The  penalty  of  a  fine  of  from  500  to  10,000  P.  T.  shall  also  be  im- 
posed upon  any  persons  who  shall  have  counterfeited  any  works  of  art  or 
musical  productions  belonging  to  the  authors  thereof  or  their  assignees  or  any 
trade-marks  belonging  exclusively  to  a  manufacturer  as  provided  by  the  rules 
and  regulations. 

Art.  315.  The  penalty  of  a  fine  of  from  100  to  2,500  P.  T.  shall  likewise  be 
incurred  by  any  persons  who  shall  have  sold  or  offered  for  sale  any  works  con- 
stituting an  infringement  or  any  goods  upon  which  there  shall  be  such  false 
trade-marks,  or  who  shall  have  performed  or  caused  to  be  performed  in  public 
any  musical  or  theatrical  works  to  the  prejudice  of  the  author  thereof. 

The  commerce  court  of  Alexandria  declared  it  to  constitute  unfair 
competition  for  a  business  man,  on  opening  a  new  shop,  to  lay  claim 
to  the  telephone  number  of  the  firm  of  which  he  had  formerly  been 
a  member,  for  the  only  purpose  of  such  a  demand  was  to  deceive 
customers  as  to  the  identity  of  the  shop  which  they  called  up.'^ 

A  tramway  concern,  authorized  under  a  Government  concession 
to  establish  a  ferry  on  the  Nile  for  the  service  and  connection  of  its 
lines,  availed  itself  of  this  privilege  in  order  to  exploit  a  Nile  passage 
and  transport  service  independently  of  its  cars.  The  court  of  appeals 
held  that  a  holder  of  a  later  Government  franchise  for  the  exploita- 
tion of  certain  ferries  and  the  collection  of  passage  fares  was  entitled 
to  demand  that  the  tramway  concern  confine  itself  within  the  limits 
of  its  concession  and  refrain  from  competing  with  the  other  fran- 
chise holder  in  this  unfair  manner.- 

A  German  manufacturer  placed  on  his  razors  the  words  "  Guaran- 
teed Sheffield  razor."  The  Sheffield  cutlery  corporation  of  England 
brought  suit.  Tlie  court  held  that  this  act  Avas  unfair  competition, 
even  if  the  steel  used  in  making  the  razors  came  from  England,  and 
ordered  the  defendant  to  efface  the  word  Sheffield.  The  court  said : 
"  It  is  prohibited  to  a  manufacturer,  under  penalty  of  unfair  com- 
petition and  damages,  to  place  on  his  merchandise  statements  of  a 
nature  to  establish  confusion  and  to  divert  the  clientele  of  a  locality 
or  of  an  industrial  establishment  which  is  engaged  especially  in  the 
same  kind  of  manufacture." " 

Section  3.  France. 

General  principles. — The  expression  "unfair  competition"  (con- 
currence deloyale),  although  not  found  or  defined  anywhere  in  the 

1  Trill,  oomm.  .Mox..  17  mars  lOlH  ;  Gazette  des  Tribunaux  Mixtes  d'figypte,  tome  III, 
AlcxanUrie  (1913),  p.  120. 

-  .VU'xandrii'.  MO  mars  1004  ;  U<?portoire  g^n^ral  do  la  jnrispriidenoe  mixtc  ftgypticnne, 
Florenco  1007,  vol.   II,  p.  .".00. 

'i  Alexandrie,  1.^5  mars  1809;  Uepurtoire  general  de  la  jurisprudouc-o  mixte  iSg.vpUenue, 
Florence  1907,  vol.  II,  p.  127. 


558  REPORT    OF    THE    COMMISSIOXER    OE    CORPORATIONS. 

codes  or  statutes  of  France,  is  nevertheless  in  general  use  by  the 
courts.^     A  definition  frequently  found  in  legal  tretitises  is :  - 

An  net  committed  in  bad  faith  with  a  view  to  producing  confusion  between  tlie 
products  of  two  mauufncturers  or  of  two  merchants,  or  which,  without  pro- 
ducing confusion,  casts  discredit  upon  a  rival  establishment. 

This  definition  does  not  fully  cover  the  multitudinous  acts  which 
the  courts  have  considered  as  unfair  competition.  According  to  one 
writer,  these  acts  fall  logically  into  four  general  classes,  wdiich  may 
be  described  as  follows :  ^ 

(1)  Acts  intended  to  produce  confusion  between  similar  establishments,  such 
as  the  adoption  of  similar  designations  or  the  imitation  of  the  exterior  charac- 
teristics, interior  fittings,  etc.,  of  shops  or  stores. 

(2)  Acts  intended  to  produce  confusion  between  the  products  of  two  different 
establishments,  such  as  the  imitation  of  trade-marlis,  trade  names,  forms  of 
containers  or  wrappers,  forms  of  products,  titles  of  worlds,  etc. 

(3)  Acts  which,  without  producing  confusion,  are  intended  to  divert  the 
clientele  of  a  manufacturer  or  merchant,  such  as  magnifying  one's  own  merits 
or  the  merits  of  one's  own  goods,  on  the  one  hand,  or  vilifying  another  or 
disparaging  another's  goods,  on  the  other  hand. 

(4)  Acts  of  unfair  competition  resulting  from  the  violation  of  contracts  and 
agreements. 

According  to  French  writers,  unfair  competition  relates  in  prin- 
ciple only  to  transactions  between  persons  engaged  in  similar  lines 
of  business.  The  word  "  competition  "  assumes,  in  effect,  a  struggle 
between  rivals  for  the  purpose  of  winning  the  favor  of  the  public 
for  their  products  or  services.  There  are  some  cases  of  unfair  com- 
petition in  French  reports  between  individuals  other  than  merchants, 
as,  for  example,  notaries,  attorneys,  trustees,  philanthropic  societies, 
etc.* 

The  cardinal  principle  of  unfair  competition  in  France,  as  shown 
by  the  court  decisions,  is  intent  to  injure.  French  jurisprudence 
makes  a  distinction  between  unfair  competition  (concurrence  de- 
loyale)  and  unlawful  competition  (concurrence  illicite),  based  on  the 
existence  or  nonexistence  of  wrongful  intent.  Where  an  act  is  done 
with  intent  to  injure  or  deceive  it  is  considered  an  act  of  unfair 
competition,  but  where  a  person  in  good  faith  commits  a  legal  wrong 

1  Allart  says  :  "  There  does  not  exist  a  law  on  unfair  competition  ;  the  legislatoi",  in 
fact,  can  not  codify  a  matter  whose  elements  present  an  extreme  diversity  without 
a  sufficient  bond  to  unite  them."  (II.  Allart,  Traite  theorique  et  pratique  de  la  concur- 
rence deloyale,  Paris,  1892,  p.  V.) 

-  roulllot,  Traite  dcs  marques  de  faltrique  et  de  la  concuiTonce  deloyale,  G'""^  ed.,  p.  716. 

3  Fuzier-Herman,  Repertoire  General  Alphabetique  du  Droit  Fran<;ais,  tome  l.S,  p.  63. 

*  The  Court  of  Cassation  has  decided  that  the  act  of  a  notary  in  establishini;  in  a 
community  situated  8  kilometers  distant  from  his  legal  residence  an  office  in  wliich  he 
exei'cised  the  functions  of  a  notary  constituted  an  act  of  unfair  competition  against  a 
resident  notary  in  the  same  community.  In  this  case  the  defendant  also  rented  a  house 
under  the  name  of  his  sister  and  had  his  name  appear  upon  the  door.  (Cass,  req., 
6  janv.,  1908,  J.  e.  P. ;  Annales  de  la  Propriete  iudustrielle,  artistique  et  litteraire,  1908, 
II,  p.  69.)     Hereafter  this  publication  is  cited  as  Annales. 


TllUST    LAWS    AND    UNFAIK    COMPETITION.  559 

or  simply  tliroiioh  negligence  or  carelessness  injures  another  it  is 
considered  an  act  of  unlawful  competition.  Such  an  act  is  regarded 
as  a  tort  and  affords  a  private  right  of  action  to  the  injured  party.^ 
Acts  of  unfair  competition  and  of  unlawful  competition  in  France 
have  been  actionable  under  articles  1382  and  1383  of  the  Civil  Code 
since  its  adoption  in  1808.-  On  the  basis  of  article  1382  the  courts 
have  developed  the  jurisprudence  of  unfair  competition.  The  lan- 
guage of  these  two  articles  is  as  follows : 

Art.  1382.  Any  act  whatever  by  a  person  which  causes  injury  to  another 
obliges  him  by  tlie  fault  of  whom  it  happened  to  compensate  it. 

AuT.  1383.  Each  one  is  responsible  for  the  injviry  which  he  has  caused  not  only 
by  his  act  but  also  by  his  negligence  or  by  his  imprudence. 

Actions  to  enjoin  unfair  practices  and  to  recover  damages  under 
these  articles  are  conducted  before  the  tribunals  of  commerce." 

In  aclditiori  to  the  jurisprudence  developed  on  the  basis  of  these  tAvo 
articles,  special  laws  have  been  passed  from  time  to  time  making 
certain  pi-actices  penal  offenses  punishable  with  fine  or  imprisonment. 
The  Penal  Code  also  contains  a  number  of  articles  relating  to  partic- 
ular acts  of  unfair  competition.  Criminal  prosecutions  under  these 
penal  provisions,  however,  do  not  take  from  the  individual  the  right 
of  action  for  damages  under  the  general  provisions  of  law  contained 
in  the  above  articles  of  the  Civil  Code. 

SPECIAL  LAWS. 

The  more  impoitant  acts  of  unfair  competition  covered  b}'^  special 
laws  are : 

1.  The  alteration  or  substitution  of  names  affixed  to  manufactured 
products.     (Law  of  July  28,  1824.) 

2.  Misuse  of  the  title  of  patentee.     (Law  of  July  5,  1844.) 

3.  The  misappropriation  or  misuse  of  trade-marks.  (Law  of  June 
23,  18r)7.) 

4.  The  practice  of  fraud  in  the  sale  of  merchandise.  (Law  of  Aug. 
1,  1005.) 

5.  The  misappropriation  of  industrial  aAvards.  (Law  of  1886, 
superseded  bj^  the  law  of  Aug.  8,  1912.) 

In  addition  to  the  above  laws,  there  are  various  other  decrees  or 
acts  of  less  importance  relating  in  a  general  way  to  the  subject  of 
unfair  competition."* 

^  Ponillct.  op.  cit..  p.  723. 

-Lobe,  r.okjiinpfiinj;  des  nnlaiitcron  WotUiPwiTlis,  I.  S.  SO. 

■■'  Tlic  tribunals  of  commerce  are  courts  composed  of  merchants.  Each  has  a  president 
and  at  least  two  members  chosen  by  the  merchants  of  a  district.  There  are  214  such 
courts  in  Frnnce.  Their  jurisdiclion  Is  confined  fo  commercial  cases.  Appeal  can  be  taken 
to  the  courts  of  appeal,  of  which  there  are  20.  (Cache,  Manual  dc  Procedure  civile  et 
comuierciale   (1909),  p.  (59.) 

*  For  a  list  of  these  laws,  see  Lobe,  op.  cit..  I.  S.  83-85. 


560  REPORT    OF'  THE    COMMISSIONER    OF    CORPORATIONS. 

The  Law  of  1824.— The  law  of  July  28, 1824/ prohibits  the  usurpa- 
tion of  commercial  names  used  to  distinguish  manufactured  articles. 
Its  purpose  is  to  protect  the  manufacturer  who  affixes  to  his  goods 
as  a  distinctive  mark  his  personal  name,  name  of  his  establishment, 
or  name  of  his  place  of  manufacture.  This  law  has  only  two  articles, 
the  second  of  which  is  not  important  in  this  connection.  Article  1 
is  as  follows: 

Whoever  shall  affix  to  inanufactiirecl  articles  or  make  appear  on  them  by 
ailditiou,  ciirtaiimeut,  or  any  alteration  whatever,  the  name  of  a  manufacturer 
other  than  the  one  who  is  the  producer,  or  the  name  of  a  factory  other  than 
the  one  in  which  the  said  articles  were  made,  or.  finally,  the  name  of  a  place 
other  than  that  of  manufacture  shall  be  punished  with  the  penalties  prescribed 
in  article  423  of  the  Penal  Code,  without  prejudice  to  an  action  for  damages, 
if  it  takes  place. 

Every  merchant,  middleman,  or  retailer  shall  be  liable  to  prosecution  if  he 
knowingly  offers  for  sale  or  puts  in  circulation  articles  marked  with  nameo 
substituted  or  altered 

Article  423  of  the  Penal  Code,  referred  to  in  the  first  paragraph, 
provided  a  penalty  of  imprisonment  of  from  three  months  to  a 
year  and  a  fine  of  not  less  than  50  francs,  but  not  exceeding  one- 
fourth  of  the  amount  paid  for  restitution  and  damages.  These 
penalties  have  been  superseded  by  the  penalties  provided  for  in  sec- 
tion 15  of  the  law  of  August  1,  1905.  They  now  consist  of  imprison- 
ment from  three  months  to  a  year  or  a  fine  of  from  100  to  5,000 
francs,  or  both. 

The  law  of  1824  does  not  prohibit  the  usurpation  or  imitation  of 
names  affixed  to  products  of  nature,  nor  does  it  prohibit  the  usurpa- 
tion or  misuse  of  the  names  which  merchants  or  middlemen  may 
affix  to  the  manufactured  articles  which  they  handle,  or  the  use  of 
such  names  in  any  other  form  than  by  affixing,  such  as  in  pros- 
pectuses, advertisements,  or  newspaper  notices.-  These  defects  have 
led  to  a  movement  for  a  revision  of  the  law.  A  bill  for  this  purpose 
Avas  introduced  in  1911.^ 

By  "name  of  a  manufacturer"  is  meant  a  person's  family  name 
or  Christian  name  or  both.  Assumed  names  are  also  protected. 
Imaginary  names  are  only  protected  when  used  as  assumed  names. 
All  the  purel.y  imaginary  names  designating  not  the  manufacturer 
but  the  product,  such  as  commercial  designations  and  fancy  names, 
are  not  protected  by  the  law  of  1824.  If  used  as  trade-marks  they 
are  protected  by  the  law  of  1857.     (See  p.  562.) 

The  imitation  of  a  name  need  not  be  exact  in  order  to  constitute 
an  infraction  of  the  law  of  1824.    If  it  is  sufficiently  similar  to  cause 

1  Loi  des  28  juillet— 4  aofit,  1824.  relative  aux  alterations  ou  suppositions  de  noms  dans 
les  produits  fabriquas. 

2  Pouillet,  op.  cit.,  pp.  646,  6G7. 

3  Pouillet,  op.  cit.,  pp.  576,  586. 


TEUST    LAWS    AND    UNFAIK    COMPETITION.  561 

confusion,  the  courts  will  protect  the  plaintiti'.     Pouillet  makes  the 
following  statement  on  this  point :  ^ 

Let  us  hold  as  certaiu  that  it  is  not  necessary  that  the  name  be  identically 
copied  in  order  to  constitute  a  misdemeanor ;  the  penalties  of  the  law  of  1824 
woukl  be  incurred  even  though  the  name  usurped  should  be  accompanied  by  a 
Christian  name  (prenom)  other  than  the  real  name;  also  if  one  letter  should  be 
substituted  for  another ;  or  if  the  name  should  be  slightly  altered  while  keeping 
its  general  aspect  and  its  principal  sound. 

The  hnv  of  1824  not  only  prohibits  the  usurpation  of  trade  names, 
but  also  the  stibstitution  of  one  name  for  another.  The  words  in 
article  1,  "  make  appear  by  alteration,  addition,  or  curtailment," 
have  been  interpreted  by  the  courts  to  apply  to  those  cases  in  which 
a  person  removes  the  name  of  a  manufacttirer  ha\"ing  a  reputation 
from  some  of  the  hitter's  goods  which  he  has  procured,  and  replaces 
it  with  his  own  name  in  order  to  ac(juire  for  himself  the  same  repu- 
tation.^ 

It  also  applies  to  cases  where  a  person  appropriates  the  bottles  or 
other  forms  of  containers  of  a  competitor  bearing  a  name  protected 
by  this  law  and  sells  his  goods  therein.  The  court  so  decided  in  a 
case  in  which  a  manufacturer  of  seltzer  water  used  some  syphons 
bearing  the  name  of  another  manufacturer." 

The  name  usurped  or  imitated  does  not  have  to  be  aflixed  to  manu- 
factured goods  themselves.  It  is  sufficient  if  it  is  affixed  to  the  con- 
tainers or  wrappers  of  the  goods.*  The  court  has  held,  however, 
that  the  use  of  a  usurped  name  on  the  invoices  or  bills  of  lading 
accompanjing  the  products  should  not  be  construed  as  being  affixed 
to  the  products  themselves.^ 

In  judging  whether  a  name  has  been  usurped  or  imitated,  the 
courts  first  inquire  whether  that  name  is  distinctive  and  special,  or 
whether  it  is  generic  and  necessary  to  describe  the  object  to  which 
it  has  been  alHxed.  AMierever  a  name  has  become  a  common  name 
of  manufactured  articles,  the  courts  refuse  to  protect  the  manufac- 
turer in  its  use.  A  family  name  is  rarely  of  this  character,  since  in 
principle  it  constitutes  an  inalienable  possession.  Only  A\hen  it  has 
been  given  to  an  object  for  which  no  other  name  exists  will  the 
courts  consider  it  open  to  general  use.  Names  of  establishments  or 
]>laces  of  manufacture,  however,  become  generic  more  often  than 
family  names. 

In  the  second  place,  the  courts  iiicjuire  wlielher  the  imitation  is 
sufficiently  like  the  original  name  to  cause  confusion  between  two 


1  roiiillot,  op.  eit.,  p.  G.')l. 

2  Pouillet,  op.  cit.,  p.  048. 

8  Paris  (4  ch.),  30  juill.,  1909;  .\nnalcs  1910,  p.  50,  for  full  title  see  p.  558,  note  4. 
=  Paris  (4  cb.),  nO  jnill.  1000  :  .\nn:ilrs  IMlo.  p.  .".it.  for  full  tille  see  p.  .">.''8,  note  4. 

19i:5,  L,  p.  21. 
6  Cass,  crini.,  IS  uov.  1901  :  .\nuales  19<)."i,  p.  182. 

3003.j°— IG 3G 


562  EEPOET    OF    THE    COMMISSIONER    OF    CORPOEATIOIS  S. 

pi'oducts.  Hence,  the  cases  of  unfair  competition  prosecuted  under 
the  hiw  of  1824  always  invohe  confusion  of  products.  They  are 
siinihxr  in  principle  to  cases  of  confusion  between  competing  estab- 
lishments. A  few  cases  brought  under  this  law  are  given  below. 
For  additional  cases  of  a  similar  character^  see  page  573. 

A  dealer  in  firearms  arranged  with  the  manufacturer  to  allix  to 
his  goods  the  name  "  Socicte  f  rangaise  des  cj^cles,  armes  et  sports," 
in  imitation  of  the  name  used  by  a  competitor  "  Manufacture  f ranx^-aise 
d'armes  et  cycles."  The  court  held  that,  in  using  this  name  as  a 
designation  of  their  products,  the  defendant  dealer  and  manufacturer 
had  created  confusion  between  their  products  and  those  of  plaintiff  in 
violation  of  article  1  of  the  law  of  July  28,  1824.^ 

A  manufacturer  of  vinegar  located  at  Fives-Lille  placed  on  his 
casks  a  vignette  bearing  the  following  notice:  "Guaranteed  pure 
vinegar — special  make  of  Orleans  vinegar."  The  vignette  and  the 
type  were  combined  in  such  a  way  as  to  make  prominent  the  words 
"  Orleans  vinegar  "  and  thereby  to  lead  the  public  to  think  that  the 
cask  contained  vinegar  coming  from  Orleans.  The  court  held  that 
this  constituted  a  violation  of  article  1  of  the  law  of  July  28,  1824. 
The  plea  of  defendant  that  the  word  "  Orleans  "  had  come  into  gen- 
eral use  and  no  longer  referred  to  the  provenance  of  the  vinegar,  but 
simply  to  a  process  of  manufacture,  was  rejected.^ 

Law  or  1841. — The  law  of  July  5, 1844,^  contains,  in  addition  to  the 
various  regidations  and  details  of  administration  of  patents,  one 
article  relating  especially  to  unfair  competition.  Article  33,  which 
prohibits  one  form  of  assuming  false  titles  in  order  to  magnify  one's 
own  merits  and  thereby  to  attract  a  clientele,  is  as  follows : 

Art.  33.  Whoever,  on  the  insignia,  annoimcements,  prospectuses,  placards, 
tratle-marks,  or  stamps,  shall  take  the  title  of  patentee  witlmut  possessing  a 
patent  issued  in  conformity  with  the  laws  or  after  the  expiration  of  a  former 
patent,  or  who,  being  a  patentee,  shall  mention  his  title  of  patentee  or  his  patent 
without  adding  to  it  these  words,  "  without  guarantee  of  the  Government,"  shall 
be  punished  with  a  fine  of  from  50  to  1,000  francs. 

In  case  of  a  second  offense  the  fine  may  be  doubled. 

Law  or  1857. — The  law  of  June  23,  1857,*  makes  not  only  the 
infringement  but  also  the  misappropriation  or  misuse  of  registered 
trade-marks  a  penal  offense.  The  latter  practices,  especially,  con- 
stitute acts  of  unfair  competition  since  they  lead  to  confusion  re- 
garding competing  products,  and  thus  injure  competitors  whose 
trade-marks  are  misappropriated  or  misused.  In  France,  as  in  some 
other  countries,  unfair  practices  involving  registered  trade-marks  are 

1  Cass.  crim.  rej.,  25  oct.  1907,  Gaucher  et  Baley,  c.  Manufacture  frangaise  d'armes  et 
cycles ;  Annales  1908,  I,  p.  170. 

-  Cass,  crim.,  2S  nov.  1895,  Beaucamps  e.  Dessaux  ;  Annales  1890.  p.  149. 

'^  Loi  (lu  5  juill.  1844,  sur  les  brevets  (Vinvention. 

*  Loi  du  23  juin  1857,  sur  les  marques  de  fabi"ique  et  de  commerce,  modiliee  par  la  loj 
du  o  mai  1890. 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  563 

punished  as  penal  offenses  while  similar  practices  involving  unreg- 
istered trade-marks  are  actionable  as  civil  misdemeanors  and  called 
unfair  competition.  Since  the  practices  are  similar  in  character  some 
consideration  is  given  here  to  those  dealt  with  under  the  trade-mark 
laAv  Avhile  other  practices  are  discussed  later.    (See  p.  573.) 

The  various  designations  that  may  be  used  as  trade-marks  are  set 
forth  in  the  last  paragraph  of  article  1  of  the  law  of  1857,  as  fol- 
lows : 

Names  under  a  distinctive  form,  denominations,  emblems,  imyreusions,  stamp-s, 
seals,  vignettes,  reliefs,  letters,  figures,  wrappers,  and  all  other  signs  serving  to 
distinguish  the  products  of  a  factory  or  the  objects  of  commerce  are  considered 
as  trade-marks  of  manufacture  and  of  commerce. 

The  law  of  1857  is  much  broader  in  scope  than  the  law  of  1824, 
since  it  protects  the  trade-marks  of  merchants  and  agriculturalists 
as  well  as  those  of  manufacturers  and  the  trade-marks  affixed  to 
products  of  nature  as  well  as  manufactured  products.  There  is 
some  overlapping  of  the  two  laws,  for  names  of  manufacturers,  firm 
names,  and  names  of  places  of  manufacture,  which  are  protected  by 
the  law  of  1824,  can  also  be  used  as  trade-marks,  providing  they  are 
of  a  distinctive  form,  and  thus  receive  the  protection  of  both  laws. 
The  law  of  1857  protects  the  trade-mark  as  a  whole,  while  the  law 
of  1824  protects  the  name  which  constitutes  one  of  the  elements  of 
the  trade-mark.^ 

Articles  7  and  8  prescribe  the  penalties  for  the  wrongfid  use  of 
trade-marks.  The  former  relates  to  counterfeit  or  copied  trade- 
marks and  the  latter  to  fraudulently  imitated  trade-marks. 

Article  7.  Those  persons  are  punished  with  a  fine  of  from  uU  to  3,01)0  francs 
or  imprisonment  from  three  months  to  three  years,  or  both : 

(1)  Who  have  counterfeited  a  trade-mark  or  made  use  of  a  counterfeited 
ti'ade-mark. 

(2)  Who  have  fraudulently  aflixed  to  their  products  or  to  tlie  objects  of  their 
commerce  a  trade-mark  belonging  to  another. 

(3)  Who  have  knov^ingly  sold  or  put  on  sale  one  or  more  products  bearing  a 
trade-mark  counterfeited  or  fraudulently  affixed. 

Article  8.  Those  persons  are  punished  with  a  fine  of  from  50  to  2,000  francs 
or  imprisonment  from  one  month  to  one  year,  or  both: 

(1 )  Who.  without  counterfeiting  a  trade-mark,  have  made  a  fraudulent  imita- 
tion of  it  of  a  nature  to  deceive  the  purchaser  or  have  made  use  of  a  trade- 
mark fraudulently  imitated. 

(2)  Who  have  made  use  of  a  trade-mark  bearing  indications  apt  to  deceive 
the  purchaser  as  to  the  nature  of  the  product. 

(3)  Who  have  knowingly  sold  or  ofTered  for  sale  one  or  more  products  bear- 
ing a  trade-mark  fraudulently  imitated  or  indications  apt  to  deceive  the 
purchaser  as  to  the  nature  of  the  product. 


1  The  Court  of  Bordeaux  in  1010,  in  a  case  where  a  name  which  constituted  both  the 
commercial  name  of  a  third  party  and  an  essential  element  of  a  trade-mark  liad  been 
fraudulently  affixed  to  manufactured  articles,  held  that  the  act  furnished  ground  for  the 
simultaneous  application  of  the  laws  of  1S24  and  18ii7.  (Bordeaux,  ID  julll.  1910, 
Gautier  fr^ies  c.  Moyet-Gautier ;  Annalcs  1911,  II,  p.  17.) 


5G4  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

According  to  article  9  less  severe  penalties  are  provided  for  the 
failure  to  place  on  certain  goods  the  trade-marks  which  have  been 
declared  obligatory.  Article  11  provides  that  the  penalties  prescribed 
by  articles  7,  8,  and  9  may  be  doubled  in  case  of  a  second  offense. 
Violations  of  these  provisions  are  prosecuted  before  the  civil  tri- 
bunals. 

The  various  acts  specified  in  articles  7  and  8  of  the  law  as  consti- 
tuting misdemeanors  are : 

1.  The  counterfeiting  of  a  trade-mark. 

2.  The  fraudulent  imitation  of  a  trade-mark  of  a  nature  to  deceive 
the  purchaser. 

3.  The  fraudulent  affixing  to  one's  goods  of  a  trade-mark  belonging 
to  another. 

4.  The  use  of  a  trade-mark,  counterfeited  or  fraudulently  imitated. 

5.  The  sale  or  offer  for  sale  knowingly  of  goods  bearing  trade- 
marks counterfeited  or  fraudulently  imitated. 

By  "  counterfeiting  "  is  meant  the  servile  reproduction  of  another's 
trade-mark,  while  by  "  fraudulent  imitation  "  is  meant  the  disguised 
reproduction.  The  act  of  reproducing  is  considered  entirely  distinct 
from  the  act  of  using  a  trade-mark.  It  constitutes  a  misdemeanor  if 
the  reproduction  is  such  as^would  deceive  the  public. 

The  practice  of  imitating  trade-marks  is  apparently  much  more 
common  than  reproducing  them  exactly.  The  forms  of  imitations 
are  innumerable.  In  determining  whether  such  practices  constitute 
misdemeanors  within  the  meaning  of  the  law  the  courts  must  take 
each  case  on  its  merits.  The  two  guiding  principles  are,  first, 
whether  there  has  been  fraudulent  intent;  and,  second,  whether  the 
imitation  is  of  a  nature  to  deceive  the  purchaser.  If  the  imitation  is 
not  such  as  would  produce  a  confusion  between  rival  products  in 
the  mind  of  the  public  no  offense  is  committed.^  It  is  not  necessary, 
however,  to  prove  that  the  purchaser  has  actually  been  deceived. 

The  method  employed  by  the  courts  to  determine  whether  an  imi- 
tation is  a  misdemeanor  is  described  by  Dalloz  in  a  summary  of  a 
case  as  follows  :^ 

A  trade-in  a  vk  of  iiiannfncture  or  commerce  constitutes  a  fraiiclulent  imitation 
of  a  previously  roistered  trade-marli  If  in  comjiaring  the  two  trade-marlis  and 
examining  their  elements  in  detail  one  finds  a  similarity  of  sound  and  appear- 
ance of  a  nature  to  deceive  the  ear  and  the  eye  and  resemblances  which  can  not 
be  the  result  of  accident  and  have  been  manifestly  chosen  and  adapted  to  the 
unlawful  purpose  of  producing  confusion  between  the  trade-marks. 

The  courts  have  considered  as  fraudulent  imitations  the  trade- 
marks "  Chocolat  du  Meunier  "  or  "  Chocolat  le  Meunier  "  as  com- 
pared with  "  Chocolat  Menier ;"  "Fromages  de  la  Petite  Normande  " 

iPoiiillot,   op.   cit.,  p.   207. 

-  Req.,  30  oct.  1901,  Volsin  c.  Jiippet  ;  Dalloz.  Jurispi-udcnce  Generate,  1902,  I,  p.  32, 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  565 

as  compared  with  "  Petits  Fromages  Normandes."  ^  But  the  courts 
refused  to  consider  as  a  fraudulent  imitation  the  trade-mark  "Graisse 
Monopole"  as  compared  with  "Vaseline  Monopole ''  when  placed 
in  dissimilar  receptacles,  or  "  Quinquina  Saint-Marcel "  as  compared 
with  "  Saint-Raphael  Quinquina."  - 

A  common  practice  is  for  a  merchant  to  imitate  the  trade-mark  of 
a  competitor,  as  closely  as  possible,  being  careful  to  add  his  own 
name  to  it  in  the  belief  that  this  will  prevent  any  prosecution  for 
fraudident  imitation.  According  to  Pouillet  the  courts  do  not  hesi- 
tate to  recognize  such  practices  as  violations  of  the  law  of  1857. 
The  same  principle  applies  where  the  essentinl  features  of  a  trade- 
mark are  reproduced  but  different  words  are  substituted  for  those 
used  on  the  original.  An  umbrella  manufacturer  registered  as  a 
trade-mark  a  triangle  within  which  were  arranged  three  umbrellas 
and  the  word  "  Veritas."  A  competitor  adopted  a  similar  trade-mark 
but  changed  the  word  "  Veritas  "  to  "  Tigre."  He  also  put  on  the 
base  the  words  "Registered  trade-mark"  when  it  had  never  been 
registered,  therebj^  showing  wrongful  intent.  The  court  held  this  to 
be  a  violation  of  the  law  of  1857.^ 

By  fraudulent  affixing  of  another's  trade-mark  is  meant  the  act  of 
the  one  who  procures  the  real  trade-mark  of  another  person  and  uses 
it  to  mark  his  own  products.  This  practice  is  most  common  in  the 
case  of  products  of  such  a  nature  that  the  trade-marks  must  be  affixed 
to  their  wrappers  or  containers  rather  than  to  the  products  them- 
selves, thus  affording  an  opportunity  to  use  these  wrappers  or  con- 
tainers for  the  sale  of  goods  of  inferior  quality. 

A  manufacturer  of  seltzer  water  put  his  product  on  sale  in  siphons 
bearing  the  trade-marks  of  a  competitor.  He  was  adjudged  guilty  of 
infraction  of  the  law  of  1857.* 

In  another  case  the  Court  of  Cassation  held  that  a  merchant  who 
sold  to  consumers  in  a  bottle  bearing  the  words  "Amer  Picon.  Phi- 
lippeville"  liquor  not  produced  by  the  house  of  Picon  committed  the 
misdemeanor  of  fraudulently  allixing  the  trade-mark  of  another, 
which  act  was  prohibited  by  section  7  of  the  law  of  1857." 

Every  fraudulent  use  of  a  trade-mark  falls  under  the  scope  of  the 
law  of  1857.  Not  only  the  affixing  of  a  usurped  trade-mark  to  goods 
but  also  the  reproduction  of  it  in  announcements  or  prospectuses  can 
constitute  a  misdemeanor.  A  frequent  practice  is  the  use  of  the  real 
trade-mark  iu  advertisements  witli  (he  i)urpose  of  ]>roparing  foi'  a 

1  Pouillet,  op  cit.,  p.  307. 

2  Pouillet,  op.  cit.,  p.  .112. 

=> -Mx.  1<>  janv.  liMiS,  Revel  pi>ie  et  (i)s  et  CnMrlinnl  e.  0;,'liastrii  ct  aulres;  Annales 
lOOS,    I.   p.   2j:i. 

<Trib.  eiv.  Seine  (.">"""  ch.),  nov.  lOOn,  riuimhre  Syndic:!  1(>  des  Eaux  Onzetises  et 
Lantlinet  e.  Plarut ;  Annales  1910.  I,  p.  .">.">. 

■^  Cass,  rcq.,  5  aofit  ISOO,  Picon  et  iMe,  c.  Mollier  ;  Annales  IKO:',,  p.  i;r>G. 


566  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

substitution  of  a  competing  product  for  the  one  bearing  the  trade- 
mark.^ 

The  following  case  illustrates  such  a  fraudulent  use : 
A  pharmacist  placed  on  the  glass  front  of  his  store  a  placard  bear- 
ing the  words  in  large  type  "  Goudron  et  capsules  Guyot  a  1  f .  25." 
When  customers  called  for  the  preparation  known  as  "  Goudron 
Guyot"  (Guyot  tar)  they  were  given  a  flask  covered  in  such  a  way 
that  the  purchaser  could  not  read  the  label  of  the  flask  bearing 
"  Goudron  Georges  Guyot  de  Chalon-sur-Saone."  The  court  held 
that  it  is  not  unlawful  for  a  druggist  to  use  a  placard  bearing  a  trade- 
mark (registered)  if  he  only  intends  to  announce  the  sale  of  the 
products  manufactured  by  the  proprietor  of  the  trade-mark;  but  it  is 
otherwise  when  the  placard  is  used  as  a  means  to  sell  competing 
products.^ 

In  a  similar  case^  a  store  attempted  to  sell  under  the  trade-mark 
of  a  certain  manufacturer  whose  goods  it  had  advertised  the  goods  of 
another  competing  concern.  Regarding  the  application  of  section  7, 
the  court  said  (p.  351)  : 

The  affixing  to  a  product  of  a  usurped  trade-mark  and  the  use  of  the  trade- 
mark constitute  two  different  misdemeanors,  the  one  provided  for  by  paragraph 
2  and  tlie  other  by  paragraph  1  of  article  7  of  the  law  [of  1857].  The  latter 
provision  has  a  much  more  extended  field  of  application  than  the  former.  It 
aims  to  reach  the  usurpation  of  the  trade-mark  under  whatever  form  it  may 
present  itself  and  to  prevent  the  public  from  being  deceived  by  the  usurpation. 
According  to  doctrine  and  jurisprudence,  it  affects  the  use  of  the  trade-mark  in 
invoices  and  it  does  not  appear  why  it  would  not  affect  prospectuses  and 
catalogues,  which  qiiite  as  well  as  invoices  are  susceptible  of  deceiving  the 
public. 

Selling  or  putting  on  sale  articles  bearing  trade-marks  which  are 
counterfeit  or  fraudulent  imitations  constitutes  a  misdemeanor  if  it 
is  done  knowingly.  The  courts  must  determine  in  eacft  case  whether 
the  merchant  or  retailer  had  knowledge  that  the  articles  sold  bore 
fraudulent  trade-marks. 

In  a  case  in  which  a  retailer  sold  goods  bearing  a  counterfeited 
label  concurrently  with  the  goocis  bearing  the  original  trade-mark 
the  court  held  that  he  could  not  invoke  his  good  faith,  for  by  simple 
inspection  of  the  two  products  he  could  convince  himself  of  the 
fraudulent  imitation.  He  was,  therefore,  held  to  have  violated  sec- 
tion 8  of  the  law."* 

A  manufacturer  of  ivory  combs  imitated  the  trade-mark  of  a  com- 
petitor, which  was  a  picture  of  an  elephant,  with  some  words  above 
and  below,  but  substituted  the  word  "  Mammoth  "  in  place  of  those 

1  Annales  1900,  I,  p.  207.  footnote. 

-  Cass,  civ.,  15  fevrier  1909,  Champigny  ot  Cie.  c.  Yvon  ;  Annales  1909,  I,  p.  266. 
•■'Lyon,  0  jiiill.   lOli'.   Laiiiol  c.   Societe  des  Grands  Magasins  des  Coi-deliers  ;   Annalefj 
1913,  I,  p.  349. 

*  Moutpellier,  23  aout  1S75,  F.  Prot  et  Cie.  c.  Mongauzi ;  Annales  1S75,  p.  305. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  567 

on  the  original  trade-mark.  The  proprietor  of  tlie  original  trade- 
mark brought  suit  against  him,  and  also  against  a  retailer  who  had 
sold  the  combs  with  the  usurped  trade-mark.  The  court  held  tliat 
this  retailer,  because  of  his  trade,  could  not  be  ignorant  of  the  ex- 
istence of  the  different  trade-marks  serving  to  distinguish  combs, 
and  that  in  putting  on  sale  the  combs  of  the  defendant  manufac- 
turer, bearing  the  picture  of  an  elephant,  he  had  made  himself  an 
accomplice  in  the  fraudulent  practices  of  the  latter  and  was  jointly- 
liable  for  the  injury  caused.^ 

Law  of  1905. — The  law  of  August  1,  1905,-  relates  primarily  to 
the  prevention  of  fraud  in  the  sale  of  merchandise  and  of  adultera- 
tions of  foodstuffs  and  agricultural  products.  In  some  respects  this 
law,  especially  article  1,  is  supplementary  to  the  laws  of  1824  and 
1857,  and  is  therefore  of  some  interest  in  respect  to  the  question  of 
unfair  competition.  Its  aim,  however,  is  primarily  to  protect  the  con- 
sumer against  frauds  of  a  nature  to  injure  the  public  health.  Article 
1  prescribes  a  penalty  of  imprisonment  for  from  three  months  to  one 
year  or  a  fine  of  from  100  to  5,000  francs,  or  both,  for  anyone  at- 
tempting to  deceive  a  contracting  party  (1)  as  to  the  nature,  the 
substantial  qualities,  composition,  and  useful  content  of  any  com- 
modity; (2)  as  to  the  kind  or  origin  of  coimnodities,  provided  that 
the  false  designation  is  the  principal  cause  of  sale;  and  (3)  as  to  the 
quantity  of  things  delivered  or  as  to  their  identity  by  delivering  an 
article  other  than  the  one  specified  in  the  contract. 

According  to  this  article,  the  use  of  certain  designations  of  a 
nature  to  deceive  the  purchaser  in  regard  to  the  quality,  quantity, 
origin,  etc.,  of  goods  is  prohibited,  and  the  proprietor  of  the  true 
designations  is  thus  protected,  but  the  scope  oi  the  law  is  limited  to 
transactions  between  contracting  parties,  which  are  generally  whole- 
sale transactions.  It  does  not  cover  the  fraudulent  substitution  of 
one  article  for  another  in  the  retail  trade.^  The  law  also  requires 
that  the  use  of  false  designations  of  kind  or  origin  must  be  the  prin- 
cipal cause  of  the  sale  of  an  article,  thus  further  limiting  its  effec- 
tiveness in  preventing  certain  unfair  practices. 

1  Trib.  civ.  Seine,  26  avril  1808,  Vilcocq  c.  Qiiidct  p6re  et  flls  et  Marchandise ;  Annales 
1899,  p.  354. 

-  I^oi  du  1  aout  190.5,  sur  In  rrprcssion  dos  frnndes  dans  la  vente  des  marchandises  et 
des  falsifications  des  denr^es  alimi^ntaires  et  des  prodiiits  agricoles. 

3  In  a  case  involvins  the  substitution  of  a  different  kind  of  tooth  wash  for  the  one  de- 
manded, action  was  brought  under  section  ]  of  tliis  law  by  the  proprietor  of  the  article 
discriminated  asainst.     The  court  said  : 

"The  plaintiff  appears  to  have  availed  herself  of  a  provision  which  could  not  be  applied 
in  this  case,  trade-marks  being  protin-ted  by  tlie  special  laws,  and  the  law  of  IftO.".  not 
having  been  enacted  as  a  weapon  in  the  matter  of  commercial  competition  •  •  *  the 
right  of  prosecution  in  the  matti'r  of  fraud  l)elongs  only  to  the  public  prosecutor  or  to 
those  who,  having  contracted,  have  been  deceived  by  the  fraudulent  acts." 

The  action  by  the  proprietor  of  the  product  which  had  been  discriminated  against  was 
therefore  dismissed.  Trib.  corr.  Peine  (S  oh.>,  11  mars  1011.  Vve.  Waldeck-Rousseau ; 
Aunales  1912,  I,  p.  5. 


568  EEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

Suits  for  violation  of  this  law  can  be  brought  only  by  the  public 
prosecutor  or  the  contracting  party  who  is  the  victim  of  the  fraudu- 
lent use  of  a  designation.  A  manufacturer  whose  product  has  been 
discriminated  against  has  no  right  of  action  \mder  this  law. 

Laws  of  issg  and  1912. — The  law  of  April  30,  1886/  reserved  the 
right  to  use  medals,  diplomas,  prizes,  and  other  honorific  distinctions 
awarded  by  expositions  and  fairs  to  the  persons  or  business  houses 
who  received  such  awards,  and  made  it  an  offense,  punishable  with 
fine  and  imprisonment,  for  anyone  to  make  an  unlawful  or  fraudulent 
use  of  such  awards.  An  important  wealmess  of  the  law  of  1886  was 
tliat  it  authorized  the  use  of  medals  and  prizes  obtained  at  all  exposi- 
tions and  fairs  regardless  of  the  conditions  surrounding  their  organi- 
zation. A  fictitious  exposition  could  be  organized  and  medals  and 
honorific  distinctions  could  be  distributed  to  unscrupulous  merchants 
and  manufacturers  for  profit.  According  to  one  writer,  scarcely  an 
exposition  was  held  which  did  not  have  near  it,  often  in  the  same 
town,  a  fictitious  exposition  which  distributed  medals  patterned  after 
those  of  the  real  exposition. - 

The  defects  of  the  law  of  1886  were  remedied  by  the  new  law  of 
August  8,  1912,  relative  to  industrial  awards,  which  provides  in 
article  1  that  only  the  awards  of  expositions  and  fairs  organized, 
patronized,  or  authorized  by  the  French  Government  or  foreign  Gov- 
ernments, or  the  awards  of  certain  other  specified  bodies,  can  have  a 
commercial  or  industrial  use,  and  that  before  such  awards -can  be  used 
commercially  or  industrially  they  must  be  registered  at  the  national 
office  of  industrial  property. 

Penalties  for  the  infraction  of  this  law  are  provided  in  article  9  as 
follows:  A  fine  of  from  50  to  6,000  francs  or  imprisonment  from 
three  months  to  two  years,  or  both,  shall  be  imposed  upon — 

1.  Those  who  unlawfully  and  fraudulently  attribute  to  themselves 
the  awards  specified  by  article  1,  or  imaginary  awards,  by  affixing 
them  to  their  products,  signs,  advertisements,  etc. 

2.  Those  who  under  the  same  conditions  apply  the  awards  to 
objects  other  than  those  for  which  they  have  been  obtained. 

3.  Those  wdio  under  the  same  conditions  shall  have  prevailed  with 
boards  of  expositions  or  competitions. 

4.  Those  who  by  any  artifice  whatever,  ambiguous  wording  or 
figurative  sign,  reproducing  more  or  less  exactly  the  conventional 
aspect  of  a  medal,  have  attempted  to  induce  the  public  to  believe 
that  they  have  obtained  an  award  which  in  fact  they  did  not  re- 
ceive. 

1  Loi  du  30  avril  1886,  relative  a  I'usurpation  dos  tnedailles  et  recompenses  Industricllos  ; 
Loi  du  8  aoilt  1912,  sur  les  recompenses  indnstrielles. 

2  Pouillet,  op.  cit.,  p.  835;  see  also  Coquet,  Les  indications  d'nriirino  ot  la  concurrence 
deloyale,  1913,  p.  151. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  569 

5.  Those  who  make  an  industrial  or  commercial  use  of  awards 
other  than  those  provided  by  article  1  of  the  law. 

6.  Those  who,  on  the  occasion  of  an  exposition  or  competition,  un- 
duly avail  themselves  in  circulars,  prospectuses,  placards,  diplomas, 
certificates,  etc.,  of  the  authorization  or  patronage  of  a  minister  or  of 
any  other  authority  or  public  administration  without  having  previ- 
ously obtained  it,  or  who  put  on  their  documents,  titles,  mottoes, 
vignettes,  coats  of  arms,  or  other  signs  and  words  of  a  nature  to 
create  a  belief  of  such  authorization  or  patronage. 

Less  severe  penalties  are  prescribed  for  violation  of  the  provisions 
for  registration. 

GENERAL  PROVISIONS. 

As  stated  aboA'e,  many  acts  of  unfair  or  unlawful  competition  in 
France  are  actionable  only  under  the  general  provisions  of  articles 
1382  and  1383  of  the  Civil  Code  (see  p.  559),  which  permit  actions 
to  enjoin  and  to  recover  damages  wherever  incurred.  Civil  actions 
for  damages  may  also  be  brought  under  these  general  provisions  in 
cases  covered  by  the  special  laws. 

In  all  cases  of  unfair  competition  brought  under  article  1382  the 
existence  of  wrongful  intent  must  be  proved.  Such  intent  may  be 
shown  by  a  single  act  or  by  a  variety  of  acts,  none  of  wdiich  taken  by 
itself  would  be  considered  sufficient  proof.  This  point  was  affirmed 
by  an  opinion  of  the  court  of  Nancy  in  1911.  The  court  held  that 
several  practices,  none  of  which  taken  separately  could  be  character- 
ized as  unfair  competition,  may  by  their  number,  variety,  and  their 
combination  reveal  the  fraudulent  intent  of  their  authors  and  con- 
stitute unfair  competition.^ 

Some  of  the  most  important  forms  of  unfair  competition  dealt 
with  under  the  general  provisions  are  discussed  in  detail  under  the 
various  headings  below. 

Confusion  as  to  establishment. — Acts  intended  to  produce  con- 
fusion between  similar  establishments  afford  ground  for  civil  actions 
under  article  1382  of  the  civil  code.  None  of  the  special  laws  relates 
directly  to  cases  of  this  kind.  Some  of  the  important  forms  of  un- 
fair competition  producing  confusion  between  similar  establishments 
are  as  follows : 

1.  Using  similar  trade  names  on  signs,  show  windows,  and  in  ad- 
vertisements, prospectuses,  etc. 

2.  Imitating  various  distinctive  marks  of  an  estal)lishment,  such  as 
signs,  store  fronts,  exhibits  in  show  windows,  interior  fittings,  etc. 

3.  losing  titles  which  serve  to  connect  one  establishment  with  an- 
other, such  as  ''  successor  to,"  "  branch  of,"  "  ex-superintendent  of," 
etc. 


1  Nancy.  25  nov.  1911,  Tllguin  et  Cie.,  c.   Societe  dcs  Engins  Graisscurs ;  Annales  1912, 
p.  258. 


570  KEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS, 

A  person  may  use  his  family  name,  a  firm  name,  fancy  name,  or 
name  of  a  place  to  designate  his  establishment.  The  use  of  such 
names  to  distinguish  one's  products  from  those  of  competitors  has 
been  discussed  in  connection  with  the  laws  of  1824  and  1857.^ 

The  general  principles  followed  by  the  courts  in  determining 
whether  the  imitation  of  such  names  is  unfair  competition  is  (1) 
whether  there  is  sufficient  resemblance  to  cause  confusion  and  divert 
the  clientele,  and  (2)  whether  the  names  are  special  and  distinctive 
or  whether  they  are  generic  and  necessary  to  designate  the  establish- 
ment. 

The  most  frequent  form  of  imitation  of  personal  names  occurs 
where  a  person  with  the  same  name  as  the  proprietor  of  a  well- 
known  concern  engages  in  the  same  kind  of  business  and  uses  that 
name  to  designate  his  establishment.  Every  person  has  the  right 
to  use  his  name  in  this  way,  but  in  doing  so  he  must  not  usurp  by 
means  of  fraudulent  confusion  the  advantages  of  the  credit  and 
reputation  acquired  by  another.-  In  the  absence  of  fraud  the  courts 
may  not  have  the  power  to  prevent  a  person  from  using  his  name — 
this  is  still  a  matter  of  controversy — but  the  courts  undoubtedly  have 
the  power  to  correct  abuses.  Frequently  a  proprietor  is  required  to 
use  his  Christian  name  with  his  family  name  and,  if  this  is  not  suffi- 
cient, to  add  his  address.^ 

A  common  method  employed  to  secure  the  use  of  a  name  similar 
to  that  of  another  is  to  induce  a  person  having  the  desired  name  to 
cede  it  or  in  the  case  of  a  firm  or  association  to  enter  the  business  so 
that  his  name  can  be  used.  AVliere  fraud  of  this  kind  exists  the 
courts  generally  prohibit  the  use  of  the  name  entirely. 

In  a  case  involving  the  fraudulent  use  of  the  same  family  name 
the  Court  of  Paris  ordered  the  defendant  to  cease  using  this  name 
by  itself.  Upon  appeal  the  Court  of  Cassation  affirmed  the  decision 
of  the  lower  court.* 

A  person  in  order  to  compete  against  the  well-known  house  of 
Gambier,  engaged  in  the  sale  of  pipes,  induced  a  cooper  named 
Gambler  to  permit  the  use  of  his  name.  The  court  declared  this  to 
be  unfair  competition  and  prohibited  the  use  of  the  name  by  the  rival 
house.'^ 

The  firm  of  Moet  &  Chandon,  a  well-known  champagne  house,  had 
acquired  a  reputation  for  the  brand  "  Moet,"  which  name  was  used  as 
a  trade-mark.  A  rival  concern  was  established  with  the  name  Moet  & 
Co.,  the  name  being  taken  from  an  associate  taken  in  for  that  purpose. 

1  See  pp.  560  and  562. 

-  Pandectes  Francaises,  Nouveau  Repertoire  de  Doctrine,  de  Legislation,  et  de  Jurispru- 
dence.    Paris,  1895,  tome  20,  p.  36. 
3  Ibid,  p.  40. 

*  Cass.,  Ii7  mars  1S77.  A.  et  M.  I.andon  c.  RcnauU  ;  .\nnalrs  1S77,  p.  02. 
■  Paris,  21  mai  1865  ;  Sirey,  1865-11-158 ;  cited  in  Pandectes  Prangaiscs,  tome  20,  p.  38. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  571 

Prior  to  this  time  he  had  been  an  accountant  in  a  pottery  concern 
and  was  without  capital  or  experience  in  the  cliampagne  business. 
The  court  prohibited  the  new  concern  from  doing  business  under  that 
name  and  awarded  damages.  Upon  appeal  the  Court  of  Paris  af- 
firmed the  decision.^ 

In  respect  to  the  imitation  of  invented  names  as  business  signs  or 
designations,  the  courts  have  condemned,  as  constituting  unfair 
competition,  the  use  of  "  Nouveau  cafe  des  Dames"  for  "Cafe  des 
Dames,"  "  citadin "  for  "  citadine,"  and  "Aux  vrais  gourmets "  for 
"  Cafe  des  gourmets."  -  On  the  other  hand,  the  courts  have  dechired 
that  a  commercial  establishment  which  adopted  the  name  "Agence 
des  theatres  "  to  indicate  its  operations  could  not  oppose  the  use  of 
the  name  "  Office  des  theatres"  by  another  establishment  of  the  same 
kind,  not  only  because  such  a  designation  was  general,  but  also 
because  no  acts  were  shown  which  would  lead  to  confusion  between 
the  two  establishments.'^ 

A  new  concern  which  established  itself  across  the  street  from  a 
well-known  concern  with  the  designation  "An  Planteur"  took  for 
its  name  "Au  nouveau  Planteur  "  and  gave  its  store  front  the  same 
general  appearance  as  that  of  the  former.  It  also  hired  the  director 
and  various  employees  of  the  older  house  and  sent  them  out  as  rep- 
resentatives to  the  customers  of  the  latter  one  day  earlier  than  the 
representatives  of  the  older  house  were  accustomed  to  call.  The  court 
held  that  the  addition  of  the  word  "  Nouveau  "  to  the  designation  of 
the  new  concern  was  not  sufficiently  different  from  the  sigTi  of  the 
older  house  to  prevent  confusion  between  the  two  establishments, 
especially  since  they  were  located  opposite  each  other  and  had 
the  same  general  appearance.  The  court  therefore  declared  the  use 
of  this  designation  and  the  other  practices  of  the  defendant  to  be  acts 
of  unfair  competition  and  awarded  damages.* 

But  in  a  case  in  which  a  manufacturer  of  lamps  in  Paris  who 
used  the  words  "A  la  lampe  merveilleuse  "  as  a  trade  name  and  trade- 
mark sued  a  competitor  for  using  the  same  words  on  the  glass  front 
of  his  establishment,  the  court  held  that  this  did  not  constitute  unfair 
competition,  since  the  Avords  "  lampe  merveilleuse  "  were  in  general 
use  and  defendant  had  never  used  them  alone,  but  always  in  con- 
nection with  his  own  name,  \az,  "  lampes  merveilleuses  Pigeon."^ 

Where  a  competitor  copies  the  details  of  the  entrance  of  a  rival 
establishment  in  a  manner  to  deceive  the  passer-by,  or  the  arrange- 
ment of  show  windows,  the  costume  of  employees,  etc.,  the  courts 
recognize  such  practices  as  unfair  competition. 

1  Pnris.  m  juill.  1S74.  Moet  et  Cli.indon  c.  Mont  et  Cie.  ;  Annalcs  1.874.  p.  .Sll. 

2  Ponillot,  op.  clt.,  p.  733. 

=1  Tril).  c-omra.  Soini\  JlJ  niai  isr.7,  Monrtin  ot  Cio.  c.  Suri  <'t  aulros;  .Vnnalos  ISC.S,  p.  ?,r,2. 
p.  352. 

*  Paris,  S  jiiill.  1010,  P.alzard  et  Cie,  c.  Lanocllc  ot  CU:  ;  .\nnales  1!»10,  p.  222. 
0  Paris,  11  mars  1892,  Potithomme  c.  Pigeon  ;  Annales  1800,  p.  93. 


5Y2  EEPOET    OP    THE    COMMISSIONER    OF    COEPOEATIONS. 

A  certain  Theophile  Pathe  founded  a  business  in  Paris  similar  to 
that  of  the  Pathe  freres,  and  painted  the  front  of  his  shop  ver- 
milion red  in  imitation  of  the  color  of  his  competitors'  shop.  The 
court  declared  that  where  a  commercial  establishment  used  ver- 
milion red  to  distinguish  its  shop  it  acquired  the  exclusive  right  to 
such  usage  and  the  use  of  the  same  color  by  defendant  was  an  act 
of  unfair  competition.  Defendant  also  pretended  in  his  advertise- 
ments that  he  was  formerly  connected  with  Pathe  freres,  and  repro- 
duced in  his  catalogues  designs  belonging  to  Pathe  freres.  As  a  re- 
sult of  the  confusion  which  was  caused  some  of  the  mail  of  Pathe 
freres  was  delivered  to  him.  The  court  also  held  these  acts  to  be 
unfair  competition.^ 

Two  persons  founded  at  Marseille  competing  messenger  services. 
One  was  called  "  Bicycle  Messengers ''  and  the  other  "  Express-Boys." 
Defendant  clothed  his  messenger  boys  in  red  uniforms  like  those 
worn  by  the  employees  of  his  competitor,  and  also  caused  similar 
tariffs  to  be  distributed.  The  court  held  that,  while  defendant  had 
the  right  to  establish  a  competing  business,  these  acts  constituted 
unfair  competition  and  defendant  must  discontinue  the  use  of  the  red 
uniforms  and  pay  damages.- 

In  a  similar  case  decided  a  few  days  later  the  Court  of  Pau  held 
that  the  act  of  a  concern  in  Biarritz  in  organizing  a  messenger  service 
and  clothing  its  boys  in  uniforms  similar  to  those  of  a  messenger 
service  at  Bordeaux  was  not  unfair  competition,  since,  being  located 
in  places  so  far  apart,  no  confusion  could  result  between  these  two 
enterprises  from  the  similarity  of  unifoi-ms.'' 

Confusion  betAveen  competing  establishments  may  be  caused  by  the 
use  of  such  terms  as  "  successor  to,"  "  ex-pupil  of,"  "  formerly  con- 
nected with,"  "  l)rother  of,"  etc.  More  frequently,  however,  the  use 
of  such  titles  is  ostensibly  for  the  purpose  of  reconunending  one's 
products  or  establishment  to  the  public* 

A  common  method  of  causing  confusion  is  to  put  the  words  "  pupil 
of  "  or  "  formerly  connected  with  "  in  small  type  on  signs  or  show 
windows  and  the  name  of  the  rival  house  in  large  letters,  so  that  the 
eye  of  the  passer-by  will  l)e  deceived.  In  a  case  in  which  a  merchant 
painted  on  the  entrance  of  his  shop  in  large  letters  the  name  of  his 
former  employer,  preceded  by  the  words  "  employee  of,"  and  on  the 
glass  front  the  same  name  in  very  conspicuous  letters  while  his  own 
name  and  the  words  "  employee  of  "  were  in  less  visible  letters,  the 
court  held  that  even  if  it  is  permissible  for  a  person  to  take  the  title 
of  employee  of  the  house  in  which  he  has  worked,  it  is  on  the  condi- 

1  Paris,  C  avril  1911.  Compaamle  Oenerale  des  Phohnographes,  etc.,  c.  Compagnie  des 
Cinematographes  Theophile  Pathe;  Annales  1011,  p.  3.33. 

-Trib.  comm.  Marseille,  4  mai  1010,  r)aval  c.  Chaleat ;  Annales  1912,  p.  29. 
•■'  Pau,  IS  mai  1910,  Vallet  c.  Le  Meneust ;  Annales  1912,  p.  26. 
*  For  cases  of  this  kind,  see  p.  581. 


TEUST    LAWS   AND    UNFAIR    COMPETITION".  573 

tion  that  this  qualification  is  used  in  a  way  not  to  cause  confusion,  as 
was  done  in  this  case.^ 

Confusion  as  to  pkoduct. — Many  of  the  acts  intended  to  produce 
confusion  between  similar  products  are,  as  explained  above  (see 
p.  562),  prosecuted  under  the  special  laws  of  1821  and  1857  relative  to 
the  usurpation  of  trade  names  and  trade-marks.  Some  cases  of  this 
kind,  lioweA'er,  are  actionable  only  under  the  a'eneral  provisions  of 
the  Civil  Code.     Among  such  may  be  mentioned  the  following: 

1.  The  usurpation  of  trade  names  affixed  to  other  than  manufac- 
tured products  or  affixed  to  manufactured  products  by  persons  other 
than  manufacturers. 

2.  The  imitation  of  trade-marks  which  have  not  been  registered 
or  of  distinctiA'e  marks  which  are  not  regarded  as  trade-marks. 

3.  The  misrepresentation  of  products  in  prospectuses,  catalogues, 
advertisements,  etc. 

4.  The  imitation  of  titles  of  literary,  artistic,  and  other  intellectual 
works. 

The  principles  involved  in  these  cases  are  the  same  as  those  already 
outlined  for  similar  cases  prosecuted  under  the  above-mentioned 
special  laws.  (See  pp.  500  and  5G2.)  The  desig*nation,  form,  or  color 
of  the  imitations  must  be  sufficiently  like  the  originals  to  cause  con- 
fusion in  the  minds  of  the  public,  and  the  marks  which  are  infringed 
must  be  distinctive  in  order  to  receive  protection. 

In  a  case  decided  in  1859  the  court  declared  as  unfair  competition 
the  act  of  adopting  the  same  shape  of  flagon,  the  same  method  of  seal- 
ing it,  and  the  same  form  of  label  as  was  used  by  a  competitor, 
thereby  creating  a  confusion  of  a  nature  to  deceive  the  public.- 

In  another  case  the  court  declared  it  to  be  unfair  competition  for 
a  manufacturer,  after  having  catalogued  the  products  which  another 
manufacturer  furnished  him,  to  make  these  products  himself  and  to 
continue  selling  them  under  the  same  catalogue  description  and  num- 
ber as  if  they  were  the  products  of  the  original  manufacturer.^ 

On  the  other  hand  the  act  of  a  merchant  in  selling  a  product 
similar  to  that  of  another,  even  in  cans  of  the  same  form  and  dimen- 
sions, was  held  not  to  constitute  an  act  of  unfair  or  unlawful  competi- 
tion since  the  products  were  sufficiently  dift'erentiated  by  their  labels, 
one  having  the  name  "Equateur,"  while  the  other  had  the  name 
"Victoria."* 

In  respect  to  the  titles  of  publications  the  court  has  held  that  it  was 
unfair  to  the  proprietor  of  a  financial  journal,  Icnown  as  "le  Capi- 
taliste,"  for  another  journal  of  the  same  character  to  take  the  title 

iRiom,  l*'  d6c.,  1903;  cited  by  Pouillet,  op.  cit  p.  S60. 
2  Paris,  P.  aont  ISoS,  Barbipr  c.  Simon  ;  Annalos  isr.!>,  p.  rtOG. 

sTrib.  comm.  Seine,  7  now  1008,  Societe  dos  i:n:;ins  Graisspurs.  c.  Ilameille ;  Annales 
1900.   II,   p.  40. 

^Toulouse,  17  lev.  1004.  I,i4)r:is;seur  c.  Canonne  ;  I>alloz,  op.  cit.  lOit.".  II,  p.  »;8, 


574  EEPORT    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

"  le  Petit  Capitaliste ; "  for,  although  the  two  publications  might  be 
different  in  form,  price,  and  other  characteristics,  the  similarity  of 
the  title  would  cause  the  public  to  regard  defendant's  journal  as  a 
supplement  or  a  reproduction  of  plaintiff's  journal  and  obviously 
cause  it  injury.^ 

A  publisher  in  Verdun  changed  the  name  of  his  journal  from 
"  Courrier  de  Verdun "  to  ''  le  Courrier  Verdunois."  Suit  was 
brought  by  the  publisher  of  another  journal  with  the  title  "le  Petit 
Verdunois  "  for  a  cessation  of  the  publication  and  for  damages.  It 
was  shown  that  the  exterior  aspect,  and  especially  the  title  of  de- 
fendant's publication,  was  similar  to  that  of  plaintiff's  publication. 
The  tribunal  of  commerce  of  Verdun  held  that  there  was  confusion 
between  the  two  journals  resulting  from  the  analogy  of  their  titles, 
from  their  size,  the  manner  of  folding,  and  the  manner  in  which 
they  were  or  could  be  presented  to  the  reader.  Upon  appeal  the 
court  of  Nancy  held  that  in  order  for  unfair  competition  to  exist  it 
is  not  necessary  that  there  be  complete  usurpation  of  the  title  of  a 
journal,  that  the  possibility  of  confusion  between  the  two  journals 
in  question  appeared  manifest.  It  resulted  from  the  fact  that  the 
same  word  "  Verdunois,"  terminated  the  title  of  each  journal,  and 
from  the  similarity  of  the  characters  used  in  printing  the  title.^ 

A  seed  merchant  inserted  an  advertisement  in  the  journal,  Le 
Petit  Jardin,  offering  gratis  a  brochure  to  the  readers  of  this  publica- 
tion. The  pamphlet  which  he  sent  to  those  who  replied  was  his 
catalogue  containing  an  ad^  ertisement  of  the  competing  journal  Mon 
Jardin.  The  court  held  the  use  of  the  latter  title  was  unfair  competi- 
tion, as  well  as  the  method  employed  to  secure  a  list  of  plaintiff's 
subscribers.^ 

Substitution  of  one  product  for  another. — 'V\'liere  competing 
products  are  similar  in  name,  taste,  color,  etc.,  the  possibility  of 
confusion  is  frequently  taken  advantage  of,  especially  by  retailers, 
to  substitute  another  product  for  the  one  demanded.  This  constitutes 
not  only  a  fraud  upon  the  consumer,  but  also  an  act  of  unfair  com- 
petition against  persons  whose  products  are  subject  to  discrimina- 
tion. Under  article  1  of  the  law  of  August  1,  1905,  such  substitution 
in  making  deliveries  constitutes  a  penal  offense  if  the  goods  desired 
were  contracted  for.  (See  p*.  567.)  Prior  to  the  passage  of  this  law 
article  423  of  the  Penal  Code  was  applicable  to  such  substitution. 
Most  cases  of  this  kind  are  prosecuted  under  the  Civil  Code. 

A  manufacturer  of  canned  goods  alleged  that  a  certain  distributor 
regularly  delivered  to  customers  demanding  his  products  the  prod- 

1  Trib.  comm.  Seine.  7  avril  1881,  Banqiie  parisienne  c.  Perrct ;  Annalos  1881,  p.  281. 

2  Nancy,  2  juill.  1006,  Didier  c.  Laurent;  Annales  1907.  p.  20. 

3  Faris,  IS  jiiin  1008,  Societe  de  librairies  et  imprimeries  horticoles  c.  Arnaud  ct  Cie. 
et  Brancber;  Annales  1009,  II,  p.  24. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  575 

ucts  of  a  competitor  of  similar  name,  who  was  a  part}^  to  tlie  fraud ; 
also,  that  no  warning  was  given  the  customers,  who  believed  that 
they  were  getting  the  products  requested,  or,  when  the  customer 
perceived  that  the  product  asked  for  had  not  been  delivered  to  him 
and  demanded  an  explanation,  affirmed  that  the  products  were 
genuine  and  not  an  imitation.  The  court  held  that  if  such  acts  oc- 
curred and  were  customary,  they  manifestly  constituted  unlawful 

acts  of  a  nature  to  render  the  defendant  liable,  but  in  this  case  the 
proof  of  the  allegations  was  not  clear,  nor  was  it  established  that  the 
unfair  acts  were  habitual.^ 

A  liquor  dealer  served  a  customer  who  demanded  some  wine  made 
by  plaintiff  with  another  kind  bearing  a  similar  name.  The  court 
held  that  such  a  substitution  constituted  an  unfair  act  when  accom- 
panied by  circumstances  which  rendered  possible  a  confusion  be- 
tween the  two  products  and  which  resulted  in  deceiving  the  con- 
sumer. The  plea  of  the  defendant  that  he  had  posted  a  placard  in 
his  establishment  stating  that  he  served  only  certain  brands  was 
rejected,  for,  in  the  opinion  of  the  court,  this  notice  might  easily 
ha^'e  escaped  the  consumer  and  was  insufficient  to  remove  all  chance 
of  error.^ 

A  dealer's  employee  without  calling  the  customer's  attention  to  the 
substitution,  gave  a  customer  who  asked  for  a  jar  of  Simon  facial 
cream  a  jar  of  another  make  bearing  the  label  "  Beauty  cream;  Paul 
Simon,  Paris."  The  court  held  that  a  retailer  who  delivers  an 
article  similar  to  that  specified  without  warning  the  purchaser  of 
the  substitution  is  liable  for  damages  to  the  injured  manufacturer 
even  if  done  without  fraudulent  intent.  It  was  not  clear  in  this  case 
whether  the  defendant  had  acted  with  fraudulent  intent  or  not." 

DEFAaiATORY  AND  DISPARAGING  STATEMENTS. AcCOrding  tO   Freiich 

law,  a  merchant  or  manufacturer  has  the  right  to  use  every  legiti- 
mate means  in  advertising  the  merits  of  his  goods  or  of  his  establish- 
ment, but  he  must  refrain  from  doing  anything  of  a  nature  to  injure 
the  credit  of  his  competitors  or  to  disparage  their  business.  It  is 
not  considered  unfair  for  a  person  to  indulge  in  the  most  extrava- 
gant claims  for  his  own  products,  so  long  as  he  does  not  refer  to  a 
competitor  disparagingly.* 

In  order  to  constitute  an  act  of  unfair  competition  disparaging 
statements  must  be  publicly  made.  A  statement  made  confidentially 
or  privately  by  one  person  to  another  would  not  aiford  ground  for 
an  action.^     Disparaging  statements  which  do  not  mention  a  com- 

1  Paris,  laoflt  1001,  Amicus  et  Comp.  c.  La  Laitcrie  du  Nord  ;  Dalloz.  op.  cit.,  1905, 
II,  p.  157. 

-  Paris.  S  jiiin  1004,  JIarius  Dul)onnft  c.  Morcior;  Annnlcs  1004,  p.  S.").~i. 

3  Grenoble  (1  cli.),  26  juin,  1912,  .T.  Simon  et  Cie.  c.  Scliicltlc? ;  Annales  1913,  p.  344. 

*  Pandectes  Frangaises,  tome  20,  p.  72  ;  Pouillet,  op.  cit.,  p.  059. 

»  I'ouillel,  op.  fit.,  p.  OGO. 


576  EEPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

petitor  or  his  products  or  establishment  by  name  may  nevertheless 
be  considered  unfair  competition  if  the  allegations  or  insinuations 
are  of  a  nature  to  cause  injury  to  another.  Such  is  the  case  when 
the  public  might  easily  understand  to  whom  the  statements  refer 
or  when  the  statements  relate  to  all  those  Avho  manufacture  in  a 
given  locality  or  folloAV  a  special  method  or  process.^  The  circu- 
lation of  statements  that  are  true  may  also  constitute  unfair  compe- 
tition if  done  with  the  intent  to  injure. 

The  cases  cited  below  illustrate  various  forms  of  disparagement 
and  show  the  manner  in  which  the  courts  have  dealt  with  them. 

The  Morning  News,  an  English  newspaper  published  in  Paris,  in- 
serted in  several  numbers  some  tables  comparing  the  number  of 
copies  sold  by  it  with  the  number  sold  by  another  English  pape'' 
published  in  Paris,  making  prominent  the  smaller  number  sold  by 
the  latter.  The  court  declared  the  act  to  be  unfair  competition  and 
awarded  damages  to  the  plaintitf.-    In  part,  the  court  said : 

Tlie  act  by  the  director  of  tlie  Morning  News  of  using  the  name  of  Galig- 
nani's  Messenger,  whetlier  in  the  said  tables  or  in  the  different  articles,  for 
the  purpose  of  disparaging  the  journal  which  bears  this  name  constitutes  an 
abuse  and  an  act  of  unfair  competition,  injurious  to  the  plaintiff,  which  it  Is 
proper  to  bring  to  an  end. 

A  druggist  distributed  in  the  neighborhood  of  the  shops  of  his 
competitors  a  prospectus  containing  the  notice  "  Before  calling  on 
your  regular  druggist  consult  this  price  list  in  the  interest  of  your 
pocketl)ook  and  your  health."  The  court  declared  this  to  be  unfair 
competition.^ 

The  Mutual  Life  Insurance  Co.,  a  New  York  corporation,  and  the 
manager  of  its  branch  office  at  Paris,  while  waging  a  competitive 
campaign  against  the  French  life  insurance  companies,  circulated 
several  prospectuses  criticizing  the  management  and  results  of  opera- 
tions of  these  companies,  especially  the  Compaguie  d'assuranccs 
generales.  In  one  of  these  prospectuses  it  was  stated  that  the  general 
expenses  of  this  French  company  were  twice  those  of  the  Mutual. 
In  another  it  was  stated  that  the  French  companj'^  was  run  in  the 
interest  of  its  shareholders  and  not  its  policyholders.  Elaborate 
statistical  calculations  based  on  the  financial  reports  of  the  companies 
compared  w^ere  presented  in  support  of  these  charges.  The  Mutual 
also  reprinted  and  circulated,  with  the  consent  of  the  author,  a  docu- 
ment by  a  French  writer,  which  tended  to  show  that  the  French  com- 
pany had  conducted  its  life  insurance  business  at  a  loss  in  1891  in- 
stead of  at  a  profit. 

1  Poiilllot,  op.  cit.,  pp.  966,  976. 

"  Trib.  comm.  Seine,  21  iiuii  1884,  Galignani's  Messenger  c.  Morning  News;  Annnles 
18S.-J,  p.   119.  ' 

3  Trib.  comm.  Melun,  11  dec,  1906;  Baillet,  Boudier  et  autrcs  c.  Crcstey ;  Annalcs 
1907,  II,  p.  -46. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  577 

Suit  to  recover  damages  was  brought  against  the  Mutual  by  the 
French  company  especially  attacked  in  these  prospectuses.  It  was 
shown  that  the  calculations  used  to  support  the  various  disparaging 
statements  circulated  by  the  Mutual,  w^hether  intentional  or  not,  were 
erroneous.  The  court  held  the  acts  of  the  Mutual  to  be  unfair  or  un- 
lawful competition  in  the  sense  of  articles  1382  and  1383  and  awarded 
damages.  The  contention  of  the  defendants  that  they  were  only 
retaliating  against  attacks  of  their  competitors  was  rejected.^  In 
respect  to  the  right  of  merchants  to  disparage  rivals  or  their  products 
the  court  made  the  following  statement : 

The  privilege  which  belougs  to  every  merchant  to  praise  his  products  in  terms, 
the  propriety  of  which,  as  a  general  principle,  it  is  not  for  the  tribunals  to  de- 
termine, does  not  confer  on  him  the  right  to  attack  a  competitor  or  to  disparage 
or  to  depreciate  the  articles  which  he  exploits,  even  by  the  way  of  simple  com- 
parison, with  the  aim  of  diverting  the  clientele  to  his  own  profit.  *  *  *  The 
tribunals  are  not  required  in  principle  to  ascertain  whether  the  criticisms 
formulated  by  a  merchant  against  his  competitor  are  well  founded. 

A  gunsmith  exposed  in  the  window  of  his  shop  a  fowling  piece  with 
a  cracked  barrel  bearing  the  placard :  ''  Fracture  of  a  St.  Etienne  gun 
barrel  by  a  single  i-gram  cartridge,  casting  doubt  upon  its  resistance." 
The  manufacturer  whose  product  was  thus  disparaged  brought  suit 
and  the  court  ordered  reparation  to  be  made.- 

The  firm  of  Jules  Mumm  &  Co.,  dealers  in  champagne,  addressed  a 
circular  letter  of  an  alleged  confidential  nature  to  their  agents  for 
distribution  to  their  clientele,  to  which  was  appended  a  table  contain- 
ing in  the  first  column  the  names  of  certain  houses,  especially  that  of 
the  plaintiff,  together  with  the  dates  of  their  foundation,  and  in  a 
second  colunm  opposite,  the  similar  names  of  older  houses,  the  pur- 
pose of  the  circular  and  table  being  to  warn  customers  that  the  con- 
cerns in  the  first  column  Avere  worthless  and  Avere  intended  only  to 
profit  from  the  reputation  of  the  older  houses,  including  that  of  de- 
fendant, by  means  of  confusion  resulting  from  similar  names.  The 
court  held  this  act  to  be  unfair  competition  and  awarded  damages.^ 
The  court  said  in  part: 

Although  it  is  lawful  for  every  merchant  in  his  circulars  to  praise  the  prod- 
ucts of  his  establishment  or  the  establishment  itself,  on  the  other  hand  he  is 
absolutely  prohibited  from  disi)ai"aging  therein  those  of  his  competitors,  espe- 
cially in  designating  them  by  name  and  in  terms  susceptible  of  injuring  them. 

These  acts  constitute  a  grave  wrong  (faute  grave)  and  an  act  of  unfair  com- 
petition which  has  caused  the  house  of  Leon  Chandon  (plaintiff)  considerable 
injury. 

'  PnrJs,  2S  juin  ISOO.  Compagnio  cl'nssiirancos  gt'in'ralos  <■.  :jrntnal  T.Ife,  P.aiKlry  oT 
B6zlat  d'Aiulibert;  Annalos  1S97,  pp.  ."^O,  32. 

"  Trib.  comni.  Seino.  27  jiiiii  T.toT.  Cliamhro  syndipale  dos  fabricants  crarmes  do  Saint 
Eticnnc  c.  IMjioon  :  Annalos  190S,  IT.  p.  86. 

3Tril).  coniin.  Uoinis.  0  sopt.  1004,  Fi-an(;ois  c.  .Tiilos  Atuinm  ct  Cic.  ;  Annalcs  1910,  pp. 
175,  177. 

30035°— 16 37 


578  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

A  manufacturer  of  cigarette  paper  affixed  to  his  wall  a  poster  in 
which  he  annoimcecl: 

The  name  of  my  paper  (Guerre  a  Jo)))  indicates  tliat  it  is  by  no  means  an 
imitation  of  tlie  "  Job  "  paper  that  I  attempt  to-day  and  tliat  I  desire  fairly  to 
compete  with  it.  *  *  *  I  am,  then,  far  from  having  the  thought  of  adding 
another  name  to  the  already  lengthy  list  of  those  who  have  sought  to  imitate 
the  paper  of  M.  Bardou.  On  the  contrary.  I  demand  only  that  my  paper  be 
not  confused  with  his.  The  real  superiority  of  my  paper,  generally  recognized, 
gives  me  assurance  that  my  brand  "  Guerre  a  Job  "  will  soon  be  preferred  by 
all  amateurs.  *  *  *  It  is  the  real  merit  of  the  paper  that  must  be  sought 
for  and  will  be  found  in  my  new  brand,  which  shall  soon  be  known  to  all  as  the 
best  product  that  exists. 

The  court  held  it  to  be  an  act  of  unfair  competition  for  a  merchant 
in  his  advertisements  and  prospectuses  to  mention  a  competitor  and 
his  products  with  the  intent  to  disparage  them,  and  enjoined  de- 
fendant from  a  further  use  of  the  word  "  Job."^ 

A  proprietor  of  a  cafe  in  Paris  by  the  name  of  Maumus  posted  the 
notice  in  large  letters :  "  The  Cafe  of  Maumus  does  not  serve  Byrrh." 
The  exclusive  proprietor  of  the  brand  "  Byrrh "  brought  suit  for 
damages.  The  court  held  that  Maumus  had  acted  in  good  faith  and 
within  his  rights  in  informing  the  public  that  he  did  not  serve  this 
drink.  Upon  appeal  this  decision  was  affirmed.-  The  court  of  ap- 
peals said,  in  part : 

It  is  certain  that  Maumus  only  made  use  of  an  incontestable  right,  that  of 
not  selling  any  byrrh  and  of  informing  his  customers  to  that  effect.  The 
normal  exercise  of  this  right  could  not  be  legally  injurious  (to  plaintiff)  since 
it  must  be  admitted  that  aside  from  the  conspicuous  notice,  no  unlawful  facts 
could  be  set  forth,  such  as  malicious  remarks,  utterances,  acts,  or  writings  of  a 
nature  to  usurp  or  depreciate  the  product  known  under  the  commercial  name 
of  byrrh. 

A  manufacturer  inserted  in  a  circular  letter  the  statement  that  the 
superphosphates  which  he  offered  to  the  public  were  the  only  ones 
which  were  absolutely  perfect  in  respect  to  certain  qualities,  such  as 
fineness,  freedom  from  moisture,  etc.  No  criticism,  however,  was 
made  of  the  products  of  other  manufacturers.  The  court  held  that 
it  was  not  unfair  competition  for  a  person  to  proclaim  his  goods  as 
the  best  in  the  world  and  much  superior  to  similar  goods,  so  long  as 
he  makes  no  mention  nor  criticism  of  the  products  of  rival  and  com- 
peting houses.^ 

A  periodical  offered  to  sell  to  subscribers  as  a  premium  a  certain 
make  of  gun  for  85  francs,  which,  it  stated,  was  equal  in  value  to 
those  sold  by  the  dealers  for  125  francs.  One  of  the  dealers  then 
announced  in  the  papers  and  by  placards  and  circulars  that  he  had 
always  sold  for  78  francs  the  same  guns  offered  as  a  premium  liy  the 

1  Paris,  2.".  avril  IROO,  Sabatou  c.  Bardou:  Dalloz,  op.  cit.,  1S70,  II.  p.  75. 

2  rail.  18  jiiin  ISO",  Lambert-Violrt  c.  Maumus;  Dalloz,  op.  cit.,  1.897,  II,  pp.  335,  336. 
=  Toulouse,  18  janv.  lOOG,  Organ  c.  Compagnic  Bordelaisc  ;  Annales  1907,  II,  p.  2. 


TRUST    LAWS   AND    UNFAIR   COMPETITION.  579 

periodical  for  85  francs.  Suit  was  brought  by  the  manager  of  the 
periodical  to  recover  damages  on  the  ground  that  the  statement  cir- 
culated by  the  defendant  was  an  act  of  unfair  competition.  The 
statement  appears  to  have  been  true.  The  court,  however,  held  that, 
by  clearly  giving  the  impression  that  instead  of  being  a  concession  in 
price  the  offer  of  the  plaintiff  was  only  a  lure  and  a  source  of  profit 
to  him,  the  defendant  had  committed  an  act  of  unfair  competition. 
Damages  were,  therefore,  awarded.^ 

Price  cutting. — In  general  a  retailer  in  France  has  the  right  to 
sell  his  goods  at  any  price  he  chooses,  and  even  at  a  loss,  unless  he  has 
entered  into  an  agreement  to  the  contrary.  When,  however,  price 
cutting  takes  place  under  such  conditions  as  to  show  a  clear  intention 
to  disparage  or  depreciate  the  value  of  another's  goods  it  may  con- 
stitute unfair  competition.- 

Agreements  to  maintain  fixed  resale  prices  are  regarded  in  France 
as  legal  and  binding,  and  the  merchant  who  cuts  the  resale  price  after 
entering  into  such  an  agreement  is  held  to  have  committed  an  un- 
lawful act,  as  well  as  an  act  of  unfair  competition,  against  those  of 
his  competitors  who  keep  their  agreements.  Such  agreements  to 
maintain  resale  prices  are  binding  only  upon  the  parties  to  the  agree- 
ment. A  manufacturer  or  distributer,  except  as  noted  above,  has  no 
ground  for  action  against  a  merchant  who  cuts  prices  if  he  has  not 
entered  into  a  contract  to  maintain  them.'' 

The  following  cases  will  illustrate  these  principles : 

Defendants  offered  to  sell  some  tooth  wash  below  cost.  The  manu- 
facturers brought  suit  against  them  on  the  ground  that  the  cut  in 
price  and  the  announcement  of  it  was  an  act  of  unfair  competition 
of  a  nature  to  depreciate  their  product.*  In  rejecting  this  contention 
the  court  stated  the  principle  applying  to  such  cases  as  follows : 

One  can  not  contest  the  right  of  a  purchaser  to  advertise  and  resell  at  what- 
soever price  he  chooses  the  merchandise  which  he  has  purchased  and  paid  for 
when  the  seller  has  made  no  reservation  which  would  talie  away  this  privilege 
from  him. 

A  dealer  in  perfumery  entered  into  an  agreement  with  the  manu- 
facturer not  to  sell  nor  allow  to  be  sold  nor  mark  or  catalogue  the 
products  of  the  latter  at  prices  below  those  fixed  as  the  minimum. 
Failing  to  keep  this  agreement  the  dealer  Avas  sued  for  breach  of  con- 
tract. The  court  sustained  the  right  of  the  manufacturer  to  sell  his 
goods  subject  to  such  conditions  as  he  might  impose  upon  the  pur- 
chaser.^ 


iBesancon,  24  nov.  1880,  Dnraolit  e.  Moulin:  Annalos  1882.  p.  2r.S. 

=  Ponillet,  op.  cit..  p.  088;  Allart.  op.  cit..  p    221  ;  Piuuloctes  rr.nncaisps.  tome  20.  p.  78. 
='See  Anniilos  1010.  I.  pp.  71-7."!. 

<  Paris,  2  dec.  ISOO,  Lamonroiix  ct  Cliouot   c.  Calamo  ot  Fleck:  .\nnal.>s  1870.  p.  CO. 
!>Trib.  conim.  de  liouen,  17  junv.,  1900,  Javal  et  Parquet  e.  Kruuschwij;  ;  Annales  190G, 
,97. 


580  REPORT    OP    THE    COMMISSIONER  .  OF    CORPORATIONS. 

The  Societe  des  Eaiix  niinerales  de  Vittel  distributed  to  the  trade 
a  circidar,  as  follows : 

We  have  the  honor  to  iuform  you  that  we  have  re<j;nhited  the  sale  of  our 
Vittel  waters  *  *  *  at  a  uiluimum  price  of  70  centimes  per  bottle  for  sale 
to  the  public. 

We  have  joined  the  regulative  union  for  this  purpose,  and  that  no  one  may 
plead  ignorance  have  placed  on  our  own  label  tlie  stamp  of  this  union,  which 
from  now  on  will  be  accompanied  with  the  following  notice :  "  The  stamp  in 
the  margin  imposes  upon  the  seller  the  obligation  to  conform  with  the  fixed 
minimum  price." 

We  place  thus  upon  our  waters,  as  it  is  our  strict  right,  an  obligation  which 
we  intend  henceforth  to  enforce  iipon  all  resellers  without  exception. 

In  consequence  the  act  of  buying  our  Vittel  waters  and  reselling  the  same  to 
the  public  constitutes  for  the  seller  an  absolute  obligation  of  not  selling  to  the 
public  at  less  than  70  centimes  per  bottle. 

The  society  brought  suit  against  a  certain  Brunet  for  selling  below 
the  fixed  price.  It  was  proved  that  Brunet  bought  the  bottles  not 
from  the  plaintiff  but  from  a  dealer  Avho  had  not  imposed  any  obli- 
gation upon  Brunet  regarding  a  minimum  resale  price.  The  court 
refused  to  consider  the  notice  on  the  label  as  binding  upon  dealers 
to  maintain  the  price  noted  thereon,  and  accordingly  held  that  since 
no  contract  existed  between  the  parties  Brunet  was  free  to  resell  his 
goods  at  prices  that  suited  him.^ 

Deceptive  advertising. — In  France  every  merchant  has  the  right 
to  attract  custom  by  advertising  his  goods.  Such  an  act  constitutes 
unfair  competition  only  when  the  announcements  contain  misleading 
statements  which  are  intended  to  decei^^e  the  public  and  thus  by 
fraud  to  divert  customers  from  competing  establishments.-  The 
following  cases  illustrate  the  principles  established  by  the  courts: 

A  merchant  opened  in  a  city  a  store  for  the  sale  of  ready-made 
clothing,  and  by  means  of  posters,  newspaper  advertisements,  and 
prospectuses  announced  that  the  goods  put  on  sale  came  from,  a 
burned  w^arehouse  and  were  sold  for  the  account  of  the  insurance 
company  at  from  50  to  80  per  cent  reductions,  when  in  fact  the  goods 
had  not  been  in  a  fire  and  were  not  sold  at  a  cheap  price  or  loss,  but 
only  at  their  real  value.  Suit  was  brought  by  a  competing  firm  of 
merchant  tailors.  The  court  held  that  the  merchant  had  knowingly 
deceived  the  public  in  order  to  acquire  the  clientele  of  his  rivals,  that 
the  acts  exceeded  the  limits  of  permissible  advertising  and  consti- 
tuted unlawful,  misleading,  and  fraudulent  tactics,  such  as  are  char- 
acteristic of  unfair  competition.  Damages  w^ere  awarded  and  judg- 
ment was  affii'med  upon  appeal.^ 

1  Trib.  comm.  Seine,  in  nov.  1900,  Societe  des  Eanx  minerales  de  Vittel  c.  Brunet; 
Annales  1910,  I.  77. 

2  Pandectes  Frangaises,  tome  20,  p.  70. 

"  Orleans,  29  mars,  18S9,  Beauvois,  dit  Demonchaux  c.  Chollet  et  Courel ;  Sirey,  Recueil 
General  des  Lois  et  des  Arrets,  1889,  II,  p.  93. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  581 

Two  merchants  announced  the  sale  of  a  bankrupt  stock  as  compris- 
ing 500,000  francs'  worth  of  merchandise,  which,  as  liquidators,  they 
were  selling  at  75  per  cent  loss,  when,  in  fact,  they  had  purchased 
less  than  12,000  francs'  worth  of  goods  from  the  bankrupt  stock 
of  another  and  were  selling  the  goods  at  little  less  than  real  value.  A 
competing  concern  brought  suit.  The  court  held  such  an  act  to  be 
unfair  competition,  and  ordered  the  defendants  to  omit  the  mislead- 
ing statements  from  their  announcements.^ 

By  agreement  a  merchant.  Levy,  took  over  the  business  of  Tar- 
naud,  a  dealer  in  novelties  at  Tours,  who  had  been  declared  bankrupt. 
He  then  announced  in  the  papers  that  on  a  given  date  the  large  stock 
would  be  lii^uidated  with  enormous  reductions,  imitating  the  usual 
manner  of  advertising  liquidation  sales.  By  other  means  also  he  led 
the  public  to  believe  that  he  was  selling  out  the  business  instead  of 
(continuing  it,  and  that  the  sale  was  a  forced  sale  of  the  particular 
stock,  when,  as  a  matter  of  fact,  he  added  considerable  quantities  of 
goods  from  other  sources  to  the  pretended  bankrupt  stock.  The 
court  declared  that  this  was  unfair  competition,  and  awarded  dam- 
ages to  two  competitors  in  the  town  who  had  been  injured  by  the 
diverting  of  their  customers.- 

UsuRPATiON  or  TITLES. — The  use  by  merchants  of  certain  qualifi- 
cations or  titles  which  they  think  might  recommend  their  establish- 
ments or  their  products  to  the  public  is,  in  general,  permissible  in 
France,  but  the  unauthorized  or  fraudulent  use  of  such  designations 
to  create  a  favorable  impression  in  the  minds  of  the  public  is  held 
by  the  courts  to  constitute  unfair  competition  against  honest  mer- 
chants. The  most  common  acts  of  an  unfair  kind  are  those  in  which 
merchants  falsely  claim  to  be  the  former  pupil,  former  employee, 
or  former  associate  of  a  well-known  house;  also  those  in  which 
persons  falsely  announce  themselves  to  be  the  depositaries  or  sole 
depositaries  of  certain  goods,  or  manufacturers  announce  falsely 
that  they  are  the  only  manufacturers  of  certain  goods  or  that  their 
goods  are  the  only  ones  receiving  an  award  at  a  certain  exposition.'' 

The  use  of  such  titles  as  former  pupil,  ex-employee,  etc.,  in  a 
manner  to  create  confusion  between  two  establishments,  is  always 
regarded  as  unfair  competition,  affording  ground  for  a  civil  action 
(see  p.  572)  ;  but  there  is  still  a  wide  difference  of  opinion  as  to 
whether  the  bona  fide  use  of  such  titles  can  constitute  imfair  compe- 
tition.'* 

The  misappropriation  or  misuse  of  awards  of  expositions  and  other 
honorific  distinctions  of  the  same  character  is  made  a  penal  offense 
under  the  law  of  1912  (see  p.  5G8). 

iTrlb.  comm.  do  Rouon,  4  juin  1S77,  Lovy,  .Taool)  ot  Lo^Taiifl  o.  Franofort  et  Knlin  ; 
Annales  1S77,  p.  2oS. 

sOrU'ans,  0  ii6c.,  ISOl,  LtVy  c.  Saintln  ot  FUssoau  ;  Sircy,  op.  »it.,  1892,   H.  p.  202. 
3  Panilccti'S  Francaisos.  tome  20,  pp.  71,  79. 
*  Pouillet,  op.  clt.,  pp.  851,  852. 


582  REPORT    OF    THE    COMMISSIONER    OP    CORPORATIONS. 

A  few  cases  involving  the  false  assumption  of  titles  follow: 

A  book  dealer  in  Clialon-siir-Saone  announced  in  a  newspaper 
that  he  was  the  sole  dealer  handling  a  certain  publication.  Another 
book  dealer  in  the  same  city,  who  handled  this  publication,  brought 
3uit  for  damages.  The  publisher  testified  that  he  had  no  sole  de- 
positary in  that  city.  The  court  held  therefore  that  the  other  book 
dealers  had  just  cause  for  action  against  the  defendant.^ 

The  act  of  a  merchant  in  distributing  to  the  public  some  pros- 
pectuses of  a  certain  house,  after  having  them  marked  with  his 
stamp,  with  the  intenti(m  of  making  the  clientele  believe  that  he 
was  the  depositary  of  this  house  when  in  fact  he  was  not,  was  held 
by  the  court  to  be  unfair  competition.^ 

A  horticulturist  claimed  to  be  the  sole  producer  of  Argenteuil 
asparagus  in  a  certain  locality,  when  in  fact  there  was  another  who 
for  a  long  time  had  been  engaged  in  growing  this  same  kind  of  vege- 
table. The  tribunal  ordered  the  suppression  of  the  word  "  sole  "  in 
the  prospectuses,  announcements,  invoices,  letterheads,  etc.^ 

A  clothing  manufacturer  opened  an  establishment  at  Blois  under 
the  trade  name  "A  la  Belle  Jardiniere,"  which  was  the  name  of  a 
Avell-known  house  in  Paris,  but  he  took  care  to  add  to  this  designa- 
tion his  own  name  as  well  as  the  name  of  the  place  in  which  he  was 
located,  so  that  confusion  between  the  two  concerns  in  violation  of 
the  law  of  1824  was  impossible.  He  had,  however,  placed  a  sign  in 
large  letters  in  his  display  rooms  located  just  across  the  street  from 
his  main  establishment,  which  read  "  Branch  of  la  Belle  Jardiniere," 
while  on  the  show  window  in  very  small  letters  was  placed  the  notice, 
''The  entrance  of  the  store  is  opposite."  He  had  also  distributed 
cards  and  inserted  advertisements  in  the  newspapers  so  worded  as  to 
convey  the  impression  that  his  shop  was  a  branch  of  the  Paris  con- 
cern. The  court  held  such  acts  to  be  of  a  nature  to  cause  injury  to 
the  Paris  house  and  ordered  the  defendant  to  discontinue  the  use 
of  the  word  "  branch."  * 

Discrimination  against  a  competitor. — Favoring  a  person  to  the 
detriment  of  his  competitors  may  constitute  an  act  of  unfair  competi- 
tion according  to  French  law.  A  common  form  of  such  discrimina- 
tion is  to  omit  or  obscure  the  name  of  a  competitor  in  a  general  direc- 
tory or  publication  of  similar  nature  which  purports  to  give  all  the 
concerns  engaged  in  a  given  line  of  business.  Another  practice  of 
similar  nature  is  to  place  a  person's  advertisement  in  a  more  favorable 

1  Dijon,  13  aoUt  1860,  Mulcey  c.  Boyer ;  Annales  1861,  p.  25. 

2  Nancy,  20  avril  1899,  Soc.  la  Franqaise  ;  cited  by  Pouillet,  op.  cit.,  p.  809. 
=  Paris,  14  dec.  1888,  Lherault  c.  Lobpuf  ;  Annalos  1891,  p.  262. 

*  Casis.  civ.,  17  janv.,  1894,  Bessand,  Blanchard,  Rochard  et  Cie.  c.  Godard ;  Sirey, 
op.  cit.,   1894,   I,  p.  433. 


TRUST    LAWS    AND    UNFAIR    COMPETITlOIsr,  583 

position  with  respect  to  those  of  his  competitors  than  he  is  entitled 
to  have.    A  few  cases  follow : 

The  courts  have  held  it  to  be  unfair  competition  for  the  proprietor 
of  a  steamboat  service  to  publish  and  distribute  a  booklet  with  the 

title  "  General  Directory  of  Steamboats  between and ," 

from  which  he  intentionally  omitted  the  name  of  a  rival  enterprise 
operating  over  the  same  course.^ 

A  certain  manufacturer  contracted  with  the  publishers  of  an 
annual  business  register  for  32  pages  of  advertising  space.  Two 
former  employees  of  his  were  allowed  to  deprive  him  of  a  part  of 
this  space  for  the  purpose  of  injuring  him.  The  court  held  the  act 
to  be  unfair  competition,  enjoined  the  further  suppression  of  his 
adA'ertisements,  and  awarded  damages.- 

The  merchants  of  Commentry  published  an  almanac  for  the  year 
1899,  called  "Almanach  de  Commentry,"  containing  their  addresses 
and  businesses  in  the  advertising  columns.  One  of  the  merchants, 
a  grocer,  bought  200  copies,  which  he  distributed  gratis  among  his 
customers,  after  having  pasted  together  pages  40  and  41,  which 
contained  the  advertisement  of  one  of  his  competitors.  The  coui-t 
held  this  to  be  unfair  competition  and  awarded  damages.^ 

The  manager  of  a  telephone  company  caused  to  be  printed  after 
the  name  of  a  subscriber  the  name  of  one  of  the  latter's  competitors 
in  the  form  of  an  advertisement  instead  of  placing  it  in  its  proper 
alphabetical  order.    The  court  held  this  to  be  unfair  competition."^ 

Corrupting  emplotees. — The  corrupting  of  the  employees  or 
workmen  of  a  competitor  constitutes  unfair  competition  if  done 
with  the  intention  of  securing  his  factory  or  trade  secrets  or  of 
diverting  his  clientele.^  But  it  is  not  unlawful  to  secure  the  services 
of  a  competitor's  workmen  by  offers,  promises,  etc.,  if  there  is  no 
intention  to  obtain  his  trade  secrets  or  to  divert  his  clientele,  or  if 
no  breach  of  contract  for  hire  is  involved.  The  following  decisions 
will  illustrate  the  view  of  the  courts  on  this  point: 

A  proprietor  of  a  bakery  tried  to  corrupt  some  employees  of  a 
competitor  in  order  to  procure  his  secrets  of  manufacture  as  well  as 
the  names  and  addresses  of  his  customers.  He  also  distributed  cir- 
culars claiming  that  he  had  been  formerly  associated  with  the 
founder  of  his  competitor's  establishment  and  that  he  had  secured 
the  head  man  and  all  the  personnel  of  this  founder  and  that  his 
competitor  would  close  his  shop  within  two  years.  The  court  held 
these    acts   to   be   unfair   competition    in    the    highest    degree    and 

1  Ronnos.  4  jiiin  ISRS;  cited  in  Pandectos  Francaises,  tome,  20.  p.  71. 

-  Tril).  comm.  Seine,  0  juin  LSTCi,  Ramo  c.  P>«"sland  ct  Oalcmpoix  ;  Annales  1S77,  p.  47. 

»  Riom,  2S  mars  1!)()(),  Rou^erollc  c.  (iuillot  :  Annales  IVtOl,  p.   ir.S. 

*  Paris,  20  nov.  i;>12.  Revue  Trimestrielle  de  Droit  Civil,  lUir,.  p.  1S4. 

6  Pouillet.  op.   (it.,  p.   102:?. 


584  EEPORT    OP    THE    COMMISSIONER    OF    CORPORATIONS. 

awarded  damages.  The  plaintiff  in  this  case  sent  circulars  to  his 
customers  replying  to  the  claims  of  the  defendant,  which  circulars 
contained  some  incorrect  statements  regarding  the  latter.  Counter 
suit  was  brought  against  the  plaintiff  and  damages  recovered  by  the 
defendant.^ 

A  manufacturer  paid  a  foreman  of  his  competitor  500  francs  for 
the  disclosure  of  the  process  of  glazing  copper  used  in  the  factory 
where  the  latter  was  employed.  The  foreman  also  assisted  the  manu- 
facturer to  the  extent  of  installing  in  his  factory  the  apparatus  neces- 
sary to  carry  on  the  competition.  Suit  was  brought  to  enjoin  the 
manufacturer  from  using  this  process,  and  also  to  recover  damages 
from  both  the  manufacturer  and  the  foreman.  The  court  held  that 
the  process  did  not  have  the  character  of  originality  and  novelty 
which  would  make  it  a  secret  of  manufacture,  and  therefore  refused 
to  enjoin  the  defendant  manufacturer  from  using  it,  but  it  declared 
that  the  act  of  the  manufacturer  in  subsidizing  the  foreman  in  order 
to  obtain  the  process,  and  the  act  of  the  latter  in  assisting  the  manu- 
facturer to  inaugurate  the  competition,  were  unfair  and  rendered 
them  liable  for  damages.- 

A  Parisian  tailor,  by  offering  a  higher  salary  to  a  forewoman  of  his 
competitor  and  also  by  agreeing  to  pay  all  costs  falling  upon  her  in 
case  of  prosecution,  induced  her  to  break  her  contract  for  hire  of 
services  and  to  sign  a  contract  with  him.  The  competitor  brought 
suit  against  him  for  damages.  The  court  held  that,  in  aiding  an 
employee  of  a  competitive  house  to  break  her  contract  by  promising 
to  take  care  of  all  pecuniary  consequences  thereof,  the  defendant  had 
committed  a  wrong  for  which  the  plaintiff  could  justly  demand 
reparation.  Upon  appeal  the  highest  court  confirmed  the  judg- 
ment, holding  that  the  acts  of  defendant  exceeded  the  rights  of  free 
competition  and  constituted  an  offense  of  a  nature  to  render  him 
liable.^ 

An  industrial  concern,  upon  opening  a  new  branch,  hired  two  em- 
ployees of  a  rival  establishment,  one  of  whom  was  experienced  in  the 
manufacture  and  the  other  in  the  sale  of  sewing  cotton.  A  suit  for 
damages  was  brought.  The  court  rejected  it,  however,  on  the  ground 
that  the  two  employees  had  not  violated  any  contractual  obligations 
in  leaving  their  former  employers  and  the  defendants  had  not  com- 
mitted any  reprehensible  act  of  competition  in  hiring  them.* 

1  Douai,  30  janv.  1912,  Petit  c.  Paquin ;  Annales  1913,  p.  80.  This  docision  is  re- 
garded as  important  by  the  Annales  in  tliat  the  court  seems  to  admit  that  it  is  lawful  for  a 
person  to  defend  himself  against  the  injurious  statements  of  others  by  addressing  a  cir- 
cular letter  to  his  customers,  providing  the  statements  are  correct. 

2  Cass,  rej.,  28  nov.  1898,  Lecomte  c.  Lambert  et  flls  et  Debeauvais ;  Annales  1899, 
p.  241. 

3  Cass,  civ.,  27  mai  1908,  Doeuillct  et  Cie.  c.  Raudnitz  ;  Dalloz,  op.  cit.,  1908,  I,  p.  459. 
^  Douai,  15  juill.  1887,  Wallaert  frferes  c.  Boutry  Droulers;  Amiales  1891,  p.  300. 


TKUST    LAWS    AND    UNFAIR    COMPETITION.  585 

Divulging  secrets. — The  divulging  of  the  secrets  of  manufacture  by 
employees  constitutes  a  penal  offense  under  article  418  of  the  Penal 
Code.^  The  re^'ealing  of  processes  of  manufacture  not  presenting 
novelty  or  newness,  which  is  the  criterion  of  a  secret  of  manufac- 
ture within  the  meaning  of  article  418,  and  the  revealing  of  trade 
secrets  other  than  those  of  manufacture  are  not  protected  by  the 
above  article.  Divulging  a  detail  of  administration  or  a  means  of 
control  purely  financial  or  a  list  of  customers,  for  instance,  is  not 
prohibited  by  this  provision,  but  constitutes  an  injurious  act,  making 
the  author  liable  for  damages  in  a  civil  action.^ 

Article  418  relates  only  to  the  disclosure  of  secrets  by  an  em- 
ployee during  the  term  of  his  employment.  If  the  disclosure  is  made 
after  he  has  ended  his  engagement,  the  act  is  not  a  penal  offense, 
but  is  actionable  under  article  1382  of  the  Civil  Code  as  con- 
stituting a  disloyal  act  on  the  part  of  the  former  employee,  for  which 
damages  can  be  claimed. 

Disloyalty  of  former  employees. — According  to  French  law  an 
employee,  upon  the  termination  of  his  engagement,  while  entitled  to 
profit  in  every  legitimate  way  from  the  knowledge  and  experience 
acquired  during  his  employment,  is  under  obligation  not  to  use  the 
information  so  acquired  in  such  a  way  as  to  injure  his  former  patron 
or  to  divert  the  latter's  clientele.  Pie  commits  an  act  of  unfair  com- 
petition, for  example,  if  he  retains  a  copy  of  the  names  and  addresses 
of  the  clients  of  his  former  employer  or  other  memoranda  that  would 
be  useful  to  a  rival  house ;  also  if  before  the  expiration  of  his  engage- 
ment he  solicits  the  clients  of  his  employer  in  the  interest  of  the  con- 
cern which  he  intends  to  establish  or  to  join.^ 

A  few  cases  illustrating  these  principles  follow : 

An  employee  who  was  about  to  leave  a  certain  firm  in  order  to 
establish  a  business  of  his  own  copied  a  part  of  the  ledger  for  his 
own  use,  and  also  the  substance  of  letters  addressed  to  the  firm  by 
its  clients,  and,  finally,  on  his  last  trip  made  at  the  expense  of  his 
employers,  he  reserved  for  himself  some  of  the  orders  which  he  had 
taken  until  he  should  become  established.     The  court  held  such  acts 

'  Art.  418.  Every  manager,  agent,  workman  of  a  factory  who  shall  communicate  or  at- 
tempt to  communicate  to  foreigners  or  to  Frenchmen  residing  in  foreign  countries  any 
secrets  of  the  factory  in  which  he  is  employed  shall  he  punished  with  imprisonment  from 
two  to  five  years  and  a  fine  of  from  500  to  20,000  francs. 

In  addition,  he  may  be  deprived  of  the  rights  mentioned  in  article  42  of  the  present 
Penal  Code  for  not  less  than  5  and  not  more  than  10  years,  counting  from  the  day  on 
which  his  penalty  begins. 

If  these  secrets  have  been  communicated  to  Frenchmen  residing  in  France  the  penalty 
shall  be  imprisonment  from  three  mouths  to  two  years  and  a  fine  of  from  IG  to  200 
francs. 

The  maximum  penalty  pronounced  by  paragraphs  1  and  .1  of  Ihe  present  article 
must  be  applied  if  it  is  a  question  of  the  secrets  of  manufacture  of  arms  and  munitions  of 
war  belonging  to  the  State. 

2  Pouillet,  op.  cit.,  p.  1109. 

spouillet,  op.  clt.,  pp.  1027-1029. 


586  EEPOET    OF    THE    COMMISSIONER    OP    CORPOEATIONS. 

to  be  unfair  competition  and  awarded  damages.  Coimtersiiit  was 
brought  in  this  case  against  tlie  former  em})loyer  for  disparaging  the 
ex-emplo3^ee  to  the  principal  supply  house  and  for  trying  to  prevent 
the  sale  of  raw  materials  to  him.  The  court  declared  this  act  to  be 
unfair  competition,  for  which  damages  Avere  awarded.^ 

In  another  case  the  court  held  that  the  former  employees  of  a  firm 
who  write  to  the  customers  of  that  firm  with  Avhom  they  have*  been  in 
touch  in  their  capacity  as  employees,  and  who  make  use  of  that 
former  position  in  the  interest  of  their  new  employer,  commit  acts  of 
unfair  competition,  rendering  them,  as  well  as  the  new  employer, 
liable  for  damages.- 

Subsidizing  striking  employees  of  competitor. — This  appears  to 
be  a  rather  novel  form  of  unfair  competition  in  France.  The  first 
important  case  occurred  in  Paris  in  1913.  The  mechanicians  of  sev- 
eral taxicab  companies  went  on  a  strike,  as  a  result  of  which  only 
about  one-fourth  of  the  number  of  taxicabs  normally  in  service  con- 
tinued running.  The  proprietors  of  those  taxis  still  in  service  sul)- 
sidized  the  strike  committee,  thus  prolonging  the  strike  to  their 
profit.  The  plaintiffs  claimed  that  this  was  unfair  as  well  as  unlaw- 
ful competition.  The  defendants  maintained  that  the  strike  was 
lawful,  and  therefore,  to  aid  it  with  funds  could  not  be  regarded  as 
unlawful.  The  court  rejected  this  argument,  holding  the  acts  to  be 
at  least  unlawful  if  not  unfair,  and  submitted  the  case  to  a  referee  to 
confirm  the  facts  and  ascertain  the  amount  of  damages.  Upon 
appeal  the  lower  court  was  sustained.  The  Court  of  Appeal  of  Paris 
said,  in  part: 

If  the  iiitei'veutinn  iu  a  labor  strike  by  workmen  belonging  even  to  different 
unions  *  ■'"  *  is,  in  print-iple,  lawfnl,  and  can  not  expose  its  authors  to 
any  action  at  law,  it  is  on  the  express  condition  that  this  intervention  take 
place  without  recourse  to  any  inifair  or  unlawful  procedure ;  a  further  condi- 
tion is  imposed  upon  the  merchant  or  manufacturer  whose  comi)etitor  is  the 
victim  of  the  strike,  namely,  that  of  not  favoring  or  encouraging  in  any  way  a 
cessation  of  his  competitor's  work  in  order  to  derive  profit  thereby ;  the  rules 
of  fairness  in  business  are  imperative  on  this  ix)int;  to  violate  them  Is  to  com- 
mit a  wrongful  and  reprehensible  act  which  can  give  occasion  for  a  suit  for 
damages. 

The  court  in  this  case  did  not  inquire,  specifically  as  to  the  ex- 
istence of  wrongful  intent,  an  essential  element  of  unfair  competi- 
tion, but  adopted  the  convenient  phrase  "  the  wrongs  set  forth  con- 
stitute acts  of  competition  at  least  unlawful  if  not  unfair."^ 

Implied  obligation  not  to  reenter  business. — An  agreement  en- 
tered into  between  an  employer  and  his  employee  or  between  the 

1  Cour  de  Lyon,  29  jiiin  1904,  Geoffray,  Jacquet  et  Gulllermain  c.  Maurage ;  Annales 
1905,  p.  34. 

2Trib.  civ.  Seine,  ."iO  jiiin,  191.'!,  Massiot  c.  Baiidin  ;  Annales,  1914,  p.  27. 

2  Paris,  9  mai  191?.;  Faivre  et  aiitros  c.  Soc.  Fran<,'aise  des  Automoliiles  de  Place; 
Annales,   1914,  pp.   10,   17. 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  587 

seller  of  a  liiisiness  and  the  purchaser  or  between  an  associate  and 
his  coassociates  not  to  engage  in  a  similar  business  is  legal  in  Franco 
if  not  unlimited  in  respect  to  time  and  space.^ 

In  the  absence  of  such  agreements  former  employees  are  under  no 
obligation  to  refrain  from  engaging  at  any  time  in  a  similar  business 
in  the  same  locality  (see  p.  585).  In  the  case  of  the  sale  of  business 
establishments,  especially  retail  stores,  however,  the  seller  is  obligated 
not  to  reestablish  within  a  certain  time  or  within  a  given  locality, 
even  if  the  bill  of  sale  carries  no  clause  to  this  effect.  The  sale  of  a 
business  is  understood  to  include  not  only  the  tangible  property,  but 
also  the  clientele  and  good  will.  Therefore  should  the  seller  re- 
establish himself  immediately  and  draw  to  himself  the  whole  or  a 
part  of  his  former  clientele  he  would  violate  article  1G25  of  the  Civil 
Code,  which  requires  that  the  seller  must  deliver  what  he  has  con- 
tracted to  sell,  and  he  would  also  commit  an  act  of  unfair  competition 
against  the  purchaser,  who  is  apt  to  lose  his  clientele.- 

In  case  the  seller  reserves  the  right  to  reestablish  himself  or  re- 
establishes outside  the  sphere  of  activity  of  his  fonner  establishment 
he  must  refrain  from  all  unfair  means  of  competition,  such  as  writing 
to  his  former  customers. 

The  following  cases  will  illustrate  the  attitude  of  the  courts  on  this 
question : 

The  Dupont  Co.,  at  Perigueux,  i^ublished  a  paper  under  the  name 
I'Echo  de  la  Dordogne.  Upon  the  dissolution  of  the  company  the 
liquidator  made  an  appraisal  of  the  property,  in  which  he  did  not 
place  a  definite  value  on  the  nanie,  clientele,  and  good  will,  but, 
nevertheless,  took  care  to  set  forth  their  importance.  It  was  shown 
that  the  purchaser  of  the  property  in  considering  the  price  also  gave 
due  consideration  to  these  factors,  and  especially  to  the  fact  that 
there  was  no  other  paper  of  this  kind  in  the  place.  After  the  sale 
of  the  paper  to  plaintiff  one  of  the  former  associates  started  a  rival 
journal,  to  which  he  gave  a  similar  name  and  which  he  pretended 
was  a  continuation  of  the  earlier  one.  He  sent  copies  to  the  former 
clientele  and  invited  their  subscriptions  and  resorted  to  various 
other  practices  injurious  to  the  former  publication.  The  Tribunal 
of  Commerce  ordered  a  cessation  of  the  publication  of  the  rival 
journal  and  awarded  damages.  Upon  appeal  the  court  of  Bordeaux 
affirmed  the  decision,  declaring  in  part  as  follows  (p.  283)  : 

The  Siilo  or  tr.nnsfer  of  nn  indnsfi-ial  oslablishment  with  tho  eliontolo  aiul  the 
good  will  has  as  a  result,  in  the  absence  of  an  agreeuiont  to  the  contrary,  the 
prohibition  of  the  seller  or  assignor  from  exercising  a  similar  industiy  in  the 
neighborhood  or  in  the  sphere  of  activity  of  the  establishment  sold. 

In  the  case  of  a  voluntary  sale  or  transfer  the  ]irohil)ition  results  from  the 
very  nature  of  the  contract  by  application  of  article  ICc*")  of  the  Civil  (NkIc. 

iJI.  All.irt,  op.  cit..  p.  200:  Ponillot.  op.  cit..  p.  912. 
2H.  Allart,  op.  cit.,  p.  207;  I-oniHot,  op.  cit.,  p.  912. 


588  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS, 

The  court  held,  however,  that  in  the  case  of  a  vohintarj'^  or  forced 
auction  sale  the  associates  are  bound  only  by  an  agreement  not  to 
reestablish,  but  such  an  agreement  existed  in  this  case,  although 
disputed  by  defendant. 

The  case  was  again  appealed.  The  court  of  cassation  conj&rmed 
the  decisions  of  the  lower  courts,  holding  that  the  above  agreement, 
which  was  unlimited  as  to  time  but  limited  to  the  Department  of 
Dordogne,  was  legal  and  binding  upon  the  defendant.^ 

A  grain  merchant  sold  his  business  and  moved  to  another  town. 
After  several  years  he  opened  a  competing  establishment  in  the 
neighborhood  of  the  one  he  had  sold.  The  court  held  that  while  the 
seller  of  a  business,  after  a  number  of  years  sufficient  to  permit  the 
purchaser  to  definitely  attach  to  himself  the  clientele,  can  establish 
in  the  same  town  a  similar  business,  he  can  not  establish  himself  in 
the  immediate  neighl^orhood  of  the  former  establishment  with  the 
intention  of  competing  against  the  new  owner.^ 

Section  4.  Belgium. 

Introductory. — The  laws  of  Belgium  respecting  unfair  competi- 
tion are  similar  to  those  of  France.  Several  special  laws,  especially 
the  patent  law  of  May  24,  1854,  and  the  trade-mark  law  of  April  1, 
1879,  contain  provisions  prohibiting  certain  unfair  acts.  Several 
provisions  of  the  Penal  Code  are  also  applicable  to  such  cases,  espe- 
cially article  191  relative  to  the  usurpation  of  trade  names,  and 
article  309  relative  to  the  di\T^ilging  of  secrets  of  manufacture.  All 
unfair  acts  not  covered  by  these  special  provisions  are  prosecuted 
under  the  general  provisions  of  law  contained  in  articles  1382  and 
1383  of  the  Civil  Code,  which  are  the  same  as  the  corresponding 
articles  of  the  French  Civil  Code. 

In  1914  a  bill  for  a  special  law  against  unfair  competition  was 
under  consideration  by  the  Belgian  parliament,  but  apparently  was 
not  adopted.  The  Government's  bill  was  presented  November  12, 
1912.3 

Penal  Code. — The  use  of  trade  names,  firm  names,  and  names  of 
organizations  to  distinguish  products  is  protected  by  article  191  of 
the  Penal  Code  which  corresponds  closely  to  the  French  law  of  1824. 
(See  p.  560.)    The  language  of  this  article  is  as  follows: 

Abt.  191. — Whoever  shall  afBx  to  manufactured  articles  or  cause  to  be  affixed 
to  them  by  addition,  curtailment,  or  by  any  alteration  whatever,  the  name  of  a 
manufacturer  other  than  the  one  who  is  the  producer  or  the  firm  name  of  a 

1  Bordeaux,  9  fev.  1885;  Cassation,  16  mars,  1886,  Laporte  c.  Paul  Dupont  fils ; 
Annales  1886,  p.  275. 

^Trib.  civ.  Lannion,  0  jnin  1008;  Ilcnri  Morvan  c.  Societe  Morvan  frferes ;  Annales 
1908,  II.  p.  87. 

^  Verliandlungen  dcr  Mittel-Europiiisclien  Wirtschaftskonferenz  in  Budapest,  1914, 
S.  305. 


TKUST    LAWS   AND    UNFAIE    COMPETITION.  589 

factory  other  than  that  of  the  manufacture  shall  be  punished  with  imprison- 
ment from  one  to  six  months. 

The  same  penalty  shall  be  pronounced  against  e^ery  merchant,  middleman, 
or  retailer  who  shall  knowingly  put  on  sale  or  put  into  circulation  articles 
marked  with  substituted  or  altered  names. 

It  will  be  noted  that  this  article  omits  the  names  of  places  of 
manufacture  which  are  protected  by  the  French  law  of  1824:. 

Article  309  of  the  Belgian  Penal  Code  of  1867  prohibits  the  divulg- 
ing of  secrets  of  manufacture  by  employees.  It  makes  an  important 
advance  over  article  418  of  the  French  Penal  Code  in  that  an  employee 
may  be  prosecuted  criminally  for  divulging  secrets  even  after  his 
employment  has  ended.    The  language  of  this  article  is  as  follows : 

Art.  309.  Anyone  who  maliciously  or  fraudulently  communicates  the  secrets 
of  the  factory  in  which  lie  has  been  or  is  still  employed  shall  be  punished  with 
imprisonment  from  three  months  to  three  years  and  a  fine  of  from  50  to  2,000 
francs. 

It  is  required  that  the  divulging  of  secrets  be  maliciously  or  fraudu- 
lently made.  An  accidental  disclosure  would  not  constitute  a  penal 
offense.  The  secrets  of  commerce  are  not  protected  by  this  article 
but  by  the  general  jurisprudence  under  section  1382  of  the  Civil  Code.^ 

Trade-makk  LAW. — The  trade-mark  law  of  April  1,  1879-  is  very 
similar  to  the  French  law  of  1857.  Article  1  provides  that  every 
sign  serving  to  distinguish  the  products  of  industry  or  the  objects 
of  commerce  can  be  considered  as  a  trade-mark  of  manufacture  or 
connnerce,  including  personal  names,  firm  names,  and  names  of  in- 
dustrial and  commercial  organizations,  if  in  a  distinctive  form. 
Article  2  provides  that  in  order  to  obtain  the  exclusive  use  of  such 
trade-marks  a  person  must  deposit  a  model  in  triplicate  and  a  stereo- 
type plate  of  the  trade-mark  with  the  registrar's  office  of  the  tribunal 
of  commerce  in  the  district  in  w^hich  his  establishment  is  situated. 
Such  registration  is  optional. 

Articles  8,  9,  and  10  provide  the  penalties  for  counterfeiting  trade- 
marks.    Article  8  is  as  follows: 

Art.  8.  Those  are  punished  with  imprisonment  from  eight  days  to  six  montlis 
or  a  fine  of  from  20  to  2,000  francs  or  both: 

a.  Who  have  counterfeited  a  trade-mark  and  those  who  have  fraudulently 
made  use  of  a  counterfeited  trade-mark; 

b.  AN'ho  fraudulently  have  affixed  to  or  by  addition,  curtailment,  or  any  alter- 
ation whatever  have  made  appear  on  the  products  of  their  industry  or  tlie 
objects  of  their  commerce  a  trade-mark  belonging  to  another ; 

c.  Who  have  knowingly  sold,  put  on  sale  or  in  circulation,  products  bearing 
a  counterfeit  trade-mark  or  one  fraudulently  affixed. 

Article  9  provides  that  anyone  who  assists  in  any  manner  the  ac- 
complishment of  the  misdemeanors  mentioned  in  article  8,  or  who 
directly  causes  these  misdemeanors,  by  gifts,  promises,  threats,  abuse 

1  !^^oroall,  Traite  do  la  concnrronco  illiVito.  r.nixollos.  IOO4.  p.  Ififi. 

- Loi  de  !"■  avril  lS7t),  conccrnunt  les  marques  dc  fabiique  et  de  commerce. 


590  EEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

of  authority  or  power,  machinations,  or  other  culpable  artifices,  shall 
be  punished  with  the  penalties  prescribed  in  that  section.  Article  10 
provides  heavier  penalties  for  a  second  offense  if  committed  within 
five  years  from  the  first  offense. 

General  provisions  of  the  Civil  Code. — The  acts  of  unfair  com- 
petition in  Belgium  which  are  actionable  under  the  general  provisions 
of  articles  1382  and  1383  of  the  Civil  Code  are  as  varied  in  form  as  in 
France.  The  Belgian  courts  frequently  cite  as  precedents  the  French 
decisions  and  vice  versa.  Important  classes  of  such  acts,  in  addition 
to  those  intended  to  cause  confusion  between  rival  establishments  or 
products,  are  (1)  circulating  defamatory  or  disparaging  statements 
regarding  a  competitor;  (2)  cutting  resale  prices  under  certain  con- 
ditions; (3)  corrupting  and  enticing  the  employees  of  a  competitor; 
and  (4)  being  disloyal  to  a  former  employer.  The  purpose  of  all 
such  acts  is  to  divert  a  competitor's  clientele,  to  drive  him  out  of 
business,  or  in  other  ways  to  injure  him.  They  give  rise  to  civil 
actions  to  enjoin  the  unfair  practices  and  to  recover  damages  under 
article  1382  of  the  Civil  Code.  According  to  a  recent  decision  of 
the  courts,  an  action  for  unfair  competition  has  three  distinct  and 
necessary  elements:  (1)  An  act  of  competition  contrary  to  fairness 
in  business;  (2)  a  XDrejudice  to  one  of  the  parties;  and  (3)  a  relation 
of  cause  and  effect  between  the  first  two  elements.^ 

Defamatory  and  disparaging  statements. — The  principles  applying 
to  cases  of  disparagement  in  Belgium  are  substantially  the  same  as 
those  developed  by  French  jurisprudence.  It  is  not  necessary  that  a 
rival  establishment  be  referred  to  by  name.-  Beference  to  a  certain 
class  of  manufacturers,  or  implications  of  such  a  nature  that  the  par- 
ticular establishment  or  product  disparaged  can  readily  be  inferred, 
may  constitute  unfair  competition.  The  circulation  of  true  state- 
ments may  also  constitute  unfair  competition  when  done  for  the 
purpose  of  causing  injury.  A  few  decisions  will  illustrate  the  princi- 
ples involved  in  such  cases. 

A  merchant  had  printed  on  blotters  which  he  used  for  advertising 
purposes  a  warning  to  the  public  to  avoid  appendicitis  by  using  the 
granite  ware  which  he  sold  in  his  store.  He  also  published  an 
article  in  a  journal  to  the  effect  that  medical  authorities  agreed  that 
in  three-fourths  of  the  cases  of  appendicitis  it  was  caused  by  chips  of 
enamel  which  were  carried  into  the  digestive  system  by  the  use  of 
enameled  cooking  utensils.  The  court  held  these  acts  to  be  unfair 
competition  and  awarded  damages.^    The  court  said,  in  part: 

Although  each  manufacturer  is  free  to  praise  his  products  and  even  to  exag- 
gerate their  qualities,  it  is  not  permissible  for  him  to  disparage  the  products 

1  Bruxelles,  11  nov.  1910,  Becker  et  consorts  c.  Ilelman  ;  La  .lurisprudence  Commerciale 
de  Bruxelles,  1911,  p.  19. 

"  Moreau,  op.  cit.,  p.  187. 

=  Trib.  coram.  Liege,  10  nov.  1903,  Societe  des  Usines  Aubry  c.  Bebelman ;  Annalea 
1903,  pp.  334,  335, 


TKUST    LAWS    AND    UNFAIR    COMPETITION.  591 

of  a  competing  and  similar  manufacture;  *  *  *  ti^e  action  is  admissible 
if  it  is  true  that  the  defendant  while  recommending  his  own  products  has  dis- 
paraged those  of  his  competitors  without  even  indicating  the  names  of  the 
competing  manufacturers. 

In  another  case  the  defendant  had  distributed  certain  printed 
circidars  attacking  in  a  bitter  fashion  plaintiifs  firm  as  well  as  one  of 
them  personally  and  disparac:ing  its  products.  The  court  held  that, 
even  were  it  established  that  the  allegations  contained  in  this  cir- 
cular were  true  in  whole  or  in  part,  nevertheless  defendant  had 
exceeded  his  right  in  giving  these  revelations  a  publicity  which  had 
no  other  aim  than  to  injure  a  competitor  and  had,  therefore,  com- 
mitted an  act  of  unfair  competition.^ 

A  merchant  sold  in  Belgium  cigarettes  wrapped  in  a  different 
colored  paper  than  that  used  by  the  French  regie,  or  Government 
monopoly,  but  bearing  the  following  notice : 

Cigarettes  compounded  and  manufactured  according  to  tlie  French  processes. 
N.  B. — No  cigarette  of  reasonable  price  can  come  from  a  foreign  country  be- 
cause the  duties  are  too  high ;  to  say  the  contrary  is  to  deceive  the  purchaser. 

The  court  held  this  to  be  an  act  of  unfair  competition  against  the 
French  tobacco  monopoly.^ 

A  gas-generator  concern  published  a  circular  in  which  they  repro- 
duced a  letter  which  purjiorted  to  have  been  addressed  to  them  by 
one  of  their  customers  and  which  stated  that  the  expense  for  repairs 
of  defendants'  gas  generator  was  nothing  in  comparison  with  that 

of  the  T gas  generator,  which  had  been  replaced.     The  court 

held  that,  since  the  names  of  but  three  systems  of  gas  generators 
commenced  with  the  letter  T,  and  in  ^iew  of  the  fact  that  the  gas 
generator  of  the  plaintiff  was  so  well  Imown,  a  part  of  the  public 
would  certainly  think  plaintiff's  apparatus  was  referred  to  in  the 
circular  and  that  the  defendants,  in  thus  making  a  comparison  be- 
tween their  own  apparatus  and  that  of  the  plaintiff  and  in  criticizing 
the  product  of  a  competitor,  had  committed  an  unlawful  act.^ 

Price  cutting. — Belgian  courts  follow  in  general  the  same  princi- 
ples as  the  French  courts  in  dealing  w^ith  the  question  of  price 
cutting.  They  inquire  (1)  whether  the  cutting  of  prices  is  accom- 
panied by  acts  intended  to  depreciate  the  value  of  the  product  and 
(2)  whether  it  is  done  in  violation  of  an  express  agreement  to  t\\^ 
contrar3\  Apparently,  the  courts  pay  less  attention  to  the  question 
of  the  fairness  of  the  means  employed  to  procure  trade-marked  goods 
sold  at  reduced  prices  than  the  German  courts.  A  few  cases  will 
illustrate  the  application  of  article  1882  to  cases  of  this  kind. 

1  Oanrl,  ^  mars  1911,  Verhol.st  et  consorts  c.  Denys  et  consorts ;  raslcrisio  Roljic,  1012, 
II,  p.  5. 

SBniselles,  !)  juin  1909,  Etat  Frsnu.ais  c.  I!  -  ;  I'asicrisio  lU-Ifro.  V.WO.  II,  p.  100. 

STrib.  comm.  Bruxelles,  7  dec.  1912,  Wilford  c.  E  ct  B ;  La  .Jurisprudence  Coramerciale 
de  Bruxelles,  1913,  p.  151. 


592  KEPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

A  certain  concern  was  sued  by  a  manufacturing  company  tinder 
article  1382  on  the  ground  that  it  had  advertised  a  commodity  in  14 
newspapers  of  the  country  at  a  price  below  that  paid  by  it  to  the  said 
manufacturing  company.  There  was  also  evidence  to  show  that 
when  customers  inquired  for  the  said  commodity  the  defendant 
concern  declared  that  it  had  sold  out  its  stock  and  offered  instead  a 
similar  article  which  it  recommended  as  superior.  The  court  held 
that  the  mere  sale  of  a  commodity  below  the  purchase  price  was 
unobjectionable,  since  each  one  is  free  to  dispose  as  he  sees  fit  of 
that  which  he  has  legitimately  acquired,  but  such  advertisement  of  a 
standard  article  at  less  than  half  the  regular  price  when  defendant 
did  not  have  a  stock  on  hand  sufficient  to  meet  the  demand  tended 
to  create  a  bad  reputation  to  the  injury  of  another  merchant  and 
also  to  prejudice  the  custom  of  the  manufacturing  company  by  con- 
veying the  impression  that  defendant  had  been  granted  unusually 
favorable  terms.  The  defendant  concern  was,  therefore,  ordered  to 
pay  damages  and  the  cost  of  publishing  the  judgment  of  the  court 
in  the  same  14  newspapers.^ 

Defendant,  a  retailer,  made  a  verbal  contract  with  plaintiff,  a 
manufacturer,  not  to  sell  his  kind  of  little  cigars  below  the  price 
fixed  by  the  latter  and  marked  on  the  box.  It  was  shown  that  de- 
fendant had  broken  this  contract.  The  court  awarded  damages  to 
the  plaintiff.- 

Defendant  sold  some  little  cigars  below  the  price  marked  on  the 
box.  The  notice  on  the  box  also  stated  that  anyone  not  maintaining 
this  price,  or,  while  maintaining  the  price,  depreciated  the  article  by 
giving  premiums,  would  be  prosecuted.  There  was  no  contract  be- 
tween the  parties  to  the  suit  or  betAveen  the  defendant  and  the  dis- 
tributor to  maintain  prices.  The  court  held  that  in  reducing  prices 
defendant  had  not  committed  an  unfair  act  against  the  manufac- 
turer.^ 

A  retailer  sold  Pall  Mall  cigarettes  at  Antwerp  and  Brussels  below 
the  price  indicated  on  the  outside  wrapper  of  the  boxes.  He  had  not 
entered  into  any  contract  to  maintain  prices.  The  court  decided,  there- 
fore, that  he  was  not  guilty  of  unfair  competition  against  the  manu- 
facturer, holding  that  the  right  of  the  merchant  to  dispose  of  his 
goods  as  he  sees  fit  is  absolute  if  they  have  been  legitimately  pro- 
cured, that  the  notice  on  the  goods  that  they  can  not  be  sold  below 
a  certain  price  does  not  impose  upon  them  a  condition  which  should 
be  transmitted  with  them,  and  that,  while  the  seller  can  bind  the 
purchaser  not  to  resell  below  a  certain  price,  and  this  legal  contract  is 
obligatory  for  the  one  who  makes  it,  it  does  not  bind  others  than  the 

1  Tribunal  de  Commerce  de  Bruxelles,  21  mars  1905,  Soc.  Napoleon  Rinskopf  c.  Soc. 
Cohn-Donnay  et  Cie.  et  al.  ;  Pasicrisie  Belfie,  1005,  III,  p.  303. 

2  Liege,  13  juill.  1912,  Larose  c.  Tincbant ;  Pasicrisie  Beige,  1912.  II,  p.  336. 

3  Liege,  26  juill.  1910,  Tinchant  c.  Uuchateau ;  Pasicrisie  Beige,  1910,  II,  p.  367. 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  593 

contracting  parties.  The  court  further  held  that  the  defendant  had 
committed  no  unlawful  act,  since  it  was  not  alleged  that  by  conniving 
with  certain  purchasers  he  had  obtained  from  them  the  goods  at 
prices  permitting  him  to  resell  at  a  profit  below  the  fixed  prices, 
causing  them  in  his  personal  interest  to  break  their  contract  with 
plaintiff,  nor  had  he  done  anything  to  discredit  the  products.^ 

A  similar  action  was  brought  against  the  defendant  in  the  above 
case  for  selling  the  "  Petit  Larousse  illustre  "  dictionary  below  the 
price  fixed  by  the  publishers.  It  was  shown  that  the  plaintiffs  had 
refused  to  deliver  their  books  to  defendant,  because  he  would  not 
agree  to  maintain  the  price,  and  that  in  spite  of  this  defendant  had 
procured  indirectly  a  large  number  of  copies  which  he  sold  below  the 
fixed  price.  The  court  of  appeal  did  not  consider  how  the  defend- 
ant procured  the  books,  but  decided  that  he  had  not  committed  an 
act  of  unfair  competition  in  cutting  the  resale  prices,  since  he  was 
not  bound  by  any  contract.^ 

An  association  of  manufacturers  of  pharmaceutical  products 
sought  to  maintain  a  fixed  price  by  various  tactics,  such  as  refusing 
to  deliver  to  dealers  not  parties  to  the  agreement,  or  delivering  to 
them  only  at  the  price  fixed  for  sale  to  the  public,  so  that  it  was 
impossible  for  them  to  make  any  profit.  The  court  held  that  while 
the  manufacturer  or  proprietor  of  a  product  is  free  to  sell  it  at  any 
price  that  he  chooses,  or  to  refuse  to  sell  it  at  all,  and  can  also  impose 
upon  the  purchaser  the  condition  not  to  resell  except  at  a  fixed  price, 
the  concerted  tactics  of  the  defendant  association  were  a  restraint  of 
the  freedom  of  commerce  and  industry.^ 

Disloyalty  of  former  employees. — Cases  of  this  kind  are  frequent 
in  Belgian  jurisprudence,  as  well  as  in  that  of  France.  Former  em- 
ployees are  under  obligations,  even  in  the  absence  of  any  agreement, 
not  to  use  the  information  acquired  during  the  period  of  employment 
in  such  a  way  as  to  injure  their  former  employers.  A  few  cases  of 
this  kind  are  given  below. 

A  former  employee  of  a  company  who  had  been  in  charge  of  its 
commercial  correspondence  established  with  another  person  a  com- 
peting company,  of  which  he  became  the  manager.  It  was  shown 
that  he  had  used  the  knowledge  acquired  by  virtue  of  his  employ- 
ment, especially  regarding  the  names  of  customers  and  their  business 
habits  and  requirements,  and  also  regarding  prices  and  market  con- 
ditions, the  methods  of  advertising,  etc.,  in  a  manner  to  injure  the 

iTrib.  coram.  Rruxelles,  6  nov.  1911,  Soci^te  Turkische  Cigarette  et  Tabac  Fabrick  c. 
Society  des  Kiands  ma;,'asins  Leonhard  Tiotz  ;  La  Jurisprudence  Commerciale  de  Bruxelles, 
1912,  p.   ir.9. 

2  Bruxelles,  29  juill.  1909,  Soci6t6  en  Nom  Collectif  IIollier-Larousse  et  Cie.,  c.  L. 
Tiotz,  Sociele  Anouyiiic  Crands  fttablissements  I.eonhaid  Tictz  :  rnsicrisie  Beige,  1909,  II, 

p.  noL'. 

^Trib.  coram.  Bruxolles  (4  ch.),  12  nov.  1907,  Gripekoven  c.  S.  ;  Annales  1908,  II.  p.  11. 
30035°— 16 38 


594  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

business  of  his  former  employer.     The  court  therefore  ordered  him 
to  pay  damages.^ 

The  former  head  cutter  of  a  dressmaking  establishment  in  Ghent 
opened  a  riA^al  establishment  and  announced  this  opening  by  means 
of  circulars  containing  the  following  reference : 

Having  been  for  many  years  employed  as  bead  cutter  in  several  large  towns, 
and  in  the  last  place  An  Louvre,  in  Ghent,  where  I  remained  nearly  five  years, 
the  skill  of  which  I  have  given  proof  makes  me  hope  that  the  ladies  will  not 
hesitate  to  honor  me  with  their  confidence. 

The  court  held  for  the  former  employer  who  brought  suit  on  the 
ground  that  defendant,  by  circulating  this  announcement,  had  tried 
to  solicit  the  customers  of  the  plaintiff.-    The  court  said  in  part : 

The  reference  to  the  fact  of  being  a  former  employee  of  a  competing  firm 
always  has  for  its  aim  to  profit  by  a  reputation  to  which  the  former  employee 
has  no  right,  and  often  for  the  sole  reason  of  being  a  means  of  diverting  the 
clientele,  especially  when  the  competition  is  established  in  the  same  locality. 
On  every  hypothesis  this  reference  is  unlawful  when  addressed  to  the  customers 
of  a  former  patron. 

A  person  had  the  exclusive  selling  agency  for  a  Dutch  fashion 
journal  in  Belgium.  During  the  13  years  covered  by  this  arrange- 
ment this  person  was  known  in  Belgium  as  the  publisher  of  the 
journal.  Before  the  termination  of  this  arrangement  the  true  pub- 
lisher announced  in  the  journal  that  he  was  the  real  owner.  lie  also 
procured  from  an  ex-employee  of  the  agent  a  list  of  subscribers  of  the 
journal  in  Belgium.  The  court  held  this  to  be  an  act  of  unfair  com- 
petition against  the  agent.  A  countersuit  was  brought  in  this  case  by 
the  publisher  against  the  former  agent  for  sending  out  a  circular  to 
the  subscribers  soliciting  subscriptions  to  a  new  journal  of  similar 
character,  in  which  it  was  stated  that  for  the  same  price  they  would 
obtain  a  subscription  lasting  twice  as  long.  The  court  held  that  this 
act  constituted  unfair  competition  against  the  publisher.^ 

Enticing  emyloijees. — According  to  Belgian  law,  it  is  permissible 
for  a  competitor  to  hire  the  employees  of  his  rival,  even  b}^  the  offer 
of  advantages,  higher  wages,  etc..  and  also  permissible  for  the  em- 
ployees of  one  employer  to  leave  him  and  enter  into  the  service  of  a 
competitor,  providing  there  is  no  agreement  to  the  contrary.  The 
hiring  of  a  competitor's  employees  constitutes  an  act  of  unfair  com- 
petition, however,  when  it  has  for  its  aim  and  effect  to  disorganize 
the  services  of  a  competitor  or  to  find  out  his  secrets  of  manufacture 

iTrib.  comm.  Bruxelles  (!'■«  ch.),  30  janv.  1908,  Societe  M.  c.  SociPtg  O.  et  associes  ; 
La  .Turispi-udence  Commerciale  de  Bruxelles,  1908,  p.  153. 

2Trih.  comm.  de  Gand  (f"  ch.i,  30  juin  1906,  Ledant  c.  Lofobvre  ;  Paslcrisie  Beige, 
1007,  III,  p.   1G4. 

^Trib.  comm.  Bruxelles,  15  nov..  190G,  Schepons  et  Cio.  c.  Sythoffi  et  Meeuwissen  ;  La 
Jurisprudence  Commerciale  de  Bruxelles,  1907,  p.  8. 


TKUST    LAWS    AND    UNFAIR    COMPETITION.  595 

or  of  commerce.^     A  few  cases  will  illustrate  the  attitude  of  the 
courts  regarding  this  practice. 

A  manufacturer  brought  suit  against  a  competitor  for  hiring  some 
of  his  agents.^  After  stating  the  general  principles  involved  in  such 
cases,  the  court  said : 

These  principles  do  not  go  as  far  as  to  permit  a  maunfacturer  to  attract  to 
himself  the  agents  of  a  competitor  for  the  purpose  either  of  finding  out  the  secrets 
of  the  latter  or  of  disorganizing  his  services  and  thus  suppressing  or  weakening 
his  free  competition.  Such  acts  are  contrary  to  commercial  honesty,  and  in 
every  case  constitute  a  fraud  or,  at  least,  a  wrong,  reparation  for  which  is  due 
to  the  one  who  finds  himself  the  victim  thereof. 

A  competitor  of  a  certain  manufacturer  succeeded  by  means  of 
gifts  and  promises  in  hiring  several  of  the  hitter's  employees  who, 
it  was  claimed,  were  engaged  in  industrial  processes  requiring  special 
skill.  The  court  held  that  neither  the  act  of  hiring  these  workmen 
nor  the  act  of  making  them  gifts  and  promises  could  be  regarded  as 
unfair.  It  was  not  shown  that  the  defendant  sought  to  secure  the 
secrets  of  manufacture  or  the  special  processes  of  the  plaintiff;  and 
as  the  defendant  might  have  been  prompted  by  legitimate  motives, 
such  as  the  desire  to  secure  the  services  of  more  skilled  or  intelligent 
workmen,  the  court  dismissed  the  suit.^ 

A  proprietor  of  a  ladies'  tailoring  establishment  employed  the 
forewoman  and  three  working  women  of  a  competitor  and,  with  their 
assistance,  copied  patterns  of  gowns  which  the  competitor  had 
bought  at  a  Parisian  shop.  It  was  shown  that  the  forewoman  had 
been  dismissed  by  plaintiff,  and  that  the  three  Avorking  women  had 
followed  the  forewoman  without  any  solicitation  from  defendant; 
also  that  the  designs  were  not  of  such  an  original  character  that  they 
could  not  have  been  procured  elsewhere,  having  been  reproduced  in 
certain  publications.  The  court  held  that  the  acts  of  defendant  did 
not  constitute  unfair  competition  against  the  plaintiff.'* 

Section  5.  Italy. 

Introductory. — The  adjudication  of  cases  of  unfair  competition  in 
Italy  follows  in  general  the  French  system.  Certain  practices  are 
forbidden  by  provisions  of  the  Penal  Code  or  of  special  laws  relating 
to  patents,  trade-marks,  etc.,  while  other  practices  furnish  ground 
for  a  civil  action  for.  an  injunction  or  damages  under  section  1151 
of  the  Civil  Code. 

1  Pasicrisie  Belpe.  1007,  ITT.  p.  2.'^2. 

2Trib.  comm.  Bruxellos  (1"  ch.i,  4  juill.  1898,  Soci^te  Anonyme  "Manufacture  de 
Biscuits  Parein  "  c.  Soci<'>t6  Anonyme  "Victoria";  Pasicrisic  Belffo,  1808,  III.  p.  20.5. 

''Trib.  comm.  d'.Vnvors  (^'  ch.),  27  juin  1809,  Soci^tC'  anonyme  pour  Texploitation  de 
la  mac-hino  ft  drcoupcr  le  I>ois  c.  I, a  Sorirlo  anonyme  I'-Viiile  ;  .Tiirisprudenc-o  <h\  Port 
d'Anvers,   1800.   I,  p.  .'^01. 

*  Trlb.  comm.  Bruxelles,  25  octobrc  1012,  Bargeaud  c.  II.:  La  Jurisprudence  Commer- 
Ciale  de  Bruxelles,  1013.  p.  50. 


596  EEPOET    OF    THE    COMMISSIONER   OF    COEPOKATIONS. 

Italy  has  not  as  yet  enacted  a  special  law  against  unfair  competi- 
tion, although  such  a  law  has  been  drafted  and  recommended  by  a 
commission  called  the  "  Royal  commission  for  the  study  and  proposal 
of  reforms  of  the  present  Italian  legislation  concerning  industrial 
property,"  which  was  created  by  a  royal  decree  of  October  8,  190G,^ 

Pexal  Code. — Section  163  of  the  Penal  Code  forbids  the  disclosure 
of  secrets  which  cause  injury.    It  reads  as  follows: 

Sec.  163.  Whoever  by  reasou  of  his  rank,  otEce,  profession,  or  trade  gains 
knowledge  of  a  secret,  the  publication  of  which  may  cause  injury  to  another, 
and  publishes  the  same  without  just  cause,  shall  be  punished  with  imprison- 
ment not  to  exceed  one  month  or  with  a  fine  of  from  50  to  1,000  lire.  If  injury 
results,  the  penalty,  shall  not  be  less  than  300  lire. 

Section  295  forbids  the  fraudulent  substitution  of  one  article  for 
another. 

Sec.  295.  Whoever  in  the  exercise  of  his  own  business  deceives  a  purchaser 
by  delivering  to  him  one  article  instead  of  another,  or  an  article  different  as 
regards  origin,  quality,  or  quantity  from  that  shown  or  bargained  for,  shall  be 
punished  with  imprisonment  not  to  exceed  six  months  or  with  a  penalty  of  from 
50  to  3,000  lire.  If  the  fraud  relates  to  precious  objects,  the  penalty  shall  be 
imprisonment  from  3  to  18  months  or  a  fine  not  less  than  500  lire. 

Sections  296  and  297  relate  to  the  reproduction  or  misappropria- 
tion of  marks  used  to  distinguish  the  products  of  another. 

Akt.  296.  Whoever  counterfeits  or  alters  the  names,  marks,  or  distinctive 
signs  of  the  works  of  skill  or  of  the  products  of  any  industry  whatever,  or  who 
makes  use  of  such  names,  marks,  or  signs,  even  though  counterfeited  or  altered 
by  another,  is  punished  by  imprisonment  of  from  one  month  to  two  years  and 
with  a  fine  of  from  .50  to  5,000  lire. 

^^'hoever  counterfeits  or  alters  industrial  designs  or  models  or  makes  use  of 
such  designs  or  models,  even  though  counterfeited  or  altered  by  another,  is 
subject  to  the  same  penalty. 

The  magistrate  may  order  that  the  sentence  of  condemnation  be  inserted  in  a 
newspaper,  designated  by  him,  at  the  expense  of  the  condemned. 

Akt.  297.  W^hoever,  in  order  to  carry  on  trade  therewith,  imports  into  the 
State,  offers  for  sale,  or  in  any  other  manner  puts  into  circulation  works  of 
skill  or  products  of  any  industry  whatever,  witli  names,  marks,  or  distinctive 
signs  counterfeited  or  altered,  or  with  names,  marks,  or  distinctive  signs  apt 
to  deceive  the  purchaser  with  regard  to  the  origin  or  quality  of  the  work  or 
product  is  punished  with  imprisonment  of  from  one  month  to  two  years  and 
with  a  fine  of  from  ,50  to  5.000  lire. 

Law  or  August  30,  1868.— The  law^  of  August  30,  1868,^  relative  to 
trade-marks  and  other  distinguishing  marks  prohibits  in  section  5 
the  misappropriation  and  misuse  of  certain  business  designations,  as 
follows : 

Sec.  5.  In  addition  to  the  general  prohil)ition  against  usurping  the  name  or 
the  signature  of  a  company  or  individual,  it  is  also  forbidden  to  appropriate 

1  Atti  della  Commissione  reale,  ecc,  Vol.  II,  Roma,  1911,  p.  575:  cited  in  U  Diritto 
Commerciale,  1912,  I,  p.  452,  and  III,  p.  47. 

^Legge,  30  agosto  1868,  n.  4577,  concernente  i  marchi  e  i  segni  distintivi  di  fabbrica. 


TRUST    LAWS   AND    UNPAIE    COMPETITION.  597 

the  commercial  name  or  the  sign  of  the  business,  the  characteristic  emblem, 
the  name,  or  title  of  an  association,  or  juristic  person,  either  foreign  or  national, 
and  to  place  them  upon  shops,  industrial  or  commercial  products,  or  on  designs, 
engravings,  or  other  works  of  art ;  even  if  the  firm  name,  sign,  emblem,  name, 
Of  title  aforesaid  does  not  coustitute  part  of  a  trade-marii  or  distinctive  sign 
or  should  not  be  registered  in  accordance  with  the  present  hnv. 

The  court  held  that  a  certain  firm  which  used  the  name  "  Prin- 
cesse"  for  corsets  was  liable  for  damages  to  the  firm  Ilosenthal, 
Fleischer  &  Co.,  who  had  previously  acquired  the  trade-mark  "  E.  F. 
C.  a  la  Princesse  "  for  a  similar  article,  the  act  having  been  mali- 
ciously committed.^ 

Article  12  prohibits  (1)  the  counterfeiting  of  trade-marks  or  other 
distinguishing  signs,  (2)  the  fraudulent  imitation  of  trade-marks 
and  other  distinguishing  signs,  and  (3)  the  sale  or  offer  for  sale  of 
goods  bearing  counterfeit  or  fraudulently  imitated  trade-marks, 
signs,  etc.    The  language  of  this  section  is  as  follows : 

Akt.  12.  He  shall  be  punished  witli  a  fine  of  not  more  tlian  2,000  lire  even  if 
there  is  no  damage  to  a  tliird  party : 

1.  Who  sliall  have  counterfeited  a  trade-marli  or  distinctive  sign  or  who  shall 
have  wittingly  made  use  tliereof ; 

2.  Who  shall  have  wittingly  placed  in  circulation,  sold  or  imported  from  a 
foreign  country,  and  for  commercial  use,  products  with  counterfeit  marivs ; 

3.  Who  shall  have  contravened  the  provisions  of  articles  3,  5,  and  6  of  the 
present  law ; 

4.  Who,  without  having  actually  counterfeited  a  trade-marlx  or  distinctive 
sign,  shall  have  made  a  fraudulent  imitation  of  one,  or  who  shall  have  wit- 
tingly made  use  of  a  fraudulently  imitated  trade-mark  or  sign ; 

5.  Who  shall  have  wittingly  placed  in  circulation,  sold,  or  imported  from  a 
foreign  country,  and  for  commercial  use,  products  with  a  fraudulently  imi- 
tated trade-mark  or  sign ; 

6.  Who  shall  have  wittingly  made  use  of  a  trade-mark  or  sign,  insignia  or 
emblem  bearing  an  indication  apt  to  deceive  the  purchaser  as  to  the  nature  of 
the  product  or  who  shall  have  sold  products  provided  with  such  trade-marks, 
signs,  or  emblems. 

In  case  of  second  offense,  the  fine  shall  be  not  more  than  4,000  lire. 

The  trade-marks  or  signs  counterfeited,  the  Instruments  which  have  served  in 
the  fraud,  and  not  merely  the  products  and  objects  accredited  \yith  such  counter- 
feiting, shall  be  confiscated. 

The  trade-marks  or  signs,  insignia,  or  emblems  altered  shall  be  restored  at  the 
expense  of  the  offender. 

These  penalties  are  applicable  without  prejudice  to  indemnification  for  dam- 
ages with  regard  to  him  who  justly  demands  them  and  to  those  greater  penal- 
ties which  are  established  by  the  I'eual  Code  for  the  case  of  falsification. 

Law  of  October  30,  1859.— Section  8  of  the  law  of  October  30, 
1850,-  relating  to  patent  rights.  ])rovides  that  tlie  patent  on  a  now 
article  comprises  the  exclusive  right  of  manufacture  and  sale  of  the 

*  Corto  fli  Cass.izione,  Torino,  IS  novombro  IflOO.  ^r.intovnni  f>.  C.  c.  Uosonthal, 
FleiscluT  &  Co.;  U  Filangieii,  lOlo,  p.  il>i. 

=  .'IT.'^l  Ucjjio  Dooroto  :  insorto  noll.n  Oaz/,.  Piom.  dol  "  dicoiuUre,  18.50,  modiflcaziorn-  alia 
Legge  sulle  privativo  incliistriall  di'l  ."'.o  oltobro  18."»9. 


598  EEPOET    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

article.  This  proyision  appears  to  make  it  allowable  for  manu- 
facturers of  patented  articles  to  fix  the  resale  price  and  other  condi- 
tions of  sale.  Under  such  circumstances  the  cutting  of  the  price  of 
patented  articles  fixed  by  the  manufacturer  appears  to  be  regarded  as 
unfair  competition. 

The  appellate  court  of  Torino  declared  it  to  constitute  unfair  com- 
petition according  to  section  8  of  the  patent  law  to  buy  goods,  manu- 
factured and  patented  in  Italy,  in  a  foreign  country  and  to  resell 
them  in  Italy  at  a  lower  price  than  that  fixed  by  the  holder  of  the 
patent  or  by  the  sole  selling  agent.^ 

Civil  Code. — Article  1151  of  the  Italian  Civil  Code  contains  a  gen- 
eral provision  of  law  applicable  to  cases  of  unfair  competition  simi- 
lar to  that  found  in  article  1382  of  the  French  Civil  Code.  The 
language  of  this  article  is  as  follows: 

Art.  1151.  Every  act  of  a  person  which  causes  damage  to  another,  obliges 
him  by  whose  fiiult  the  damage  has  been  caused  to  compensate  for  said  damage. 

As  a  result  of  the  interpretation  of  this  provision,  its  application 
is  practically  limited  to  cases  where  deceit  or  an  milawful  act  on  the 
part  of  the  offender  can  be  shown.^ 

Article  1151  of  the  Civil  Code  is  supplemented  by  article  1152, 
which  provides  that  every  person  is  responsible  for  the  damage 
caused  not  only  by  his  own  acts,  but  as  a  result  of  his  negligence  or 
imprudence,  and  also  by  article  1153,  which  provides  that  every  per- 
son is  equally  liable  for  injuries  resulting  from  his  own  acts  and 
for  injuries  resulting  from  the  acts  of  persons  for  whom  he  is  respon- 
sible or  of  chattels  in  his  custody. 

The  following  cases  illustrate  the  application  of  arti<3le  1151  to 
unfair  competitive  practices : 

Enticing  custo?ners. — The  practise  of  drawing  prospective  pur- 
chasers awa\'  from  a  competitor  was  held  to  constitute  unfair  com- 
petition by  a  Venice  court.^  A  novelty  dealei-,  who  had  placed  a 
runner  in  front  of  a  competitor's  shop  to  coax  buyers  away  and  into 
his  own  shop,  was  held  liable  for  damages  in  an  action  charging  un- 
fair competition  under  section  1151  of  the  Civil  Code.  The  court 
said : 

As  long  as  one  of  these  runners,  of  whom  the  house  of  Pauly  speaks,  stands 
in  the  neighborhood  of  a  shop  in  the  public  street,  even  placing  himself  at  a 
show  window,  and  remains  in  a  purely  contemplative  attitude,  it  may  be  spoken 
of  as  annoyance,  but  not  as  direct  offence.  On  the  contrary,  there  is  damage 
when  the  runner  becomes  active  and  seeks  to  turn  the  customers  aside,  whether 
by  treating  with  them  directly  or  by  treating  with  the  persons  who  accompany 
them.  I 

1  Corte  d'appello,  Torino,  15  maggio  1912,  Consorzio  Agrario  Cooperative  di  Torino  c. 
Martin  Cultivator  Co.  :  Mon.  d.  Trib.,  lOliJ.  p.  U:\C>. 

2  Ramella.  Trattato  doll;i  Propriota  Indnstrialo,  1000.  II,  p.  ?>~'2. 

"Trib.  di  Venezia,  14  aprile  1904.  Societa  Salviati  .Tesurum  c.  Ditta  Pauly  e  C. 
Rivista  di  Dir.  Com.,  1004,  II,  p.  46S. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  599 

Every  merchant  has  the  right  that  anybody  freely  enter  into  his  shop :  this 
is  a  right  whicli  it  was  not  necessary  to  write  in  any  code,  precisely  because 
it  is  inherent  in  the  liberty  and  in  the  very  life  of  trade. 

Another  merchant  who  for  purposes  of  competition  seeks  to  dissuade  him 
w'ho  by  approaching  has  manifested  the  intention  of  entering  into  a  shop  makes 
an  attack  upon  that  right. 

Deceptive  advertising. — The  owner  of  a  hotel  in  the  health  resort 
Bellagio,  who  had  distributed  posters  which  annoiniced  that  during 
the  approaching  winter  season  the  principal  hotels  of  the  resort 
would  be  closed  and  that  his  hotel  would  be  the  only  one  to  remain 
open  all  the  year  round,  was  held  liable  for  damages  to  another  hotel 
keeper  of  the  same  place  whose  hotel  was  also  open  throughout  the 
vear.^ 

Misrepresentation. — The  proprietor  of  a  hotel  in  Sestri  Levante, 
where  reservations  had  been  made  for  a  noted  American,  was  granted 
damages  against  a  competitor  who  had  maliciously  induced  the  trav- 
eler to  become  a  guest  at  his  hotel  instead  of  the  other  by  means  of 
false  statements  concerning  reservations  made  by  representatives  of 
the  defendant  hotel.- 

Divulging  trade  secrets. — A  lye  manufacturer  at  Milan  got  judg- 
ment for  damages  against  a  competitor  who  offered  to  furnish  the 
plaintiff's  customers  with  the  formula  used  by  the  plaintiff  either  at 
a  stipulated  price  or  in  return  for  their  agreement  to  buy  from  him 
for  several  years  certain  materials  required  by  the  formula.^ 

Disparaging  statements. — A  druggist  was  found  guilty  of  unfair 
competition  who  had  dissuaded  others  from  buying  at  a  competitor's 
drug  store  by  asserting  that  the  goods  of  the  latter  were  of  an  in- 
ferior quality.* 

The  publication  by  a  physician  of  letters  purporting  to  come  from 
patients  as  expressions  of  gratitude  for  alleged  medical  and  surgical 
cures,  and  weaving  thereinto  disparaging  allusions  to  some  other 
physician,  without  naming  the  latter  but  in  such  a  manner  that  the 
average  reader  knew  to  whom  the  disparaging  statements  referred, 
was  held  to  constitute  unfair  competition,  because  therel)y  the  honor 
and  professional  reputation  of  the  plaintiff  were  prejudiced  in  the 
eyes  of  his  patients.^ 

A  manufacturer  of  "  Sapocarbol,"  who  in  advertising  this  article 
made  disparaging  statements  about  a  comj^eting  product  called 
"  Lysoform,"  was  held  to  be  guilty  of  unfair  competition,  under  sec- 

^  Corte  d'apppllo,  Milann,  12  settombro  190r..  Ferrario  c.  Gilardoni ;  Mon.  d.  Trih., 
1907,  p.  32. 

2  Corte  dl  Cassazlone,  Torino,  12  gennaio  1914.  Capolini  c.  .Teuscli ;  II  Filangierl,  1914, 
p.  419. 

3  Corte  d'appcllo,  Milano,  10  novcmbre  1907,  \'an  Haorle  c  C.  c.  Ileiman  o  C.  ;  Mon. 
d.  Trib.,  1908,  p.  148. 

*  Corte  di  Cassazionp.  Torino,  9  sottombre  191."..  Vassallo  c.  Tattarino ;  H  Filannicri, 
1914,  p.   4.'il. 

'  Corte  d'appcllo.  I'arnia,  21  niagu'lo  1912.  Prati  c.  Carovi  :  II  Diritto  Commercialp. 
191:;,  II,  p.  97. 


600  REPORT    OP    THE    COMMISSIONER    OP    CORPORATIONS. 

tion  1151  of  the  Civil  Code,  for  maliciously  enticing  the  customers  of 
a  competitor  by  unlawful  and  fraudulent  means.^ 

A  freer  range  to  public-service  companies  than  to  ordinary  busi- 
ness concerns  is  suggested  by  the  decision  in  a  case  where  a  co- 
operative society,  in  its  effort  to  get  a  new  telephone  concession  for 
Milan  and  vicinity,  employed  an  engineer  to  appear  before  a  public 
meeting  and  discuss  the  defects  and  inconveniences  of  the  service 
furnished  by  the  "Alta  Italia,"  as  well  as  the  advantages  that  would 
accrue  to  the  public  from  the  proposed  enterprise.  In  denying  relief 
to  the  "Alta  Italia  "  the  court  said  that  since  a  public  franchise  was 
sought  vital  interests  of  the  public  were  at  issue,  and  under  such  cir- 
cumstances j)ublic  criticism  and  censure,  such  as  was  complained  of, 
does  not  constitute  unfair  competition,  but  is  a  legitimate  right 
of  the  public  whenever  the  conditions  depicted  actually  exist.- 

Assuming  or  imitating  distinctive  designations  of  anx)ther. — 
Where  a  manufacturer  at  Catania  who  made  use  of  a  picture  of 
-35tna  and  Catania  Harbor  on  the  labels  for  his  sauce  complained  of 
the  use  by  a  competitor  in  another  town  of  similar  labels  for  a  similar 
sauce,  so  put  up  as  to  clearly  resemble  the  plaintiff's  product,  the 
court  held  that  whoever  manufactures  or  sells  a  product  similar  to 
that  previously  manufactured  or  sold  by  another  person  must  ab- 
stain from  any  artifice  which  is  calculated  to  deceive  purchasers  re- 
garding the  provenance  of  the  goods,  especially  if  the  original  manu- 
facturer or  dealer  has  in  the  course  of  a  long  period  of  years  estab- 
lished a  reputation  for  his  goods  and,  besides,  has  made  them  recog- 
nizable to  the  public  by  special  external  distinguishing  marks.^ 

A  new  concern  at  Milan  was  obliged  to  pay  damages  for  getting 
out  a  catalogue  designed  after  the  catalogue  of  a  company  with  an 
established  reputation,  giving  the  same  descriptions  of  the  goods 
listed  and  pricing  each  article  at  a  lower  figure  than  that  named  by 
the  old  company.*  Similarly  a  lye  dealer  at  Milan,  after  build- 
ing up  a  trade  as  sole  agent  for  Heimann's  "  Stella-Sole  "  lye,  began 
to  use  the  name  and  similar  advertising  matter  in  the  sale  of  a  lye  of 
his  own  make  and  was  sued  therefor.  His  plea  that  the  terms 
"  Stella  "  and  "  Sole  "  were  in  common  use  in  the  trade  was  unavail- 
ing and  he  was  obliged  to  pay  damages.^ 

The  application  of  section  1151  of  the  Civil  Code  to  the  misuse  of  a 
trade  name  in  order  to  cause  confusion  as  to  the  manufacturer  of 
goods  is  illustrated  by  the  following  case: 

1  Corte  d'appello,  Milano,  1  febbraio  1911,  Industria  Itallana  del  Disinfettanti  c.  Brl- 
oschi;  Mod.  d.  Trib.,  1911,  p.  109. 

2Trib.  di  Milano,  3  lugllo  1900;  Riv.  di  Diritto  Com.,  1904,  Ft.  II,  p.  470. 

2  Corte  d'appello,  Catania,  29  dicembre,  1911,  Narcisi  c.  Idonia  ;  La  Leg^'f.  1912,  p.  563. 
*  Corte  d'appello,  Milano,  7  agosto  1907,  Kahn  c.  Levi ;  Mon.  d.  Trib.,  1907,  p.  849. 

^  Corte  d'appello,  Milano,  11  ottobre  1907,  Barbareschi  c.  Heimanu ;  Mon.  d.  Trib., 
1908,  p.  153. 


TRUST    LAWS    AXD    U^^FAIE    COMPETITION.  601 

A  company  was  formed  at  Maregliano  with  the  name  Fratelli 
Branca  fu  Carlo  &  Co.,  which  competed  with  another  concern  having 
the  name  Fratelli  Branca  located  at  Milan.  The  latter  concern 
brought  suit  against  the  former  for  imfair  competition.  The  court 
ordered  the  defendants  to  discontinue  such  a  use  of  their  own  name 
on  their  vermouth  as  was  likely  to  lead  the  public  to  believe  that  it 
was  put  up  by  Branca  Bros,  of  Milan.^ 

Section  6.  Spain. 

Article  1902  of  the  Civil  Code  of  Spain  contains  a  general  provision 
of  law  similar  to  article  1382  of  the  Civil  Code  of  France,  but  it  has 
not  been  used  much  until  recently  against  acts  of  unfair  competition.^ 

Penal  Code. — The  Penal  Code  of  Spain  contains  four  articles 
applicable  to  certain  forms  of  unfair  competition.  Articles  291  and 
552  prohibit  the  counterfeiting  of  the  distinctive  signs  of  industrial 
or  commercial  establishments  and  the  fraudulent  imitation  of  indus- 
trial or  literary  property.  The  language  of  these  articles  is  as  fol- 
lows : 

Art.  291.  The  counterfeiting  of  seals,  marks,  notes,  or  countermarks  -which 
industrial  or  commercial  undertakings  or  establishments  use  shall  he  punished 
with  the  penalties  of  correctional  punishment  by  hard  labor  in  its  minimum  and 
medium  grades. 

Art.  552.  They  shall  likewise  incur  the  penalties  specified  in  article  550  who 
commit  any  defraudation  of  literary  or  industrial  property. 

Article  550  provides  a  penalty  of  major  arrest  in  its  minimum  and 
medium  grades  and  a  fine  equal  to  treble  the  damage  caused.  This 
penalty  is  applicable  where  the  imitation  is  fraudulent  and  capable 
of  deceiving  the  ordinary  observer. 

The  subsiitution  of  trade-marks  or  names  is  prohibited  by  article 
292  as  follows: 

Art.  292.  ^Yith  the  penalty  of  major  arrest  and  fine  of  125  to  1,250  pesetas 
shall  be  punished,  whoever  sells  the  objects  of  commerce,  substituting  on  them 
for  the  mark  or  name  of  the  true  manufacturer  the  mark  or  name  of  another 
supposed  manufacturer.  * 

Article  514  of  the  Penal  Code  prohibits  the  disclosure  of  industrial 
secrets : 

Art.  514.  The  agent,  employee,  or  workman  of  a  factory  or  other  Industrial 
establishment  wlio  with  injury  to  his  eini)l(»yer  discloses  the  secrets  of  liis 
industry,  shall  l)e  punished  with  the  penalties  of  correctional  imprisonment  in 
its  minimum  and  medium  grades  and  fine  of  125  to  1,250  pesetas. 

Law  concerning  industrial  property. — The  law  of  May  16, 
1902,   concerning   industrial   property,   under   chapter   10,   contains 

iCorte  d'appcllo,  Napoli,  27  novombro  1005;  Fratelli  Branca  c.  Frafolli  Branca  fu 
Carlo  e  C;   I!   Filnii;,'i('ri.   litoij.  ji.  r.s. 

-  Lobe,  Die  Bekiimpfuug  des  uulautorcn  Wettbewerbes,  Bd.  I,  S.  91. 


602  EEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

several  broad  provisions  for  combating  unfair  competitive  prac- 
tices.^ Article  131  defines  what  is  meant  by  unfair  or  unlawful 
competition  (competencia  ilicita),  while  article  132  specifies  seven 
different  classes  of  acts  which  constitute  unlawful  competition.  Ar- 
ticle 139  provides  the  penalties  for  infractions  of  article  132.  Tiie 
language  of  these  three  articles  is  as  follows : 

Art.  131.  By  unfair  competition  is  understood  every  attempt  to  profit  unlaw- 
fully from  the  advantages  of  an  industrial  or  conuiiercial  reputation  acqiiired 
l)y  the  efforts  of  anotlier,  and  whicli  is  his  property  l)y  virtue  of  the  present  law. 

Akt.  132.  As  constituting  acts  of  unfair  competition  are  considered : 

(a)  Tlie  imitation  of  the  designs  or  inscriptions  of  store  windows,  store 
fronts,  decollations,  or  anything  else  susceptible  of  causing  confusion  with 
anotlier  establishment  of  the  same  kind  adj(»ining  or  very  near. 

(h)  The  imitation  of  the  wrappers  used  by  a  competing  house  in  a  manner 
to  lead  to  confusion. 

(c)  Choosing  as  tlie  name  of  an  industrial  or  commercial  organization  a 
designation  in  which  is  included  the  name  of  a  locality  known  as  the  seat 
of  a  well-known  establishment  with  the  object  of  profiting  unlawfully  from  its 
reputation. 

{(1)  Wilfully  circulating  false  assertions  against  a  rival  with  the  object  of 
taking  away  his  customers. 

(c)  Publishing  announcements,  advertisements,  or  newspaper  articles  tending 
to  depreciate  the  quality  of  the  products  of  a  competitor. 

(/)  Announcing  oneself  in  a  general  manner  and  contrary  to  the  actual  facts 
as  a  depositary  of  a  product  national  or  foreign. 

(g)  The  use  without  proper  authorization  of  designations  or  expressions  such 
as  "  prepared  according  to  the  formula  of — "  or  "  in  accordance  with  the 
process  of  manufacture  of  — ,"  unless  the  formula  or  the  process  belongs  in  the 
public  domain. 

Art.  139.  In  all  the  cases  which  constitute  unfair  competition,  according  to 
article  132,  as  well  as  in  those  of  falsehood  in  the  designations  of  provenance, 
the  authors  shall  be  punished  with  fines  of  from  100  to  500  pesetas;  the  accom- 
plices with  fines  of  from  50  to  250  pesetas;  and  the  concealers  with  fines  of 
from  25  to  175  pesetas,  all  these  at  the  instance  of  the  interested  party. 

According  to  one  authority,  the  definition  of  unfair  competition 
in  articles  131  and  132  of  the  above  law  is  incomplete  and  defective 
,so  that  its  scope  is  greatly  restricted.  In  the  first  place  only  acts 
involving  forms  of  industrial  property  protected  by  the  law  are  pro- 
hibited, and  in  the  second  place  the  acts  that  can  he  prosecuted  as 
unfair  competition  are  specified  in  article  132,  leaving  all  other  acts 
beyond  the  reach  of  the  law.- 

The  following  are  examples  of  cases  brought  under  the  above  pro- 
visions of  law. 

A  company  opened  two  coffee  stores  under  the  commercial  name 
Tupinamba,  having  obtained  the  exclusive  use  of  this  name  from  the 
proper  authorities.    A  competing  concern  opened  stores  directly  op- 

^  Ley  de  10  mayo  do  1002  sobro  la  propriedad  industrial  :  Boletin  de  la  Ilevista  General 
de  Legislacion  y  Jurisprudencia,  Tomo,  116,  pp.  117,  120. 

=  Enciclopedia  .Iiiriilica  Espauola    (1010),   Tomo  VII,   p.   634. 


TRUST    LAWS    AXD    UNFAIR    COMPETITION.  603 

posite  the  two  Tnpinamba  stores,  imitating  in  tlieir  exterior  decora- 
tion the  style  and  color  of  the  latter  and  also  the  color,  style,  and 
form  of  the  containers  of  the  latter.  The  signs  over  the  new  stores 
contained  besides  the  name,  the  words  "branch  of  Tnpinamba,"  the 
words  "  branch  of "  being  written  in  small  letters  and  the  word 
"  Tnpinamba  "  in  letters  as  large  as  those  used  to  designate  the 
bona  fide  stores.  Action  was  brought  under  articles  131,  132  (a)  and 
(b),  and  139  of  the  Law  of  Industrial  Property  of  May  IG,  1902,  on 
the  ground  that  these  acts  resulted  in  confusing  the  majority  of  the 
public  and  judgment  was  obtained.  Upon  appeal  the  supreme  tri- 
bunal.affirmed  the  decision.^ 

Defendant  registered  a  trade-mark  for  a  pharmaceutical  product 
consisting  of  a  rectangular  label  bearing  in  large  letters  the  word 
"  Histogeno  "  in  imitation  of  the  registered  trade-mark  "  Histogenol," 
with  which  plaintiff  designated  a  similar  and  competing  product. 
Defendant  also  inserted  statements  in  the  medical  journals  to  the 
effect  that  the  product  of  his  competitor  had  been  shown  by  tests  to 
be  liable  to  decompose  and  become  poisonous  while  his  preparation 
was  unchangeable  and  preferred  by  all  the  principal  hospitals.  Ac- 
tion was  bi'ought  for  violation  of  paragraph  (e)  of  article  132  of  the 
law  of  industrial  property  and  the  penalties  prescribed  by  article  139 
were  demanded.  The  court  held  that,  although  article  132  (e) 
designated  as  one  form  of  unfair  competition  the  publication  of  an- 
nouncements, advertisements,  or  articles  in  periodicals,  which  tended 
to  depreciate  the  quality  of  the  products  of  a  competitor,  this  pro- 
vision taken  in  connection  with  section  131  related  only  to  products, 
in  respect  to  which  there  existed  a  property  right  known  anil  regis- 
tered, and,  as  such  right  was  expressly  prohibited  for  pharmaceutical 
products  by  article  19  (d)  of  this  law,  no  protection  against  criticism 
was  affoi'ded  by  article  132  (e).  The  court  held,  however,  that  the 
trade-mark  of  the  defendant  being  dul}^  registered  was  protected 
against  imitation,  counterfeiting,  etc.,  by  the  provisions  of  this  law.- 

Articles  121  to  130,  inclusive,  of  the  law  of  industrial  property 
deal  with  the  use  of  designations  of  provenance.  According  to  article 
125  no  one  has  the  right  to  make  use  of  the  name  of  a  place  of  manu- 
facture to  designate  a  natui-al  or  manufactured  product  coming  from 
another  i)lace.  Geogi'ai:)hical  designations  which  have  become 
generic  are  excepted.  This  exception,  however,  is  not  applicable  to 
vinous  products.  The  penalty  for  the  infraction  of  tliis  law  is  pro- 
vided in  article  139  above. 

The  counterfeiting  and  usurj^ation  of  patents  of  invention,  trade- 
marks, designs,  and  models  of  manufacture  are  dealt  with  in  articles 


1  Madrid,  sontoncia  do  SO  do  diciombro  do  1007:  Oacfta  do  Madrid.  2S  onoro,  umo, 
anoxo  num.  :i,  in'ini.  L'S,  p.   171. 

-Trilmnal  Siiprot'io.  S  dr  iulio  dc  I'.UI:  .Iiirisi)riidencia  Criminal.  Tomi),  H~  (1911  i, 
p.  48. 


604  EEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

133  to  137,  inclusive.  Article  133  proAddes  that  the  counterfeiting  of 
these  forms  of  industrial  property  shall  be  punished  in  accordance 
with  article  291  of  the  Penal  Code.  Article  135  provides  that  the 
usurpation  of  patents  is  punished  with  a  fine  of  from  200  to  2,000 
pesetas.  Accomplices  and  concealers  receive  less  severe  penalties. 
Article  136  prescribes  a  fine  of  from  25  to  125  pesetas  for : 

1.  Those  who  use  a  tracle-mai'k,  design,  or  industrial  model  without  having 
the  corresponding  certificate  of  pmperiy,  and  who  convey  the  impression  by 
using  the  term  "  registered  "  or  other  analogous  expressions  that  they  have  such 
fertifioate. 

2.  Those  who  being  legitimate  proprietors  of  a  trade-mark  affix  it  to  products 
distinct  from  those  for  which  it  was  granted. 

3.  Those  who  having  altered  the  total  or  partial  configuration  of  the  dis- 
tinctive mark,  design,  or  model  use  it  with  the  expression  "  registered  "  or  other 
analogous  expressions  without  actually  having  registered  this  variation. 

4.  Those  who  remove  from  goods  in  order  to  sell  them  the  trade-marks  of  the 
producer  without  his  express  consent,  although  they  do  not  atflx  said  trade- 
marks to  other  products. 

Article  138  provides  that  those  who  use  a  trade-mark,  design,  or 
model  in  a  manner  which  can  mislead  the  consumer,  by  causing  him 
to  confuse  them  with  the  true  and  lawful  signs,  shall  be  punished  in 
accordance  with  article  552  of  the  Penal  Code,  which  provides  a 
penalty  of  imprisonment  from  one  month  and  one  daj'  to  three 
months,  together  with  triple  damages.  The  following  are  cases  based 
on  this  article : 

A  French  liquor  distilling  concern  registered  a  trade-mark  in 
Spain  together  with  special  containers  and  labels  to  distinguish  its 
product.  The  trade-mark  was  a  design  with  the  word  "  Benedictine." 
Another  liquor  manufacturer  used  the  name  "  Bernardine  "  and  also 
imitated  the  form  and  color  of  the  containers  of  the  plaintiff  in  order 
to  create  a  confusion  between  the  two  products.  The  lower  court 
condemned  him  to  imprisonment  for  two  months  and  one  day  to- 
gether with  fines,  indemnities,  and  costs.  Upon  appeal  the  Court  of 
Cassation  affirmed  the  decision,  holding  that  the  defendant  had 
used  casks  or  demijohns  with  designs  and  inscriptions  similar  to  and 
so  closely  resembling  those  of  the  plaintiff  that  the  consumer  could 
easily  be  led  into  error,  confusing  it  with  the  original  brand  known 
and  sold  with  the  name  Benedictine.  Hence  it  declared  these  acts  to 
be  unfair  competition  and  a  violation  of  article  138  of  the  law  of 
industrial  property.^ 

In  a  recent  decision  in  which  a  patented  model  of  containers  was 
used  in  such  a  way  that  it  Avas  confused  Avith  the  legitimate  one, 
the  coiu't  held  that  the  act  constituted  unfair  competition  as  defined 
and  punished  in  article  138  of  the  law  of  May  16,  1902.^ 

1  Tribunal  Supromo,  24  de  abrll  de  1000;  .Turisprudoncia  rriminal,  Tomo,  82  (1909), 
p.  426. 

=  Enciclopedia  Jurfdica  Espafiola,  Apendlce  de  191.3,  p.  223. 


TEUST    LAWS    AND    UNFAIR    COMPETITION.  605 

The  usurpation  of  commercial  names  and  industrial  awards  is 
dealt  with  in  articles  140  to  145,  inclusive.  The  language  of  the 
first  four  of  these  articles  is  as  follows : 

Art.  140.  As  a  usurpation  of  a  commercial  name  shall  be  punished  with  a 
fine  of  from  25  to  125  pesetas : 

1.  The  use  of  a  commercial  name  as  registered,  when  it  is  not  legally  regis- 
tered. 

2.  The  designation  of  an  establishment  by  means  of  a  denomination  which 
belongs  to  another  and  older  house,  whose  name  has  been  registered. 

3.  The  false  designation  of  an  establishment  as  a  branch  of  another,  national 
or  foreign,  whose  name  is  in  the  register. 

Art.  141.  Those  who  employ  with  bad  faith  the  commercial  name  which  has 
been  registered  as  the  exclusive  proi^erty  of  another,  living  in  the  same  locality, 
shall  be  punished  with  a  fine  of  from  50  to  250  pesetas. 

Art.  142.  Those  shafl  be  punished  with  a  flue  of  from  25  to  125  pesetas 
who  affix  the  industrial  awards  which  they  have  obtained  to  products  distinct 
from  those  for  which  they  were  gi-anted.  With  a  fine  of  from  125  to  250  pesetas 
shall  be  punished  those  who  use  on  the  designs  or  inscriptions  of  their  establish- 
ments, announcements,  Invoices,  labels,  etc.,  reproductions  of  medals  and  indus- 
trial awards  to  which  they  have  no  right. 

Art.  143.  A  fine  of  from  250  to  500  pesetas  shall  be  imposed  upon  those 
who  use  reproductions  of  medals  and  industrial  awards  making  allusion  to 
expositions  or  fairs  which  have  not  taken  place. 

According  to  article  144  compensation  for  damages  and  injuries 
are  additional  to  the  above  penalties. 

Section  7.  Portugal. 

The  laws  relating  to  imfair  competition  in  Portugal  are  similar 
to  those  in  Spain.  Article  2301  of  the  Civil  Code,  which,  like  article 
1382  of  the  French  code,  is  applicable  to  unfair  competition,  pro- 
vides that  whoever  violates  or  oifends  the  rights  of  another  incurs 
the  obligation  to  indemnify  the  injured  party  for  all  the  damages 
which  he  has  caused.^  The  law  of  May  21,  1896,^  concerning  indus- 
trial and  commercial  property  contains,  especially  in  articles  198 
to  209,  inclusive,  numerous  provisions  against  unfair  competition, 
with  penalties  of  fine  and  the  payment  of  damages  to  persons  injured. 
The  language  of  the  most  important  articles  is  as  follows : 

Art.  198.  The  use  of  a  geographical  name  in  the  sense  of  an  indication  of 
provenance  is  not  allowed,  except  when  the  article  to  which  it  is  applied  was 
really  there  produced,  worked,  or  modified. 

Exception  is  made  in  the  case  in  which  the  geographical  name  loses  the  restric- 
tive character  to  designate  a  class  of  products  known  in  coniinorce  by  that  name, 
Tliis  exception  does  not  apply  to  vinous  products. 

Art.  199.  The  indication  of  provenance  consists  of  the  designation  of  a 
locality  or  region  which  has  become  known  for  its  products. 

iCficliRo  Civil,  art.  2^61. 

=  Lol,  21  maio  ISOG.  Providcncias  piira  jrarantia  da  propriedado  industrial  e  commercial. 
Colleccao  da  Legislagao  rortugueza,  1S9G,  p.  337. 


606  EEPOET    OF    THE    COMMISSIONER    OF    COEPOKATIONS. 

Art.  200.  Goods  mannfactured  abroad  or  in  Portugal  may  bear,  respectively, 
the  name  or  the  mark  of  a  merchant  of  Portugal  or  of  a  foreign  country,  pro- 
vided that  the  indication  of  the  connti*y  in  vphich  they  were  manufactured  is 
clearly  visible,  and  that  it  be  proved  by  an  authentic  document  that  the  said 
name  or  mark  was  affixed  with  the  consent  of  the  merchant  in  question. 

Art.  201. — Considered  to  be  cases  of  unfair  competition,  and  as  such  punish- 
able, are: 

(1)  Those  in  which  indications  of  false  provenance  are  made. 

(2)  Those  in  which  the  manufacturer  or  merchant  employs  signs,  paints  the 
fagade  of  his  shop,  and  arranges  or  furnishes  it,  in  a  manner  to  cause  con- 
fusion with  some  other  adjoining  or  nearby  establishment  of  a  like  nature. 

(3)  Those  in  which  the  manufacturer  or  merchant  attributes  his  goods  to  a 
manufacturer  other  than  the  true  one  without  due  authorization. 

(4)  Those  in  which  the  tradesman  or  merchant  pretends  to  have  deposited 
or  registered  his  goods  abroad  without  having  done  so. 

(5)  That  in  which  the  manufactxirer  declares:  "Manufactured  according 
to  the  formula  or  process  of  the  factoi-y  of  *  *  *,"  or  the  equivalent 
thereof,  when  he  can  not  produce  a  document  proving  an  authorization  granted 
for  that  purpose,  or  when  the  formula  or  processes  are  not  in  the  public  domain. 

(6)  Those  in  which  the  manufacturer  or  merchant,  for  the  purpose  of  giving 
a  reputation  to  his  goods,  appropriates,  without  authorization,  in  any  form  or 
manner,  the  name,  the  mark,  or  the  establishment  of  another  manufacturer  or 
merchant  who  manufactures  or  deals  in  similar  goods. 

(7)  Those  in  which  the  Portuguese  manufacturer  puts  upon  his  goods  for- 
eign names,  marks,  or  labels,  genuine  or  fictitious,  in  such  a  way  as  to  induce 
the  belief  that  they  are  foreign  products. 

(8)  Those  in  which  the  manufacturer  by  bribery,  espionage,  or  buying  em- 
ployees or  laborers,  or,  in  any  other  criminal  manner,  procures  and  makes  use 
of  the  disclosure  of  a  factory  secret. 

(9)  Those  in  which  the  unregistered  mark  of  a  certain  article  is  eliminated, 
and  another  mark  is  put  in  the  place  of  it. 

In  addition  to.  these  provisions  relating  specifically  to  unfair  com- 
petition the  law  contains  various  provisions  for  the  protection  of 
trade-marks,  industrial  or  commercial  names,  industrial  models, 
designs,  awards,  etc. 

Section  8.  The  Netherlands. 

Pexal  Code. — Certain  unfair  competitive  practices  in  the  Nether- 
lands are  prosecuted  under  the  various  provisions  of  the  Penal  Code 
or  of  special  laws,  while  other  practices  afford  ground  for  civil 
actions  under  the  general  provisions  of  sections  1401  and  1402  of  the 
Civil  Code.  The  circulation  of  slanderous  statements  is  prohibited 
by  article  261  of  the  Penal  Code.  Civil  actions  to  recover  damages 
for  injury  to  honor  or  good  name  sustained  as  a  result  of  slander  are 
provided  by  article  1408  of  the  Civil  Code. 

The  unauthorized  disclosure  of  trade  secrets  is  prohibited  by  article 
273  of  the  Penal  Code,  which  is  as  follows : 

Art.  273.  Whoever  intentionally  makes  known  any  facts  relating  to  an  under- 
taking in  trade  or  industry  in  which  he  has  been  or  is  interested,  and  concern- 
ing which  facts  secrecy  has  been  imposed  upon  him,  will  be  punished  with  im- 


TRUST    LAWS   AND    UNFAIR    COMPETITION.  607 

prisonment  of  not  more  thau  six  months  or  with  a  fine  of  not  more  than  600 
guilders.  I'rosecution  does  not  take  place  except  upon  complaint  by  the  manage- 
ment of  the  undertaking. 

Furthermore,  the  misappropriation  or  misuse  of  a  competitor's 
business  designations  is  prohibited  by  article  337,  the  first  paragraph 
of  which  is  as  follows: 

Art.  337.  Wlioever  intentionally  imports  within  the  Kingdom  in  Europe  with- 
out a  clear  stipulation  that  such  goods  will  be  exported,  or  whoever  sells,  offers 
for  sale,  furnishes,  distributes,  or  has  in  stock  for  sale  or  distribution  any  goods 
which  or  the  wrappers  of  which  have  been  falsely  provided  with  the  name,  firm 
name,  or  trade-mark,  to  which  some  other  person  is  entitled,  or  with  the  name  of 
a  definite  place  as  an  indication  of  provenance,  but  with  the  addition  of  a  fic- 
titious name  or  firm  name,  or  upon  which  goods  or  upon  the  wrappers  of  which 
said  name,  firm  name,  or  trade-mark,  even  if  slightly  altered,  have  been  imi- 
tated, will  be  punished  with  imprisonment  of  not  more  than  three  months  or 
with  a  fine  of  not  more  than  GOO  guilders.     *     *     * 

There  have  been  frequent  complaints  as  to  the  effect  of  the  fore- 
going provision,^  and  the  draft  of  a  proposed  penal  code-  b}^  the 
Minister  of  Justice,  Cort  van  der  Linden,  contains  the  following 
substitute : 

Art.  320.  Whoever,  in  order  to  establish,  maintain,  or  extend  his  business 
sales,  intentionally  commits  fraudulent  acts  for  the  purpose  of  deceiving  the 
public  or  his  customers  is  punished  as  guilty  of  unfair  competition  with  impris- 
onment of  not  more  than  one  year  or  with  a  fine  of  not  more  than  900  florins. 

Civil  Code.— Articles  1401  and  1102  of  the  Dutch  Civil  Code  con- 
tain broad  general  principles  of  law  similar  to  articles  1382  and  1383 
of  the  P'rench  Civil  Code,  which  have  been  successfully  applied  by 
the  courts  to  cases  of  unfair  competition.  The  language  of  these 
articles  is  as  follows : 

Art.  1401.  Every  unlawful  act  by  which  another  person  sustains  injui-y  obliges 
him  by  whose  fault  the  Injur.v  has  been  caused  to  compensate  for  the  same. 

Art.  1402.  Every  person  is  responsible  for  the  injury  he  has  caused  not  only 
by  his  act  but  also  by  his  negligence  or  imprudence. 

Dutch  jurists  are  not  in  agreement  as  to  the  scope  of  the  term 
"unlawful  act"  (onrechtmatige  daad),  and  as  a  result  there  has 
been  no  uniformity  in  the  decisions  of  the  Dutch  courts  regarding 
the  applicability  of  section  1401  of  the  Civil  Code  to  unfair  com- 
petitive practices. 

Two  different  vieAvs  obtain:  The  first  or  restrictive  interpretation 
is  based  chiefly  on  two  decisions  of  the  Supreme  Court  (Hooge  Kaad) 
of  April  G,  and  June  29,  1883,^  where  "  unlawful  act  "  (onrechtuiatige 
daad)  Avas  defined  as  "solely  such  an  act  of  commission  or  omission 
as  prejudices  a  legal  right  or  violates  the  rights  of  another." 

1  rraoadvips  van  .Tosopluis  .Titta  in  Ilanrlplinircn  dcr  Ncdcrlanrlsclio  .Tiiriston-Von-onising, 

190::,  p.  41.'  foi. 

2  Merzioninfr  van  liot  Wotl)0('k  van  Strafroclit.  I>(  i-l  I.  Wcl.soutweriJcn  vu  Toclicliting. 
's  Gravcnliage,  1900. 

3  Weekblad  van  Let  Kccht,  Nos.  490L  4927,  and  S1G8. 


608  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

The  second  or  broader  view  maintains  the  applicability  of  section 
1401  of  the  Civil  Code  to  unfair  practices  of  competition  as  set  forth 
in  Molengraaff's  fundamental  discussion  of  the  whole  subject  in  his 
paper  entitled  "  De  oneerlijke  concurrentie  voor  het  forum  van  den 
Nederlandschen  rechter."  ^ 

Molengraaff  formulated  his  view  thus: 

Whoever  in  commercial  intercourse  acts  otherwise  tlian  is  proper  for  one 
man  toward  another,  or  otherwise  than  is  proper  to  act  with  respect  to  one's 
fellow  citizens,  is  obliged  to  render  compensation  for  the  damages  thus  caused 
to  others. 

This  more  liberal  interpretation  of  the  term  "  unlawful  act "  has 
since  then  been  frequently  adopted  by  the  Dutch  courts  and  has 
made  it  possible  to  recover  in  an  action  for  damages  on  account  of 
practices  which  are  considered  unfair  and  unlawful  by  every  fair 
and  reasonable  man. 

The  court  at  Zwolle  held  that  the  words  "  unlawful  act  "  in  section 
1401  of  the  Civil  Code  must  not  be  interpreted  in  the  restricted  sense, 
as  if  they  signified  only  such  acts  as  are  prohibited  by  the  law  or  by 
ordinances  issued  by  an  authorized  poAver;  that  all  those  acts  are  to 
be  understood,  attributable  to  the  perpetrator,  which  cause  injury 
to  another,  and  wdiich  in  organized  society  are  to  be  considered  as 
entirely  out  of  harmony  with  the  current  conceptions  of  morality 
and  propriety  and  that  for  that  reason  also  they  come  under  unfair 
competition.^ 

The  same  court  ^  held  that  the  word  "  unlawful "  comprises  every- 
thing that  is  conti'ary  to  justice,  fairness,  and  good  faith.  The  court 
at  Amsterdam  held  that  "  not  only  every  act  that  does  not  conform 
to  the  written  law  of  the  statutes  and  decrees  is  '  unlawful,'  but  also 
every  act  Avhich  is  not  permitted  according  to  justice,  fairness,  and 
good  faith."  * 

A  decision  of  the  court  of  Groningen,  which  was  affirmed  by  the 
court  at  Leeuwarden,  states  that  "  in  order  to  determine  certain  acts 
as  being  '  unlawful '  and  as  constituting  unfair  competition  it  is 
necessary  that  said  acts  must  be  contrary,  if  not  to  the  laAV  or  to 
general  legal  principles,  at  any  rate  to  the  generally  prevailing  con- 
ceptions of  morality  and  good  faith."  ^ 

The  restrictive  interpretation  of  section  1401  of  the  Civil  Code  was 
again  upheld  by  the  Supreme  Court  in  its  decision  of  January  6, 1905,** 
where  it  held  that  sections  1401  and  1402  apply  only  to  those  acts  of 

1  Rechtsseleerd  Mag.,  1887,  p.  373,  386.      Cf.  N'edorlandscho  Handolsrocht,   1912,  p.  76. 
aoericht  zu  Zwolle,  Urt.  v.  14.  Marz,  1894;  Oster.  Patentblatt,  1903,  p.  185. 
3  29  Apr.  1903,  Weekblad  van  het  Recht,  No.  7971. 

*  Gericht  zu  Amsterdam,  Urt.  v.  1.'!,  .Tuni,  3  899  ;  (istor.  ratentblatt,  1903,  p.  184. 

*  Gericht  zu  Groninsen,  Urt.  v.  3.  Marz,  1899  ;  Gericht  zu  Leeuwarden,  Urt.  v.  23.  Mai, 
1900;   Oster.  Patentblatt,  1903,  p.    185. 

8  Weekblad  van  het  Recht,  No.  8163. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  609 

omission  or  commission  whereby  a  legal  I'ight  is  prejudiced  or  where 
the  rights  of  another  are  violated.  It  may  be  granted,  the  court  says, 
that  the  act  on  account  of  Avhich  suit  is  brought  may  conflict  with 
what  is  proper  in  commercial  intercourse,  but  this  does  not  permit  us 
to  conclude  therefrom  that  these  acts  are  unlaw^ful  in  the  sense  of 
sections  1401  and  1402.^ 

The  effect  of  this  decision  of  the  Supreme  Court,  apparently 
Avould  be  to  make  section  1401  of  the  Civil  Code  inapplicable  to 
many  cases  of  unfair  competition." 

On  INIarch  9,  1914,  the  Queen  of  the  Netherlands,  "  in  view  of  the 
need  for  a  special  provision  for  the  su]:>pression  of  unfair  competi- 
tion," submitted  to  the  second  chamber  of  the  Dutch  Parliament,  to 
be  incorporated  into  the  Penal  Code  the  following  provision  drafted 
by  ISIr.  Aalberse,^  which  is  similar  to  the  proposed  substitute  for 
article  32 G  referred  to  above.     (See  p.  607.) 

Abt.  326'''^.  Whoovor,  in  order  to  establish,  preserve,  or  extend  liis  business 
sales,  commits  an  act  to  deceive  the  pul)lic  or  ii  particular  person,  providing 
any  injury  can  arise  therefrom  to  his  competitors,  is  inuiished  as  guilty  of  unfair 
competition  by  imprisonment  not  to  exceed  one  j^ear  or  by  a  fine  not  to  exceed 
nine  hundred  guilders. 

The  following  cases  illustrate  some  of  the  forms  of  unfair  compe- 
tition which  have  been  prosecuted  under  the  general  provisions  of 
the  Civil  Code : 

The  court  at  Zwolle  assessed  damages  against  a  merchant,  who  in 
a  newspaper  advertisement  stated  that  his  competitor  had  mixed 
Eussian  oil  with  his  so-called  American  oil,  thereby  injuring  the 
plaintiff  by  leading  the  public  to  suspect  said  oil  to  be  of  an  inferior 
(juality.  The  decision  was  affirmed  by  the  court  at  Arnhem,  which 
held  that  although  no  distinct  act  was  mentioned  to  which  the  injury 
might  be  traced,  nevertheless  a  statement  like  this  in  its  very  nature 
caused  an  injury,  since  it  was  not  likely  that  customers  who  have 
once  become  prejudiced  w^ould  henceforth  trust  the  seller  of  these 
goods.* 

The  publication  of  a  notice  that  the  goods  furnished  by  a  certain 
manufacturer  are  useless  was  held  not  to  be  an  insult,  but  to  constitute 
an  unlawful  act.^ 

The  court  at  Breda  held  that  if  goods  (stoves)  are  sold  as  coming 
from  a  well-known  factory,  but  in  reality  have  not  been  manufac- 
tured there,  the  factory  thus  defrauded  will  sell  a  smaller  number  of 

iWeekblad  van  hot  Rcclit,  8  Feb.  1905,  No.  8108. 

-R.  W.  J.  C.  Do  Monthon  I'.ako  ;  Uechtsgeloerd  Magazijn,  1!>0T,  p.  4.'>4. 
3  Wcokblad  van  hot  Uoclit,  No.  9509,  Apr.  1,  1914. 

1  Geiicht  zii  Zwolle,  T'rt.  v.  14.  Miirz,  1894;  Gericbt  zu  Arnliem,  lit.  v.  Id.  .Jan.  1S95  ; 
Oster.  Patentblatt,  1903,  p.  184. 

sGericht  zu  Hertogenbusch,  Urt.  v.  5.  Mai   1000;  Osier.   Pa(<Ti(l)Iall.   100.3.   p.  185. 

30035°— IG 39 


610  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

stoves  than  it  would  have  sold  otherwise,  and  therefore  will  sustain 
an  injury.^ 

The  court  at  Rotterdam  held  that  the  manufacturer  who  imitated, 
even  with  some  slight  deviation,  the  wrappers  which  a  competitor 
had  devised  and  introduced  into  business  and  thereby  caused  con- 
fusion in  the  public  mind  concerning  the  two  manufacturers  had 
committed  an  unlawful  act.^ 

In  a  case  where  a  former  saleswoman  of  a  certain  La  Fontijn 
opened  a  similar  shop  in  the  same  street  and  announced  on  the  door 

of  her  shop,  in  small  letters,  "  M ,  formerly  saleswoman  of," 

and  then  in  much  larger  letters  "  La  Fontijn,"  the  court  at  Breda 
held  the  defendant  for  damages  under  article  liOl  of  the  Civil  Code 
because  the  said  act  constituted  unfair  competition.^ 

The  court  at  Rotterdam  in  a  decision  March  21,  1898,  confirmed  by 

the  court  at  's-Gravenhage,  stated: 

Someone  invents  a  disinfeetuut  and  calls  it  "  Lysol,"  a  name  that  comes  into 
general  use.  Now,  it  does  not  constitute  unfair  competition  if  another  person 
sells  a  disinfectant  of  the  same  composition ;  only  it  must  be  clear  that  the  new 
product  does  not  come  from  the  original  manufacturer  of  "  Lysol."  ■* 

Section  9.  Switzerland. 

Introductory. — There  is  as  yet  no  Federal  law  in  Switzerland 
dealing  specifically  with  unfair  competition,  although  in  November, 
1908,  the  Swiss  Federal  department  of  industries  called  a  conference 
of  representatives  of  the  business  associations  of  Switzerland,  at 
which  preliminary  steps  were  taken  looking  toward  a  future  enact- 
ment of  such  a  special  Federal  law.^  Several  of  the  cantons,  how- 
ever, have  adopted  laws  against  unfair  competition  which  resemble 
the  German  law  of  1909. 

Section  96  of  the  draft  of  the  proposed  Federal  penal  code,''  con- 
tains the  following  provision  regarding  the  practice  of  enticing  a 
competitor's  oiistomers: 

Whoever  entices  the  clientele  of  another  by  unfair  methods,  especially  by 
crafty  devices,  fraudulent  statements,  or  malicious  insinuations,  is  punished 
upon  complaint,  with  imprisonment  or  with  a  fine  not  to  exceed  20,000  francs. 
Both  penalties  may  be  combined. 

Section  96  is  supplemented  by  section  97,  which  provides  the  same 
punishment  for  the  betrayal  or  spying  out  of  factory  and  trade 
secrets,  as  well  as  for  the  unfair  use  of  such  secrets. 

iGericht  zu  Breda,  Urt.  v.  24.  Miirz  1896;  Oster.   Patontblatt,   ]003,   p.   1.S4. 

2  Gericht  zu  Rotterdam,  Urt.  v.  6.  Nov.,  1901  ;  Oster.  Patentblatt,  1903,  p.  185. 

3  30  Jimi  189G,  Weekblad  van  het  Recht,  1896,  No.  G855. 

*  Gericht  zu  Rotterdam,  Urt.  v.  21.  Miirz   1898;  Oster.   Patentblatt,   1903,  p.  185. 
5  Conrad,  llaudwiirterbucb  d.  Staatswisscnscbaften,  vol.  8,  1911.  p.  797  fol. 
"  Vorentwurf  zu  einem  Scbweizeriscliea  Strafgesetzbuch,  April,  1908. 


TRUST    LAWS    AND    UNFAIR    COMPETITION.  Gil 

Law  of  Obligations. — The  new  Swiss  Federal  Law  of  Obligations 
of  11)11  ^  contains  in  articles  41  and  18  broad  civil-law  provisions 
against  unfair  practices.  The  first  paragraph  of  article  41  is  the 
same  as  article  50  of  the  old  Law  of  Obligations. 

Aet.  41.  Whoever  unlawfully  causes  injury  to  another,  either  iuteutioually  or 
through  negligence,  is  bound  to  compensate  him. 

In  like  manner,  whoever  intentionally  causes  injury  to  another  in  a  manner 
repugnant  to  good  morals  is  bound  to  make  compensation. 

Art.  48.  AVhoever  as  a  result  of  false  publiL'ations  or  of  other  practices  con- 
trary to  good  faith  is  disturbed  in  his  business  clientele  or  threatened  in  the 
possession  thereof  can  demand  cessation  of  these  business  practices  and  in  ease 
of  fault  compensation  of  the  injury. 

These  provisions  apparently  are  broad  enough  to  cover  a  variety 
of  unfair  practices,  as  the  following  cases  will  illustrate : 

A  manufacturer  of  a  liqueur  advertised  it  as  "  Hors  concours 
1889,"  thus  leading  the  public  to  believe  that  his  product  was  not 
entered  at  the  Paris  Exposition  in  1889  because  it  had  already  ob- 
tained the  highest  awards,  whereas  in  fact  it  was  there  awarded  only 
a  silver  medal  and  honorable  mention.  In  an  action  for  damages 
brought  by  a  competitor  the  court  held  that  the  circulation  of  this 
misleading  announcement  was  an  act  of  luifair  competition  and 
afforded  ground  for  a  civil  action  for  damages  under  article  50  of  the 
Law  of  Obligations-  (article  41  of  the  present  law). 

A  cooperative  society  of  a  certain  Swiss  city  puljlished  two  articles 
charging  that  an  association  of  fuel  dealers,  which  had  a  contract 
with  the  city  to  purchase  all  its  coke  from  the  city  gas  plant,  had 
taken  steps  before  the  city  authorities  to  hinder  or  Avholly  prevent 
the  delivery  of  coke  to  the  society.  The  association  of  fuel  dealers 
brought  suit  for  damages  under  article  48  of  the  Law  of  Obliga- 
tions on  the  ground  that  the  circulation  of  this  statement  was  un- 
fair competition.  It  was  shown  that  the  charge  was  not  justi- 
fied by  the  facts  and  that  the  defendant  had  been  negligent  in  not 
ascertaining  the  truth  before  circulating  the  statement,  but  it  was 
not  shown  that  defendant  had  wilfully  distorted  the  facts.  The 
court  denied  recoveiy  on  the  ground  that  there  was  nothing  in  the 
declaration  or  the  findings  to  show  that  any  damage  had  been  done, 
or  was  likely  to  be  done,  to  the  plaintiff. 

In  rendering  its  opinion  the  court  stated  that  article  48  offered  two 
means  of  protection  to  persons  injured  by  acts  of  competition,  to  wit: 
(a)  An  action  to  enjoin  practices  susceptible  of  causing  a  diminution 
or  loss  of  clientele,  for  which  action  the  commission  of  a  legal  wrong 
(faute)  is  not  necessar}'';  and  (A)  an  action  for  damages,  whicli  re- 
quires proof  of  a  legal  wrong  and  the  existence  of  injury.    Plaintiff 

1  Schwoizorisclios  Oblifrationonrccht  vom  ."0.  Miirz  1011. 

-Kioilt's  &  Co.  V.  I'.diiiu'l  iV;  Co.,  Triliuiiiil  FCdonil  Suisse,  ~y)  iiiai  IblKJ  ;  Kntsclieidungou 
des  Schweizerisclicn  Bundesgeiicbtes  Bd.  XIX,  p.  248. 


612  llEPOKT    OF    THE    COMMISSIONER    OF    CORPOEATIONS. 

had  argued  that  malicious  intent  was  not  necessary  for  the  applica- 
bility of  section  48,  and  that  the  probability  of  future  damage  was 
suflicient  to  establish  the  liability  of  the  defendant.  The  court,  how- 
ever, did  not  rule  on  the  point  of  what  constituted  a  legal  wrong  in 
the  sense  of  article  48,  but  dismissed  the  case  on  the  second  ground, 
viz,  absence  of  injury.^ 

A  Sw^iss  manufacturer  of  hairsprings  for  watches,  who  had  his 
registered  trade-mark  on  a  green  wra[)per,  attempted  to  enforce  his 
claim  to  the  exclusive  right  to  use  green  wrappers  by  securing  an 
order  for  seizure  of  similarly  wrapped  springs  made  by  a  competitor, 
which  were  sold  by  a  jeweler  in  La  Chaux-de-Fonds,  who  advertised 
his  shop  as  the  "  depot  exclusif  "  for  springs  in  green  wrappers.  He 
also  brought  suit  against  the  maker  of  the  competing  spi'ings,  charg- 
ing him  Avitli  fi'audulent  imitation  mider  the  trade-mark  law  of 
December  10,  1879,  and  unfair  competition  under  article  50  (article 
41  of  the  present  law)  of  the  Law  of  Obligations.  Besides  he  in- 
serted advertisements  in  two  newspapers,  stating  that  all  springs 
in  green  folders  sold  by  persons  other  than  his  exclusive  selling  agent, 
S.,  were  only  a  poor  imitation  of  his  genuine  green- wrapped  springs. 
The  court  held  that  the  right  to  use  green  folders  for  wrapping 
hairsprings  was  common  property,  and,  as  no  infringement  of  plain- 
tiff's registered  mark  was  alleged,  he  had  no  ground  of  action  against 
the  competing  manufacturers  for  either  infringement  or  unfair  com- 
petition. On  the  other  hand,  the  court  compelled  the  plaintiff  to 
make  reparation  to  the  defendant  for  the  damage  caused  to  his  trade 
by  the  seizure  and  the  untruthful  advertisement  that  his  goods  were 
a  poor  imitation.  The  court  took  occasion,  however,  to  characterize 
the  jeweler's  course  in  advertising  his  shop  as  the  exclusive  depot  for 
springs  in  green  wrappers  as  unfair  competition,  since  it  was  a  false 
statement  calculated  to  injure  another's  business,^ 

In  a  frequently  cited  case  involving  the  imitation  of  the  title  of  a 
newspaper  by  a  competitor  the  Federal  Supreme  Court  held  that  such 
imitation  was  not  a  violation  of  the  copyright  law  but  an  act  of 
unfair  competition,  because  it  was  intended  to  deceive  the  public  by 
introducing  a  new  article  under  the  designation  of  an  old  one.^ 

The  superior  court  of  the  Canton  Ziirich  held  that  "  although  a 
copyright  can  not  attach  to  a  time  table  or  to  a  railway  guide,  yet 
because  it  has  been  published  in  the  same  form  for  many  years  a  right 
to  it  has  been  established,  so  that  a  third  party  may  not  publish 

1  Societe  des  Marcliands  do  Combustibles  de  La  Chaux-de-Ponds  et  consorts  c.  Coopera- 
tive des  Syndicats  de  La  Cbaux-de-Fonds,  Trlb.  Federal  Suisse,  26  avrll  1913;  Entscheid- 
ungen  des  Schweizerisehon  Buiidesgcriclites,  Bd.  30,  II,  S.  2i'7. 

-  Baelmi  et  Cie.  centre  Hugucnin,  Trib.  Fedei-al  Suisse,  18  juillet,  1891  ;  Entscheidungen 
des  Scliweizerischen  Bundesgericbtes,  Bd.  XVII,  p.  462. 

2  Orell  Fiissli  c.  Scbweizerisches  Vereinssortiment ;  Schweiz.  Bundesgericbt.,  18.  Dez. 
1891.    Entscbeiduugen  des  Scbwoizeriscben  Bundesgericbtes,  1891,  Bd.  XVII,  p.  753. 


TEUST   LAWS  AND   UNFAIR  COMPETITION.  613 

said  time  table  in  a  form  which  might  lead  the  public  to  believe  that 
the  new  publication  was  the  same  as  the  old  one."'^ 

In  a  recent  case  brought  before  the  commerce  court  of  Bern  the 
question  was  raised  whether  false  advertising  (or  misrepresenting 
one's  own  goods)  was  unfair  competition  in  violation  of  article  48 
of  the  Law  of  Obligations.  The  court  stated  that  hitherto,  under 
unfair  competition,  the  Swiss  civil  courts  had  dealt  only  with  cases 
involving  the  diverting  of  a  competitor's  clientele  by  usurping  his 
distinctive  marks,  disparaging  his  goods,  or  circulating  false  state- 
ments about  him,  but  that  the  false  advertising  of  one's  own  goods 
should  also  be  considered  as  unfair  competition  in  the  sense  of 
article  48,  since,  even  though  the  legal  rights  of  competitors  are  not 
directly  prejudiced  thereby,  their  relations  with  their  customers  are 
nevertheless  injured.- 

Trade-mark  law  of  September  26,  1890. — The  Federal  law  of  Sep- 
tember 20,  1800'  (which  abrogates  the  law  of  18T0),  concerning 
the  protection  of  trade-marks,  the  indication  of  provenance,  and 
industrial  awards,  prohibits  (1)  imitations  of  a  registered  trade-mark 
that  deceive  the  public;  (2)  unlawful  use  of  another  person's  trade- 
mark; (3)  dealing  in  goods  to  which  trade-marks  have  been  unlaw- 
fully attached. 

Several  articles  of  this  act  relate  to  indications  of  provenance. 
According  to  article  18  a  manufacturer  or  producer  may  use  the  name 
of  a  city,  locality,  or  country  as  an  indication  of  provenance  of  his 
products,  but  it  is  forbidden  to  affix  a  false  indication  of  provenance 
to  goods.  Names  of  localities  or  countries  which  have  assumed  such 
a  general  character  that  in  commercial  usage  they  designate  the 
nature  and  not  the  provenance  of  goods  are  excepted  by  article  20 
from  the  above  prohibition.  According  to  this  article  (20)  it  is 
allowable  for  a  manufacturer  to  use  the  name  of  the  locality  of  his 
main  establishment  as  a  designation  of  provenance  for  goods  pro- 
duced elsewhere,  provided  his  firm  name  or  registered  trade-mark  is 
added  to  the  designation  of  provenance. 

Article  24,  relating  to  the  usurpation  of  trade-marks,  is  as  follows: 

Aut.  24.  According  to  the  ijrovisions  iiicnlioiu'd  Itclow,  civil  or  criiiiinal  action 
may  l)o  talvon  against — 

(ff)  Wlioover  coiuiterfeits  tlie  trade-marlc  of  another  or  so  imitates  it  that  the 
puhlic  is  deceived. 

(h)   Whoever  uses  the  trade-mark  of  another  for  liis  own  pro(hicts  or  goods. 

(r)   AVhoever  sells,  ofl'ers  for  sale,  or  puts  into  circnlation  i>roducts  oi-  g Is 

I  Obergpricht  dos  Knntons  Ziirich,  Entselicifl  vom  12.  Mni  1S04,  citpd  by  Alfrocl  Simon 
"  T>or  ^rcwcrhlielie  Rochtsscl.'itz  in  dcr  Scliweiz,"  1S!)7,  p.  174. 

-  IIan(Icls;,'oriclit  dos  Kantons  Born,  15.  Dez.  lltl."^,  .Tordi-Koclior  und  Kons.  c.  Moses 
Bernhoim  ;  Zoitschrift  d.  Bornisobon  .Tiiristcnvorcins,  1014,  p.  276. 

•■^  Biindos>;osotz  liotv(>fT('nd  don  Sciuilz  dor  I':ibiil<-nnd  Il.-uidolsm.irkon,  dor  Ilorlxiinfts- 
bozoielinnuson  von  Wanrou  und  dor  gcworbliolicu  AuszoicluuuiKon  vom  20.  Soptoinbor, 
1890, 


614  REPOKT    OF    THE   COMMISSIONER   OP    CORPOEATIONS. 

which  he  knows  are  provided  with  a  trade-mark  which  is  counterfeited,  imitated, 
or  unlawfully  affixed. 

id)  Whoever  knowingly  taltes  part  in  the  above-named  offenses  or  knowingly 
aids  or  facilitates  their  commission. 

(e)  Whoever  refuses  to  indicate  the  provenance  of  products  or  goods  in  his 
possession  which  bear  counterfeited,  imitated,  or  luilawfully  affixed  trade- 
marks. 

(f)  Wlioever  violates  the  provisions  of  articles  IS,  third  paragrapli,  19,  20 
(sec.  1),  21,  and  23  of  this  law. 

Article  26  supplements  the  preceding  provisions,  as  follows : 

Art.  2G.  Whoever  to  his  ti'ade-niarks  or  business  papers  falsely  adds  a  state- 
ment which  is  intended  to  create  the  impression  that  a  trade-mark  has  really 
been  registered ; 

Whoever,  on  his  business  signs,  advertisements,  prospectuses,  invoices,  letters, 
or  papers,  improperly  makes  use  of  indications  of  provenance  or  mention  of 
trade  distinctions,  or  omits  the  indications  prescribed  l)y  article  22,  is  punished 
ex  officio  ^  or  upon  private  complaint  ^vith  a  tine  of  from  30  to  500  francs  or  witli 
imprisonment  of  from  three  days  to  three  months.  Against  former  offenders 
these  punishments  may  be  doubled. 

Federal  decree  or  May  8, 1914,  relating  to  foodstuffs. — Article  3 
of  the  decree  of  May  8,  1914,  of  the  Federal  Council  relating  to  the 
commerce  in  foodstuffs  -  provides  against  the  use  of  deceptive  labels. 

Art.  3.  Foodstuffs  shall  not  be  brought  into  commerce  under  a  designation  cal- 
culated to  deceive. 

The  employment  of  marks  and  imaginary  names  which  might  give  rise  to 
deception  is  prohibited  wliether  they  are  registered  as  trade-marks  or  not. 

If  it  is  required  to  affix  a  descriptive  designation  upon  the  goods  themselves 
or  upon  their  wrappers  (containers,  covers,  etc.),  striking  imaginary  names, 
in  no  far  as  their  use  is  at  all  permitted,  shall  not  be  affixed  in  letters  larger 
than  the  descriptive  designation.  The  superscriptions  must  be  so  made  that  the 
descriptive  designation  is  visible  together  with  the  imaginarj'  name. 

Cantonal  laws. — In  the  absence  of  a  special  Swiss  Federal  law 
against  unfair  competition,  several  Cantons  have  enacted  such  laws, 
viz,  Ziiricli,  1911;  City  of  Basel,  1900;  Luzern,  1900  (revised  in 
1912)  ;  Freiburg,  1900;  Neuchatel,  1904;  Aargau,  1911. 

These  cantonal  laws  are  similar  to  the  German  law  against  tmfair 
competition,  and  prohibit  fraudulent  advertising,  refusal  to  sell 
goods  at  the  price  advertised,  disparagement  of  competitors,  and 
betrayal  of  business  and  trade  secrets. 

Basel  and  Luzern  require  permission  by  the  police  for  conducting 
closing-out  sales  that  have  not  been  authorized  by  a  court,  and  the 
l^ermission  is  made  dependent  upon  such  business  having  been  estab- 
lished in  a  community  of  the  Canton  for  at  least  two  years.  In  Frei- 
burg it  is  an  offense  to  advertise  for  sale  below  cost  a  large  stock  of 
goods  for  the  purpose  of  ruining  the  business  of  a  competitor.  The 
law  of  Neuchatel  requires  that  when  rebates  are  given  the  rate  must  be 

1  That  is,  upon  initiative  of  the  Government. 

-  Verordnung  d.  schweizorischon  Bundesrats  betreffend  d.  Verkohr  mit  I^ebcnsmitteln  u. 
Gebrauchsgegenstandeu  vom  S.  Mai  1014  ;  cf.  Eidgcn.  Gesetzsammig.  No.  14,  20.  Mai  1!114. 
p.  ISO  fol. 


TRUST   LAWS  AND  UNFAIP.   COMPETITION.  615 

indicated.  Selling  goods  accoi-ding  to  the  "  coupon,"  "  Hydra," 
"  Gella,"  or  "  sno^Yball "  system  ^  is  prohibited  by  police  ordinances 
in  Luzern,  Schwyz,  Waadtland,  and  Ziirich. 

Unfair  coTnpetition  law  of  Zurich. — On  January  29,  1911,  the  Can- 
ton of  Ziirich  adopted  by  popular  vote  a  law  against  unfair  competi- 
tion.^ This  law  resembles  somewhat  the  German  law  of  1909,  although 
it  is  not  so  comprehensive. 

Sections  1,  2,  and  5  of  this  law  relate  to  deceptive  advertising: 

Sec.  1.  In  public  business  advertisements  (by  means  of  newspaper  adver- 
tising, circulars,  posters,  etc.)  no  untrutliful  statements  must  be  knowingly 
made  whereby  honest  business  activity,  based  on  good  faith,  is  injured  or  en- 
dangered. 

Sec.  2.  It  is  prohibited  in  particular  to  knowingly  make  incorrect  or  otherwise 
misleading  statements  in  pul)lic  offers  of  goods  or  of  industrial  services  concern- 
ing business  relations,  as,  for  instance,  concerning  quality  and  price  of  goods, 
size  of  stocks,  source  or  method  of  supply,  which  awaken  the  impression  of  an 
unusually  favorable  offer. 

Sec.  5.  No  owner  of  a  business  shall  advertise  goods  for  sale  at  a  lower  price 
than  that  at  which  he  is  actually  willing  to  sell  them. 

Sections  3  and  4  relate  to  methods  of  advertising  closing-out  sales 
and  sales  of  goods  from  a  bankrupt  stock. 

Sec.  3.  The  announcement  of  closing-out  sales  (liquidations)  is  permissible 
only  with  the  consent  of  the  proper  authorities  of  the  Government  Council. 

Permission  is  to  be  refused  if  the  announcement  gives  evidence  of  a  purpose 
of  unfair  business  practices.  Permission  already  granted  is  to  be  revoked  if 
such  a  practice  becomes  evident ;  in  case  of  disobedience  the  closing  of  the  busi- 
ness is  to  be  ordered,  if  necessary,  by  the  cantonal  authorities. 

The  Government  Council  will,  liy  a  decree  subject  to  approval  by  the  Can- 
tonal Council,  establish  the  special  regulations  concerning  permits  for  closing- 
out  sales  and  the  fees  payable  therefor. 

Sec.  4.  Announcements  of  the  sale  of  goods  coming  from  a  bankrupt  or  at- 
tached stock,  l)ut  wliich  no  longer  1)elong  to  the  said  stock,  must  not  be  so 
worded  as  to  create  tlie  impression  lliat  llie  sale  takes  place  on  the  order  or  for 
the  account  of  the  bankruptcy  or  prosecuting  office. 

Section  6  relates  to  disparaging  another's  goods  or  services: 

Sec.  0.  It  is  prohibited,  for  purposes  of  competition,  knowingly  and  publicly 
to  designate  the  goods  or  services  of  another  as  being  inferior. 

Section  7  relates  to  corrupting  a  competitor's  employees  to  obtain 
trade  secrets: 

Sec.  7.  It  is  prohibited  (n)  to  attempt  to  learn  factory  secrets  by  means  of 
gifts,  promises,  or  in  other  unfair  ways,  from  employees  or  workmen  of  a  com- 
peting business,  .nnd  to  attem])!  |o  procui'e  models  or  specifications  of  a  tech- 
nical natur(\  as  weU  as  to  make  unauliiorized  use  of  secrets  thus  learned 
for  purposes  of  competition;  {h)  to  make  or  to  promise  gifts  to  employees  or 
workmen  of  a  business  concern  in  order  to  procure  orders  for  supplies  or  for 
work  from  said  concern. 

1  Similar  to  "  block  "  system,  scp  p.  Ofifi. 

^Gpsotz  Rcscn  den  unlanteren  Wctlbeworli  iin  Ilandcls-  und  Gewerbebetrieli,  vom  20. 
Jan.   1!>H. 


616  REPORT   OP   THE   COMMISSIONER  OF   CORPORATION? S. 

Accordinni:  to  section  8,  violations  of  the  provisions  of  this  hiw  will 
be  pnnished  by  the  cantonal  authorities  with  fines  of  from  20  to 
1,000  francs.  In  cases  of  a  second  offense,  lai'ger  fines  are  author- 
ized and  the  offender  may  be  bound  over  to  the  circuit  court,  which 
may  also  inflict  imprisonment  of  not  more  than  one  month.  The 
right  to  apply  the  provisions  of  the  Penal  Code  is  not  impaired,  as 
well  as  the  right  to  civil  prosecution  of  a  claim  for  damages.  The 
department  of  justice  and  the  police  authorities  are  charged  with  the 
enforcement  of  this  law. 

Unfair  competition  laio  of  Neuchdtel. — The  law  relating  to  unfair 
competition  and  closing-out  sales  of  xVpril  27,  1001,  of  the  Canton 
XeuchateP  provides  against  a  greater  number  of  specific  unfair 
practices  of  competition  than  those  prohibited  in  the  similar  law  of 
Zurich.  Chapter  I  (arts.  1  to  8)  contains  provisions  for  the  sup- 
pression of  inexact,  deceptive,  or  disparaging  statements,  as  well  as 
the  divulgence  of  trade  secrets.  Chapter  II  (arts.  9  to  22)  relates  to 
closing-out  sales.  Chapter  III  (arts.  23  to  26)  relates  to  penalties 
for  violations  of  this  law. 

Articles  1  and  2  of  this  law  prohibit  false  advertising  of  goods : 

Art.  1.  It  is  forbultlon,  especially  in  offering  merchandise,  to  make,  in  pub- 
lications concerning  the  natui'e,  quality,  quantity,  price,  process  of  manu- 
facture of  merchandise,  as  well  as  the  reasons  for  the  sale,  false  statements  with 
a  view  to  creating  the  impression  of  an  extraordinarily  advantageous  offer. 

The  term  "  pulilication."  includes  announcements,  circulars,  prospectuses, 
advertisements,  posters,  pictures,  business  papers,  containing  any  of  the  indi- 
cations above  mentioned. 

Art.  2.  The  prefect  of  police,  ex  officio  or  on  complaint,  has  the  right  at  all 
times  to  demand  proof  of  the  statements  piiblished  on  the  subject  of  the 
existence  and  the  importance  of  the  stock  or  of  the  reasons  for  the  sale  of  the 
merchandise  offered. 

He  brings  the  case  before  the  examining  magistrate  if  this  evidence  is  not 
forthcoming. 

Articles  3,  4,  and  5  forbid  deceptions  as  to  price  and  quantity  of 
goods : 

Art.  .S.  All  merchandise  exposed  for  sale  with  a  price  mark  must  be  delivered 
inmiediately  at  the  price  indicated  to  anyone  who  dechires  himself  a  cash  buyer 
thereof. 

Art.  4.  The  prices  fixed  for  sale  at  retail  must  be  expressed  in  legal-tender 
money  and  correspond  exactly  to  the  units  or  whole  multiples  of  officially 
recognized  weights  and  measures. 

When  a  price  is  indicated  in  regard  to  a  certiiin  quantity  of  merchandise,  it 
is  assumed  to  apply  to  the  whole  of  that  quantity. 

Art.  5.  The  announcement  of  a  discount  must  always  indicate  the  rate. 

Article  6  prohibits  the  promise  of  aleatory  or  speculative  consid- 
eration in  connection  with  the  sale  of  goods : 

Art.  C).  It  is  forbidden  to  attract  buyers  by  the  promise  of  aleatory  advan- 
tages under  any  form  whatever. 


^Loi  du  27  avril  1904,  sur  la  concurrence  dtMoyale  et  les  liquidations. 


TRUST   LAWS   AND  UNFAIR  COMPETITION.  617 

Article  7  relates  to  disparaging  a  competitor's  business : 

Art.  7.  It  is  forbidden  to  relate  or  to  affirm  acts  tliat  are  known  to  be  inexact 
and  of  a  nature  to  injure  a  competitor  in  the  exercise  of  his  trade  or  industry. 

Article  8  relates  to  the  diviilgence  of  trade  secrets : 

Art.  8.  It  is  forbidden  to  employees,  workmen,  or  apprentices  of  a  commercial 
house  or  an  industrial  establishment  to  divulge  the  connnercial  or  industrial 
secrets  of  which  they  have  acquired  knowledge  by  reason  of  their  situation 
unless  authorized  to  do  so  by  the  proper  authority. 

It  is  equally  forl)idden  to  incite  employees,  workmen,  or  ajiprentices  to  divulge 
secrets  of  this  kind. 

Articles  9  and  10  relate  to  the  definition  of  closing-out  sales : 

Art.  9.  A  closing-out  sale  means  every  operation  by  which,  under  any  name 
whatever,  a  merchant  seeks  to  accelerate  the  normal  turnover  of  all  or  part  of 
his  goods,  having  recoiu'se  for  this  purpose  either  to  a  reduction  of  the  ordinary 
price  of  these  goods  or  to  notices  (closing-out  sale,  cut-price  sale,  sale  at  any 
price,  etc.)  tending  to  create  the  impression  of  a  particularly  advantageous  sale. 

Art.  10.  Excluded  from  the  regulations  of  the  present  law  are  («)  sales  con- 
ducted in  execution  of  Federal  laws;  (b)  sales  made  at  public  auction  in  con- 
formity with  the  provisions  of  tlie  Code  of  Civil  Procedure. 

Articles  11,  12,  and  13  state  the  conditions  under  which  a  closing- 
out  sale  may  be  authorized : 

Art.  11.  No  general  or  partial  liquidation  shall  be  announced  or  opened  with- 
out a  written  authorization,  granted  by  the  prefecture,  which  informs  the  local 
authority  of  it. 

Tlie  request  for  authorization  must  give  the  reason  in  writing  and  be  signed 
l)y  the  proprietor  of  the  goods  or  his  authorized  representative. 

Art.  12.  To  conduct  a  closing-out  sale,  only  that  merchant  can  be  authorized 
who,  in  the  locality  where  it  is  to  take  place,  has  been  making  a  profession  of 
buying  and  selling  merchandise  of  the  same  kind  as  that  to  he  closed  out,  for 
two  years  at  least,  if  it  is  a  question  of  a  partial  closing-out  s.ile. 

Art.  1.3.  The  preceding  article  may  be  deviated  from  by  decision  of  the  police 
department  under  exceptional  circumstances  (departure,  decease,  prolonged  sick- 
ness of  the  head  of  the  house,  etc.). 

Article  11  regulates  announcements  or  advertisements  of  closing- 
out  sales: 

Art.  14.  Every  published  announcement  relative  to  a  closlng-out  sale  must 
indiCiUe  the  name  of  the  proprietor  of  the  merchandise  and  liis  firm  name. 

Besides,  it  must  expressly  state  the  true  character  of  the  closing-out  sale 
(general  or  partial). 

Article  15  relates  to  the  locality  where  the  closing-out  sale  is  to  be 
conducted : 

Art.  15.  The  closing-out  sale  must  be  hold  in  tlie  loci  11  ties  where  the  merchant 
plies  his  trade.  This  rule  may  be  deviated  from  under  exceptional  circum- 
stances with  the  authorization  of  the  police  department. 


618  EEPOET    OP    THE   COMMISSIONER  OF    CORPOEATIONS. 

Article  16  requires  an  inventory  of  stock  before  authorization  of  a 
general  closing-out  sale: 

Art.  16.  Tlie  merchant  who  wishes  to  conduct  a  general  closing-out  sale  of 
his  business  must  accompany  his  request  for  authorization  with  an  inventory 
of  the  stock  of  his  goods  and  indicate  the  place  where  they  are  stored  and 
where  they  are  sold. 

Article  17  limits  the  duration  of  a  general  closing-out  sale : 

Art.  17.  The  duration  of  a  general  closing-out  sale  must  not  exceed  one  year, 
without  an  authorization  from  the  police  department. 

Article  18  prohibits  the  replenishment  of  stock  during  a  closing- 
out  sale: 

Art.  18.  From  the  date  of  the  request  for  the  authorization  to  liquidate,  every 
replenishment  of  goods  is  forbidden.  The  contravention  of  this  prohibition,  in 
addition  to  the  penalties  fixed  l\v  the  present  law,  may  lead  to  the  immediate 
termination  of  the  closing-out  sale  by  revocation  of  the  authorization. 

Articles  19,  20,  and  21  relate  to  the  frequency  and  duration  of  such 
sales : 

Art.  19.  An  interval  of  two  years  at  least  must  elapse  between  two  general 
closing-out  sales  conducted  by  the  same  merchant. 

Art.  20.  The  duration  of  a  partial  liquidation  must  not  exceed  one  month. 

Art.  21.  An  interval  of  five  months  at  least  must  intervene  between  two  par- 
tial closing-out  sales  conducted  by  the  same  merchant  and  for  the  same  kind  of 
goods. 

Article  22  provides  for  the  segregation  and  marking  of  goods  to  be 
sold: 

Art.  22.  The  goods  to  be  closed  out  must  be  separated  from  other  goods  and 
marked  in  a  clear  manner. 

Articles  23  and  21  provide  imprisonment  up  to  8  days  or  a  fine  up 
to  100  francs  for  violations  of  articles  3  to  6,  11,  11,  15,  17,  19,  20  to 
22,  and  imprisonment  up  to  30  days  or  a  fine  up  to  1,000  francs  for 
violations  of  articles  1,  7,  8,  and  18  of  this  law. 

Unfa'tT-compethtion  law  of  Aargau. — The  law  of  the  Canton  Aargau 
of  March  21,  1911,^  for  the  suppression  of  unfair  competition  and 
business  practices  and  the  regulation  of  clearance  sales  comprises  12 
sections.  Four  of  these  are  administrative  merely,  but  the  first  eight 
set  up  specific  standards  or  requirements. 

Sections  1  and  4  are  aimed  at  damaging  misrepresentations.  The 
former  forbids  them  Avhen  wilfully  made  in  regard  to  a  competitor 
or  his  products,  and  the  latter  prohibits  "  puffing "  or  exaggerated 
claims  in  regard  to  one's  own  establishment,  and  even  forbids  a  mer- 
chant to  advertise  articles  at  a  specified  price  unless  he  has  them  in 
stock.     Sections  2  and  3  are  for  the  protection  of  trade  secrets  and 

^  Oesctz  iiber  die  P.pkampfnng  dps  unlniitoron  Wottbcwerbos  nnd  nnlautoron  Goschitfts- 
SPl)alirens  und  das  Vcrfahron  boi  AiisverkiUifpn,  vom  24.  Miirz  1011  ;  Schweizprlscbe 
Zpitscbrift  fill-  Strafi-eeht   (1912),   p.  04. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  G19 

prevention  of  corrnption  of  employees  and  are  somewhat  similar  to 
the  English  Prevention  of  Corruption  Act  of  IDOG  (see  p.  534).  These 
four  sections  dealing  with  unfair  practices  are  worded  as  follows : 

Sec.  1.  Whoever  as  business  proprietor  or  in  the  service  of  such  an  one  circu- 
lates untrue  statements  concerning  a  competitor  or  his  goods  or  industrial 
services  against  better  knowledge  or  in  a  grossly  negligent  manner,  Mhich  are 
adapted  to  injiu*e  the  competitor's  business  or  credit,  is  punishable. 

Sec.  2.  He  is  punishable — 

1.  Who  induces  employees  or  workmen  of  a  third  party,  or  those  who  were 
such,  to  divulge  factory  or. other  business  secrets  of  said  third  party. 

2.  Who  makes  use  of  or  gives  out  the  business  secrets  of  a  competitor,  -which 
he  has  learned  through  his  own  punishable  conduct  or  through  the  disloyalty 
of  third  parties. 

3.  Who  acquires  the  knowledge  of  such  secrets  by  virtue  of  his  office  or  as 
a  court  expert  and  then  makes  use  of  them  in  competition  or  gives  them  out. 

4.  AVho  as  an  employee  or  workman  reveals  the  secrets  of  his  business  to 
competitors,  whether  for  the  purpose  of  competition  or  with  the  intent  of  doing 
an  injury  to  the  proprietor  of  the  business. 

Sec.  3.  He  is  punishable  who  offers,  promises,  or  grants  to  the  employee  or 
agent  of  a  third  party  presents  or  other  advantages  in  order  thereby  to  gain  a 
preference  in  competition  for  himself  or  a  third  party. 

Punishable  also  is  the  employee  or  agent  of  a  business  undertaking  who,  for 
such  a  purpose,  demands  presents  or  other  advantages  or  allows  them  to  be 
promised  him  or  who  accepts  them  when  offered. 

Sec.  4.  He  is  also  guilty  of  punishable  luifair  competition — 

1.  Who  in  published  announcements  or  through  other  communications  that  are 
intended  for  an  extensive  group  of  persons  knowingly  or  in  a  grossly  negligent 
manner  makes  untrue  statements  concerning  business  relations,  for  example, 
concerning  the  quality  or  the  price  of  his  goods,  or  concerning  the  size  of  the 
stock,  or  concerning  the  source  of  supply  or  the  method  of  supply  or  the  occasion 
for  the  offer,  which  statements  are  adapted  to  create  the  impression  of  an 
unusually  favorable  ofler. 

2.  Who  announces  or  lists  at  a  certain  price  goods  which  he  does  not  keep, 
whether  he  demands  a  higher  price  from  the  purchasers  or  does  not  deliver 
them  these  goods  at  all. 

3.  Who  in  retail  trade  for  goods  which  are  sold  by  weight  or  measure  does 
not  announce  the  price  for  full  weight  or  measure  nor  maintain  them  in  a  sale. 

4.  Whoever  in  retail  trade  does  not  give  the  price  of  goods  in  Swiss  currency. 

Sections  5  to  8  forbid  the  holding  of  closing-out  sales  except  under 
permits  issued  by  the  proper  authority  on  payment  of  fees  prescribed. 
Each  application  for  holding  such  a  sale  must  show  what  goods  are 
to  be  offered  and  the  reason  for  the  sale.  For  general  closing-out 
sales  permits  are  not  to  be  issued  oftener  than  once  in  two  years,  and 
then  only  in  case  damage  has  been  caused  by  the  elements  or  the 
party  contemplates  retirement,  removal,  or  transfer  to  another  town. 
Stock-reducing  sales  may  be  held  twice  a  year,  but  none  can  be  held 
during  the  latter  half  of  December.  These  four  sections  are  given 
below : 

Sec.  5.  The  permission  of  the  proper  Government  department  is  required  for 
conducting  a  closing-out  sal(\  Permission  is  1i>  be  granted  provided  the  follow- 
ing legal  provisions  are  met : 


620  REPORT   OF    THE   COMMISSIONER   OF    CORPOEATIOKS. 

The  quality  and  quantity  of  the  p:oo(ls  intended  for  tlie  closing-out  sale,  as 
well  as  the  reason  for  the  closinjj-out  sale,  nuist  be  indicated  in  the  written 
application. 

The  announcement  of  a  closing-out  sale  may  only  occur  with  the  statement 
of  the  name  of  the  firm. 

The  closing-out  sale  shall  be  conducted  only  in  the  existing  business  premises. 

Cut-price  sales  which  have  the  character  of  a  closing-out  sale  come  under  the 
provisions  of  this  law. 

Sec.  6.  Permission  for  a  total  closing-out  sale  shall  be  granted  only  in  case  of 
going  out  of  business,  change  of  ownership,  removal  of  the  business  to  another 
locality,  or  accidents  due  to  the  elements. 

As  a  rule  only  those  owners  of  a  business  are  entitled  to  make  application  for 
a  permit  for  a  total  closing-out  sale  who  have  sold  similar  goods  in  the  same 
community  for  at  least  two  years. 

The  total  closing-out  sale  shall  not  last  longer  than  a  lialf  year. 

The  repetition  of  such  a  sale  before  the  expiration  of  two  years  after  the 
close  of  the  preceding  one  is  not  permitted. 

During  a  total  closing-out  sale  the  replenishment  of  goods  is  forbidden. 

Sec.  7.  Only  those  owners  of  a  business  are  entitled  to  make  application  for 
a  permit  for  a  partial  closing-out  sale  who  during  at  least  one  year  have  sold 
similar  goods  in  the  same  community. 

For  the  second  half  of  the  month  of  December  no  permits  shall  be  granted. 

A  partial  closing-out  sale  shall  be  permitted  only  twice  during  a  year  and 
only  with  at  least  a  three  months'  interval.  The  duration  of  a  partial  closing- 
out  sale  shall  not  exceed  two  weeks. 

Sec.  8.  For  every  permit  to  conduct  a  partial  closing-oiit  sale  a  fee  of  from 
15  to  40  francs,  and  to  conduct  a  total  closing-out  sale  a  fee  of  from  50  to  200 
francs  is  to  be. paid. 

Section  10.  Germany. 

Introductory. — In  combating  the  rapid  spread  of  unfair  business 
practices  during  the  last  half  century  German  courts  did  not  utilize 
general  provisions  of  law,  as  the  French  courts  did,  but  resorted  in 
the  main  to  special  legislation.  Although  the  principle  contained  in 
article  1382  of  the  French  Civil  Code  prevailed  in  the  law  of  a  con- 
siderable part  of  the  German  Empire  prior  to  the  adoption  of  the 
present  Civil  Code,  and  especially  in  Prussia,  the  courts  made  prac- 
tically no  application  of  it  to  the  field  of  unfair  competition.^ 

The  first  attempts  of  the  Imperial  Government  to  curb  unfair 
competition  were  contained  in  various  laws  for  the  protection  of 
patents,  trade-marks,  and  other  forms  of  industrial  property.  Of 
these  the  most  important  was  the  trade-mark  law  of  1894,  which 
adopted  the  first  provision  especially  directed  against  unfair  compe- 
tition. It  was  shortly  followed  by  the  enactment  of  the  special  law 
of  May  27,  189C,  against  unfair  competition,  which  after  13  years 
was  superseded  by  the  new  law  of  June  7, 1909. 

Various  provisions  of  the  Civil  Code,  especially  sections  823  to  826, 
have  also  been  applied  to  cases  of  unfair  competition,  as  well  as  sev- 
eral provisions  of  the  Penal  and  Commercial  Codes. 

1  Fold,  Das  Roirhssosetz  scgen  den  unlautoren  Wettbewerb  vom  7.  .Iiini  IfiO!)  (nannovr-r, 
1910),  S.  2-G  ;  Rosenthal,  Ilandwrirterbncb  der  Staatswissenscbaften,  1009,  Bd.  8  (Wett- 
bewerb.  unlauterer),   S.  799. 


TRUST   LAWS   AND  UNFAIR  COMPETITION.  021 

SPECIAL   LAWS. 

Patent  law. — Section  40  of  the  patent  law  of  May  25,  1877/  in 
addition  to  the  penalties  for  infringement  of  patents,  contains  two 
paragraphs  relating  in  a  general  way  to  the  subject  of  unfair  compe- 
tition.   They  are  as  follows : 

With  a  fine  of  not  more  than  150  marivs  or  arrest  is  punislied : 

1.  Whoever  iirovides  ohjeots  or  their  wrappers  with  u  desiunatiou  which  is 
adapted  to  cause  tlie  luistalvcn  idea  that  tlie  objects  are  protected  by  a  patent 
in  accordance  with  tliis  law. 

2.  Whoever  in  advertisements  uses  a  designation  ui>on  his  sitcnboards,  busi- 
ness cards,  or  in  similar  announcements  which  is  adapted  to  cause  the  mis- 
taken idea  that  the  objects  referred  to  therein  are  protected  by  a  patent  in 
accordance  with  this  law. 

This  provision,  as  will  be  noted,  makes  the  false  claim  or  misuse  of 
a  patent  right  a  penal  offense.  Civil  actions  to  enjoin  the  practice 
and  to  recover  damages  can  also  be  brought  under  other  laws. 

The  practices  forbidden  by  the  two  paragraphs  of  this  section  are 
regarded  as  acts  of  unfair  competition,  since  they  awaken  the  impres- 
sion that  the  goods  which  are  falsely  claimed  to  be  patented  are 
more  useful  and  more  valuable  than  competing  goods.  The  public 
may  be  deceived  thereby  and  competitors  injured.^ 

Tkade-mark  law. — Three  sections  of  the  trade-mark  law  of  May 
10,  1894,^  prohibit  the  usurpation  or  misappropriation  of  certain 
designations  used  to  distinguish  competing  products.  Section  11 
relates  to  the  misappropriation  of  names,  firm  names,  and  trade- 
marks; section  15  relates  to  the  misappropriation  of  decorations 
used  as  distinctive  marks;  and  section  16  relates  to  the  misuse  of 
designations  of  provenance  of  a  geographical  nature.  The  language 
of  these  three  sections  is  as  follows: 

Sec.  14.  Whoever,  knowingly  or  as  a  result  of  gross  negligence,  unlawfully 
provides  goods,  containers,  or  wrappers,  or  announcements,  price  lists,  business 
letters,  recommendations,  bills,  or  the  like,  with  the  name  or  the  firm  name  of 
another,  or  with  a  trade-mark  protected  by  the  regulations  of  this  law,  or  puts 
on  sale  or  sells  such  goods  illegally  marked,  is  bound  to  compensate  the  injured 
party  for  the  damage. 

If  he  has  knowingly  committed  the  act,  he  is  also  punished  with  a  fine  of 
from  150  to  5,0(X>  marks  or  with  imprisonment  up  to  six  months.  The  criminal 
prosecution  takes  place  only  upon  complaint.  The  recall  of  the  complaint  is 
permissible. 

Sec.  15.  Whoever,  for  the  purpose  of  deception  In  trade  and  commerce,  pro- 
vides goods  or  their  containers  or  wrappers,  or  announcements,  price  lists,  busi- 
ness letters,  recommendations,  bills,  or  the  like,  with  a  dress  which  within  tlie 
particular  branch  of  business  is  a  distinctive  mark  of  another  for  like  goods, 

1  Patentgcsetz  vom  25.  Mai  1877,  Rpichsgcsptzblatt,  1877,  S.  501,  S.  509. 
^AllfeUl,  Grundriss  des  Gewcrbliclion  Hechtsscluitzes,  1910,  S.  S.'i. 

3  Gesetz  zum  Schutz  dcr  Waarenbezeichnungcn  vom  12.  Mai  1894,  Roiclisgesctzblatt, 
1S94.   S.  441. 


622  EEPOET    OF    THE    COMMISSIONER   OF    CORPOEATIONS. 

without  his  acquiescence,  or  whoever  for  tlie  same  purpose  puts  on  sale  or  sells 
goods  marked  in  this  way,  is  obligated  to  the  injured  party  for  the  injury,  and 
is  punished  with  a  fine  of  from  lUO  to  o,0<J0  marks  or  with  imprisonment  up  to 
three  montlis.  The  criminal  prosecution  takes  place  only  upon  complaint.  The 
recall  of  the  complaint  is  permissible. 

Sec.  1G.  Whoever  falsely  provides  goods,  containers,  or  wrappers,  or  announce- 
ments, price  lists,  business  letters,  recommendations,  bills,  or  the  like,  with  a 
national  coat  of  arms,  or  with  the  name  or  coat  of  arms  of  a  place,  municipal- 
ity, or  larger  communal  organization,  for  the  purpose  of  causing  a  mistaken 
idea  regarding  the  quality  and  value  of  the  goods,  or  who  for  a  like  purpose  sells 
or  puts  on  sale  goods  so  designated,  is  punished  with  a  fine  of  from  150  to 
5,000  marks  or  with  imprisonment  not  exceeding  sis  months. 

The  use  of  names  which  serve  to  designate  certain  goods  according  to  com- 
mercial usage,  without  intending  to  designate  their  provenance,  does  not  fall 
under  this  provision. 

In  addition  to  registered  trade-marks,  these  three  sections  protect 
family  names,  firm  names,  the  exterior  appearance  of  goods,  wrap- 
pers or  containers,  and  designations  of  provenance  when  used  as 
distinctive  marks  of  products.  Section  IG  of  the  law  of  1909  against 
unfair  competition  affords  similar  protection  to  designations  of  estab- 
lishments. (See  p.  C39.)  The  designations  of  products  which  have 
become  generic  are  not  protected  by  these  provisions.  Likewise 
according  to  section  16  of  the  Trade-Mark  Law,  designations  which 
no  longer  refer  to  the  provenance,  but  haAe  become  the  common  name 
of  goods,  are  specially  excepted. 

The  distinctive  marks  specified  in  these  sections  may  be  affixed  to 
the  products  which  they  distinguish  or  they  may  be  used  on  an- 
nouncements and  advertisements  of  various  kinds  regarding  the 
goods.  The  use  of  such  distinctive  marks  by  others  is  considered 
an  act  of  unfair  competition,  since  it  leads  to  confusion  between 
products  and  thereby  injures  the  rightful  possessors. 

During  the  passage  of  this  measure  in  1894  another  provision  of 
much  broader  scope  was  proposed,  but  was  finally  dropped,  with  the 
understanding  that  a  special  law  regarding  unfair  competition  should 
be  introduced.  Two  years  later,  in  accordance  with  this  arrange- 
ment, the  law  of  May  27,  1896,  was  enacted. 

Unfair  competition  law  of  1896. — The  Law  of  May  27,  1896,^  for 
the  Suppression  of  Unfair  Competition  contained  16  sections,  Avhich 
dealt  with  the  following  practices :  - 

1.  Deceptive  advertising  of  one's  own  goods  or  services — sections  1 
to  4,  inclusive. 

2.  Deception  in  respect  to  quantity  or  quality  of  goods  in  retail 
trade — section  5. 

1  Gcsptz  znr  P.ekampfung  tics  unlauteren  Wettbewerbes  vom  27.  Mai  1806  ;  Reichsgesetz- 
blatt,  180G,  S.  145-149. 

=^  Wassermanu,  Uer  Unlautere  Wettbewerb  nach  Deutschem  Rtcht   (Leipzig,  1907),  S.  9. 


TKUST    LAWS   AND    UNFAIR   COMPETITION.  623 

3.  Disparagement  or  misrepresentation  of  another's  business, 
goods,  services,  etc. — sections  G  and.  7. 

■i.  Misappropriation  of  another's  business  designations — section  8. 

5.  Unauthorized  disclosure  of  trade  secrets — sections  9  and  10. 

The  hist  five  sections  of  the  law  dealt  with  matters  of  procedure, 
compensation,  etc. 

The  law  of  1896  had  a  salutary  effect  in  curbing  the  several  varie- 
ties of  unfair  competitive  acts  specifically  mentioned.  All  other 
forms  of  unfair  competition  remained  beyond  the  reach  of  the  law 
until  this  weakness  was  remedied  by  the  application  of  section  826  of 
the  new  Civil  Code,  which  became  effective  in  1900,  and  the  enact- 
ment in  1909  of  a  new  law  against  unfair  competition  of  much 
broader  scope,  which  supplanted  the  earlier  law. 

Unfaiu  competition  law  of  1909. — The  Law  of  Juno  7,  1909,^ 
against  Unfair  Competition  preserves  the  principal  features  of  the 
earlier  law,  but  makes  certain  additions  and  modifications  which  ex- 
perience showed  to  be  necessary.  The  most  important  additions  are 
a  general  clause  fashioned  after  section  826  of  the  Civil  Code  but 
confined  to  business  affairs,  a  section  relating  to  the  corruption  of 
employees,  and  several  sections  relating  to  bankrupt  and  closing-out 
sales.  The  law  also  extends  to  the  employer,  under  certain  circum- 
stances, liability  for  the  unfair  acts  of  his  employee.  The  penalties 
are  also  increased. 

The  new  law  contains  in  all  oO  sections,  which  relate  to  the  follow- 
ing practices: 

1.  Acts  in  business  which  are  contrary  to  good  morals — section  1. 

2.  Deceptive  advertising  of  one's  own  goods  or  services — sections 
3  to  5. 

3.  JNIethods  of  advertising  and  conducting  closing-out  sales  or  sales 
of  goods  from  a  banki-upt  stock — sections  6  to  10. 

4.  Deception  in  respect  to  quantity  or  quality  of  goods  in  retail 
trade — section  11. 

5.  Bribery  or  corruption  of  employees  for  competitive  purposes — 
section  12. 

6.  Disparagement  or  misrepresentation  of  another's  business, 
goods,  or  services — sections  11  and  15. 

7.  Misappropriation  of  another's  business  designations — section  16. 

8.  Unauthorized  disclosure  of  trade  secrets — sections  17  to  20. 
Sections  2, 13,  and  21  to  30  contain  provisions  regai-ding  definitions, 

procedure,  penalties,  compensation,  the  rights  of  foreigners,  etc. 

General  clause. — Section  1  of  the  law  of  1909  provides  that  acts  in 
business  which  are  repugnant  to  good  morals  afford  ground  for  an 

1  Gesetz  gegcn  den  unlautcron  Wt-ttboworl)  voni  7.  Jiiui  1900  ;  Kcichsgcsctzblatt,  1000, 
S.  400-r)00.     Set-  full  tiaiialatiou  ou  p.  800. 


624  KEPOET   OF    THE   COMMISSIONER   OF    COEPOEATIONS. 

action  to  enjoin  the  practices  and  to  recover  damages.  According 
to  Finger,  this  general  provision  dominates  the  whole  law  of  1909.^ 
In  respect  to  unfair  competitive  practices  in  business,  its  scope  is  as 
broad  as  is  that  of  article  1382  of  the  French  Civil  Code.  Any  com- 
petitive act  that  would  be  considered  by  the  French  courts  as  "  dis- 
loyal" (deloyale)  would  be  considered  by  the  German  courts  as 
""against  good  morals"  (gegen  die  guten  Sitten).- 

The  far-reaching  scope  of  the  general  clause  makes  possible  the 
correction  of  countless  competitive  acts  which  formerly  could  not 
be  dealt  with  at  all  or  only  in  an  incomplete  way.  The  field  of 
application,  according  to  Fuld,  is  almost  unlimited  and  the  power 
which  section  1  gives  to  the  judge  extraordinary." 

Inasmuch  as  the  application  and  interpretation  of  this  section  by 
the  courts  is  similar  to  section  820  of  the  Civil  Code,  the  discussion  of 
it  is  given  below  under  the  head  of  general  provisions.     (See  p.  647.) 

Deceptioe  advertising. — Sections  3,  4,  and  5  of  the  law  of  1909 
prohibit  the  circulation  of  statements  which  falsely  represent  one's 
business  in  order  to  attract  trade.  The  language  of  these  sections 
is  as  follows : 

Sec.  3.  Whoever  in  public  advertisements  or  in  communications  intended 
for  an  extensive  group  of  persons  malves  incorrect  statements  regarding  busi- 
ness relations,  especially  regarding  tlie  quality,  the  origin,  the  method  of  pro- 
duction, or  the  scale  of  prices  of  goods  or  industrial  services,  regarding  the 
kind  of  supply  or  the  source  of  supply  of  goods,  regarding  the  possession 
of  marks  of  distinction,  regarding  the  cause  or  the  purpose  of  the  sale,  or 
regarding  the  quantity  of  the  stocks,  which  are  adapted  to  create  the  impres- 
sion of  an  especially  favorable  offer,  is  subject  to  an  action  to  desist  from  such 
incorrect  statements. 

Sec.  4.  Whoever,  vi^ith  the  intention  to  create  the  impression  of  an  especially 
favorable  offer,  knowingly  makes  untrue  statements  and  statements  adapted 
to  mislead,  in  public  advertisements  or  in  communications  intended  for  an 
extensive  group  of  persons,  regarding  business  relations,  especially  regarding 
the  quality,  the  origin,  tlie  method  of  production,  or  the  scale  of  price  of  goods 
or  industrial  services,  regarding  the  kind  of  supply  or  the  source  of  supply  of 
goods,  regarding  the  possession  of  marks  of  distinction,  regarding  the  cause  or 
the  purpose  of  the  sale,  or  regarding  the  quantity  of  the  stocks,  is  punished 
with  imprisonment  up  to  one  year  and  with  a  fine  up  to  5,000  marks,  or  with 
one  of  these  penalties. 

If  the  incorrect  statements  specified  in  paragraph  1  were  made  in  a  busi- 
ness establishment  by  an  employee  or  representative,  then  the  proprietor  or 
manager  of  the  concern  is  punishable,  besides  the  employee  or  representative, 
if  the  act  happened  with  his  knowledge. 

Sec.  5.  The  use  of  names  which  in  business  dealings  serve  to  specify  certain 
goods  or  industrial  services,  without  intending  to  specify  their  provenance,  is  not 
included  under  the  provisions  of  sections  3  and  4. 

1  ringer,  Roichsgcsetz  gegen  den  imlauteren  Wettbewerb,  Berlin,   1910,   B.   14. 

2  Fuld,  op.  cit.,  S.  42. 
SFuld,  op.  cit.,  S.  75. 


TEUST    LAWS   AND   UNFAIR   COMPETITION.  625 

In  the  sense  of  the  provisions  of  sections  3  and  4,  pictorial  presentations  and 
other  contrivances  which  are  calculated  and  adapted  to  replace  such  state- 
ments are  to  be  regarded  in  the  same  way  as  the  specified  statements. 

The  intention  of  these  sections  is  to  prevent  fraudulent  advertise- 
ments used  to  divert  a  competitor's  customers. 

Sections  3  and  -i  cover  exactly  the  same  classes  of  incorrect  state- 
ments, but  section  3  provides  only  a  civil  remedy,  while  section  4 
provides  penalties  of  fine  and  imprisonment  if  the  acts  specified 
were  knowingly  done  with  the  intention  of  deceiving  the  public. 
Violation  of  section  4  occurs  if  the  person  circulating  the  statements 
knew  that  they  were  untrue  and  calculated  to  mislead.  The  careless 
or  negligent  circulation  of  incorrect  statements  is  not  included.^ 

In  accordance  wath  section  13,  an  action  for  damages  can  be  brought 
against  the  one  circulating  incorrect  statements  in  violation  of  sec- 
tion 3  if  he  knew  or  should  have  known  that  they  were  untrue,  but 
printers,  publishers,  etc.,  must  have  actual  knowledge  of  the  untruth- 
fulness of  such  statements  before  damages  can  be  recovered.  The 
part  of  section  13  relating  to  this  matter  is  as  follows : 

For  compensation  of  the  damage  arising  from  violations  is  responsible:  (1) 
Whoever  in  case  of  section  3  liuew  or  should  have  Ivuown  the  incorrectness  of 
the  statements  made  by  him.  Against  editors,  publishers,  ]>rinters,  or  distribu- 
tors of  printed  periodicals  the  claim  for  compensation  of  damage  can  be  made 
efCective  only  if  they  knew  the  incorrectness  of  the  statements. 

Section  5  is  new.  The  first  paragraph  exempts  from  the  provisions 
of  sections  3  and  4  designations  of  provenance  which  have  become 
generic,  such  as  Carlsbad  salts,  Swiss  cheese,  Cologne  Avater,  etc.  As 
noted  above,  a  similar  exemption  was  made  in  section  IG  of  the  trade- 
mark law  which  prohibits  the  use  of  false  statements  of  geographic 
provenance.     (See  p.  622.) 

The  second  paragraph  of  section  5  places  all  pictorial,  symbolical 
and  graphical  presentations  used  in  advertisements  within  the  scope 
of  sections  3  and  4,  thus  correcting  a  weakness  which  had  existed  in 
the  earlier  laAv.  The  use  of  such  devices  to  falsely  represent  one's 
business  is  now  dealt  with  in  the  same  manner  as  false  statements. 
Under  this  provision,  for  instance,  a  suit  can  be  brought  against  a 
dealer  in  firearms  who  puts  in  his  advertisements  a  picture  of  a 
large  plant,  spacious  workrooms,  etc.,  when  in  reality  he  has  only  a 
small  workshop  in  an  attic  with  few  workmen.^ 

The  expression  "  in  public  advertisements  or  in  communications 
intended  for  an  extensive  group  of  persons,"  used  in  sections  3  and  4 
and  also  in  later  sections,  includes  practically  every  form  of  an- 
nouncement or  communication,  piinted  or  oral,  not  directed  to  par- 
ticular persons.    Common  forms  of  public  advertisements  are  news- 

1  Fuld,  op.  cit.,  p.  158.  «  Finger,  op.  cit.,  p.  127. 

30035°— 16 40 


626  TiEPOET    OF    THE    COMMISSIONER    OF    COKPOEATIONS. 

paper  insertions,  placards,  signs  on  roofs  of  buildings,  in  show  Avin- 
dows  and  on  theater  curtains,  notices  affixed  to  goods,  or  to  their 
wrappers  or  containers,  and  catalogues  distributed  to  the  general 
public.  Common  forms  of  "  communications "  are  annual  reports 
of  corporations,  insurance  companies,  etc.,  mimeographed,  printed, 
or  otherwise  manifolded  reports  of  merchants  to  their  patrons,  and 
the  oral  statements  of  accounts  of  a  business  manager  of  a  retailers' 
association.^ 

How  large  a  circle  of  persons  may  be  regarded  as  "  an  extensive 
group  of  persons"  can  not  be  determined  according  to  any  general 
rule,  but  depends  upon  the  circumstances  in  each  case.  A  personal 
letter  to  one  or  even  to  several  individuals  would  be  excluded. 
Actions  against  persons  making  untrue  statements  to  individuals 
are  possible,  however,  under  section  1  of  the  law. 

The  criterion  of  whether  a  statement  is  incorrect  or  untrue  is  the 
sense  in  which  the  public,  or  that  part  of  the  public  for  wdiom  it  is 
intended,  accepts  it.  It  is  not  necessary,  in  order  to  obtain  convic- 
tion, to  show  that  persons  have  actually  been  deceived  by  them. 
The  suppression  of  a  fact  essential  to  the  judgment  of  the  public  is 
also  considered  as  an  incorrect  or  untrue  statement  within  the  mean- 
ing of  these  provisions.  The  same  is  true  of  a  correct  statement  pre- 
sented in  such  a  way  as  to  convey  an  erroneous  impression  to  the 
casual  reader.  A  good  example  is  that  of  a  dentist  who,  in  a  news- 
paper advertisement,  puts  the  words  "teeth,  1  mark,"  in  large  Latin 
type  and  the  words  "  exclusive  of  setting  "  in  small  German  letters.- 
An  ambiguous  statement  may  also  be  incorrect  within  the  meaning 
of  section  3. 

Not  all  incorrect  or  untrue  statements  are  prohibited  by  these 
sections,  but  only  such  as  are  adapted  "  to  create  the  impression  of  an 
especially  favorable  offer,"  and  thereby  to  divert  the  clientele  of  a 
competitor.  Comic  and  harmless  exaggerations,  for  example,  which 
can  easily  be  recognized  by  everyone  as  such,  are  not  considered  as 
AHolations  of  sections  3  and  4.  The  expression  "  adapted  to  mis- 
lead "  contained  in  section  4  has  the  same  significance  as  the  expres- 
sion "  adapted  to  create  the  impression  of  an  especially  favorable 
offer  "  used  in  section  3.  Whether  the  incorrect  or  untrue  statements 
contained  in  an  advertisement  or  announcement  would  mislead  is 
in  each  case  a  question  of  fact,  in  the  determination  of  which  the 
courts  take  into  consideration  the  average  intelligence  of  the  class 
of  persons  concerned,  their  manner  of  living,  their  ability  to  judge, 
their  inexperience  and  credulity,  the  local  customs  prevailing,  and 
other  factors  of  like  nature.  It  is  not  necessary  to  shoAv  that  cus- 
tomers have  actually  been  misled  and  diverted  by  such  statements. 

1  Fukl,  op.  cit.,  pp.  87-00  ;  Finger,  op.  cit.,  p.  38.  =  p,,]^^  op    f.^ ^  pp    o.n-Ofj, 


TKUST    LAWS   AND    UNFAIK    COMPETITION.  627 

The  incorrect  or  untruthful  statements  forbidden  by  sections  3  and 
4  must  also  be  in  regard  to  ''  business  relations."  This  term  is  very 
broad,  including  all  relations  either  directly  or  indirectly  affecting 
business.  It  may  even  include  statements  regarding  personal  and 
family  relations.  Sections  3  and  4  specify  some  eight  classes  of  un- 
truthful statements  which  are  prohibited,  viz :  ^ 

1.  Quality  of  (joods.  Under  this  liead  come  incorrect  statements  regardinj? 
the  external  or  internal  cliaracteristies,  properties,  or  qualities,  such  as  "  bound 
in  leather,"  "  four-ply  linen  collars,"  "  English  cloth,"  etc. 

2.  Origin  of  goods.  This  class  was  inserted  in  the  new  law  to  cover  any 
cases  not  Included  in  the  first  class.  If  a  horse  dealer,  for  example,  designates 
a  horse  as  of  "  Graditz  stock,"  the  name  refers  more  to  the  origin  than  to  the 
characteristics  of  the  animal. 

3.  Method  of  production.  This  class  includes  all  such  expressions  falsely 
made,  as  "guaranteed  first-class  work,"  "made  by  hand,"  "without  artificial 
perfuming,"  etc. 

4.  iimle  of  prices.  Under  this  classification  belong  all  such  statements,  if 
untrue,  as  "  only  one  price,"  "  selling  at  factory  price  or  at  cost,"  "  special  cut- 
price  day,"  etc. 

5.  Kind  or  source  of  supply.  This  class  includes  such  statements,  if  un- 
true, as  "  direct  from  the  factory,"  "  packed  in  ice,"  "  Strassburg  pie,"  "  Jamaica 
rum,"  etc. 

6.  Possession  of  marks  of  distinction.  Under  this  head  come  such  statements, 
if  untrue,  as  "  doctor  of  dental  surgery,"  patented,"  "  awarded  first  prize,"  etc. 

7.  Cause  or  purpose  of  a  sale.  In  this  classification  are  included  all  untrue 
statements  regarding  sales,  such  as  "  fire  sale,"  "  damaged  by  water,"  "  on  ac- 
count of  alterations,"  etc.,  which  are  not  covered  by  the  special  provisions  of 
sections  6  to  10. 

8.  Quantity  of  stocks  on  hand.  This  is  a  new  class  which  includes,  among 
other  things,  the  advertisement  of  a  certain  stock  of  goods  for  sale  when  a 
merchant  does  not  actually  have  such  stock  on  hand. 

The  special  mention  of  these  eight  classes  of  incorrect  statements 
does  not  exclude  other  forms,  such  as  the  date  of  beginning  business, 
the  composition  of  goods  of  all  kinds,  the  number  of  subscribers,  etc. 

A  few  cases  will  illustrate  the  application  of  these  sections  to  unfair 
advertising. 

A  dealer  advertised  a  sale  of  goods  at  factory  prices.  He  also 
stated  that  the  factory  emploj^ed  300  persons.  It  Avas  shown  that 
his  prices  were  higher  than  those  of  the  manufacturer.  The  court 
held  that  he  was  guilty  of  an  incorrect  statement  in  the  sense  of 
section  3,  since  his  advertisement  was  calculated  to  make  the  i)ublic 
believe  not  only  that  it  was  purchasing  at  a  factory  price,  but  also 
at  the  price  of  a  large  factory.^ 

A  photographer  placed  in  his  window  a  placard  advertising  one 
dozen  '"  carte-de-visite  "  pictures  at  l.SO  marks  and  one  dozen  cabinet 
pictures  at  4.80  marks.    The  samples  of  })liotographs  shown  were  all 

1  Fiild,  oi-.  cit..  pp.   111-1  \r,. 

2  Oherlandossoriclit  ^'ollo,  ITrt.  v.  lli.  Fcli.  lliIO;  cIIimI  l)y  Scclow.  Siimmluiifr  nonor  wicli- 
tiger  Kutsclifiduugcii  :uif  (iniuU  tk-ss  Gesctzes  gogen  deu  uulautcrou  Wcltlicwcrli,  S.  '21. 


628  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

mounted.  Prospective  customers  were  informed,  however,  that 
mounted  photographs  were  higher.  The  Imperial  Court  hekl  this 
act  to  be  a  viohition  of  section  4  of  the  law,  since  the  defendant 
intended  "  to  deceive  the  public  by  creating  tlie  impression  of  a 
specially  favorable  offer."  ^ 

A  cigarette  manufacturer  in  Frankfurt  a.  M.  used  the  name  of  an 
Egyptian  company  on  his  product.  The  Imperial  Court  held  this 
to  be  an  incorrect  statement  regarding  business  relations  in  the  sense 
of  section  3  of  the  law  against  unfair  competition,  notwithstanding 
the  plea  that  the  Frankfurt  concern  had  been  established  by  the 
Egyptian  company.- 

A  cigar  manufacturer  in  Bremen,  Germany,  who  used  Havana  leaf 
designated  his  product  as  "  Genuine  Havana  cigars."  The  Imperial 
Court  held  that  the  average  consumer  understood  by  such  a  designa- 
tion an  imported  cigar,  and  that,  therefore,  the  manufacturer,  in 
using  this  designation,  had  made  an  incorrect  statement  regarding  the 
origin  of  his  goods,  which,  considering  the  cheap  price,  created  the 
impression  of  an  especially  favorable  offer.^ 

A  newspaper  publisher  promised  to  insure  subscribers  to  the 
amount  of  1,000  marks  against  death  by  accident.  It  was  shown  that 
the  conditions  imposed  were  not  those  customary  in  the  insurance  busi- 
ness, but  were  wholly  exceptional  and  unexpectedly  severe,  so  that 
they  would  rarely  be  fulfilled.  As  a  result  the  impression  of  an 
ordinary  insurance  to  the  amount  of  1,000  marks  was  created,  while 
in  truth  an  actually  effective  insurance  wdth  which  the  subscribers 
]'eckoned  and  which  had  been  advertised  did  not  exist.  Furthermore, 
the  defendant  knew  that  his  announcement  could  be  understood  in  a 
sense  not  corresponding  to  the  actual  facts.  The  Imperial  Court 
held,  therefore,  that  such  acts  violated  section  4:  of  the  law  against 
unfair  competition.* 

Bankrupt  and  closing-out  sales. — The  law  of  1909  contains  five  sec- 
tions dealing  specifically  Avith  the  manner  of  advertising  and  con- 
ducting closing-out  sales  and  sales  of  goods  from  a  bankrupt  stock. 
Violations  of  these  provisions  are  made  penal  offenses,  punishable  in 
most  cases  with  fine  or  imprisonment  or  both.  In  accordance  with 
section  13,  civil  suits  to  enjoin  the  acts  and  to  recover  damages  can 
also  be  brought  against  the  offender.  The  language  of  these  sections 
is  as  follows: 

Sec.  6.  If  in  public  advertisements  or  in  corunmnications  intended  for  an 
extensive  group  of  persons,  the  sale  of  goods  is  announced,  which  came  from  a 

1  Rcichssei'icht,  Urt.  v.  6.  Dezember  1910;  cited  by  Seelow,  op.  cit.,  p.  40. 

2  Reichsgericht,  Urt.  v.  12.  Juni  1913;  Das  Rccht,  1913,  Beilage  (Doiitsclilands  Oberst- 
richterlichc  Rcchtsprechung)    No.   2501. 

3  Roicbsgerirbt,  Urt.  v.  10.  Miirz  1914;  Das  Recht,  1914,  Beilage  No.  14.87. 

*  Relchsgericbt,  Urt.  v.  22.  Oktober  1912  ;  Gewerblicher  Reclitsscbutz  und  Urheberrecht, 
1913,  p.  19. 


TEUST    LAWS    AND   UNFAIR    COMPETITION.  629 

bankrupt  stock  but  no  lonc;er  belong:  to  siir-h  bankrupt  stock,  it  is  forbidden  to 
luake  any  reference  to  tbe  provenance  of  tbe  s'oods  from  a  bankrupt  stock. 

Violations  of  this  provision  are  punished  with  a  fine  up  to  150  marks  or  with 
arrest. 

Sec.  7.  Whoever  in  public  advertisements  or  in  communications  which  are 
intended  for  an  extensive  group  of  persons  announces  the  sale  of  goods  under 
the  designation  of  a  closing-out  sale  is  obliged  in  the  announcement  to  give  the 
reason  which  has  given  occasion  to  the  closing-out  sale. 

Through  the  superior  administrative  authorities,  after  hearing  given  to  tlie 
proper  legal  representatives  of  Industry  and  trade,  regulations  may  be  made  for 
the  announcement  of  certain  kinds  of  closing-out  sales  to  the  effect  that  notices 
regarding  the  reason  of  the  closing-out  sale  and  the  time  of  Its  beginning  be 
provided  at  a  place  to  be  designated  by  them,  as  well  as  a  list  furnished  of  the 
goods  to  be  sold  out. 

The  inspection  of  the  list  is  permitted  to  everyone. 

Sec.  S.  Whoever  in  case  of  the  announcement  of  a  closing-out  sale  places 
goods  for  sale  which  have  been  procured  merely  for  the  purpose  of  a  closing-out 
sale  (so-called  replenishment  of  goods)  is  punished  with  imprisonment  up  to 
one  year  and  with  a  fine  up  to  5,000  marks  or  witln  one  of  these  penalties. 

Sec.  9.  The  announcement  of  a  closing-out  sale  within  the  meaning  of  section 
7,  paragraph  2,  and  of  section  S  applies  also  to  every  other  announcement  which 
relates  to  the  sale  of  goods  on  account  of  winding  up  business,  giving  up  a  par- 
ticular kind  of  goods,  or  getting  rid  of  a  specific  stock  of  goods  from  tlie  existing 
supply. 

With  respect  to  season  and  inventory  sales,  which  in  the  announcement  are 
specified  as  such  and  are  customary  in  regular  business,  the  provisions  of  sec- 
tions 7  and  8  have  no  application.  Concerning  the  number,  time,  and  duration 
of  the  customary  season  and.  inventory  sales,  the  superior  administrative  au- 
thorities may  make  regulations  after  hearing  the  proper  legal  representatives  of 
industry  and  trade. 

Sec.  10.  With  fines  up  to  150  marks  or  with  arrest  is  punished : 

(1)  Whoever,  contrary  to  the  provisions  of  section  7,  paragraph  1,  neglects  in 
the  announcement  of  a  closing-out  sale  to  give  the  reason  which  has  given 
occasion  to  the  closing-out  sale; 

(2)  Whoever  violates  the  regulations  Issued  on  the  basis  of  section  7,  para- 
graph 2,  or  in  complying  with  these  regulations  makes  incorrect  statements ; 

('.])  Whoever  violates  the  regulations  provided  by  the  superior  administrative 
authorities  on  the  basis  of  section  9,  paragraph  2,  sentence  2. 

The  purpose  of  these  provisions  is  to  restrict  the  manner  of  adver- 
tising and  conducting  certain  types  of  sales  which  are  frequently  used 
as  a  means  to  lure  people  away  from  tJie  shops  they  usually  trade 
with  and  to  dispose  of  goods  of  inferior  quality. 

Section  6  makes  it  unlawful  to  advertise  the  sale  of  goods  from  a 
bankrupt  stock  unless  they  actually  belong  to  such  stock  at  the  time 
the  sale  is  announced.  Objects  which  are  not  subject  to  legal  attach- 
ment do  not  belong  to  the  bankrupt  stock.  Such  notices  as  "  Sale  of 
bankrupt  goods  and  other  goods,"  "  Sale  at  the  prices  fixed  l)v  the 
trustee  in  bankr\iptcy,"  "  Purchased  from  a  trustee  in  bankruptcy," 
where  the  goods  do  not  actually  l)elong  at  that  time  to  a  l)anki-upt 
stock,  are  prohibited.^     Tlie  prohibitions  of  section  0  relate  only  to 

»  Fuld,  op.  cit.,  p.  214. 


630  P.EPOET   OF    THE   COMMISSIONER   OF   COEPOEATIONS. 

goods  "whiclj  at  some  time  Avere  part  of  a  bankrupt  stock,  but  which 
have  passed  out  of  the  hands  of  the  trustee.  The  advertising  of  a 
bankrupt  sale  of  goods  which  never  formed  a  part  of  a  bankrupt 
stock  is  not  prohibited  by  this  provision,  but  by  sections  -3  and  4. 

A  fine  not  exceeding  150  marks  or  arrest  is  prescribed  for  violation 
of  this  section.  In  addition  section  13  authorizes  an  injured  party  to 
bring  action  to  enjoin  and  to  recover  damages. 

The  following  cases  illustrate  the  application  of  this  provision: 

A  dealer  after  buying  some  goods  from  a  bankrupt  stock  an- 
nounced a  closing-out  sale  of  bankrupt  goods  on  a  certain  day.  The 
goods  were  not  delivered  to  him  until  the  clay  before  the  sale,  which 
was  some  days  after  the  announcement  had  been- made.  The  Im- 
perial Court  held  that,  nevertheless,  section  G  had  been  violated, 
since  on  the  clay  of  the  sale  the  goods  no  longer  belonged  to  the 
bankrupt  stock.^ 

A  merchant  contracted  with  an  administrator  in  bankruptcy  to 
handle  a  bankrupt  stock,  guaranteeing  him  30,000  marks  for  it  and 
three-fourths  of  all  the  receipts  above  this  amount.  The  merchant 
then  advertised  a  closing-out  sale  of  bankrupt  goods.  Suit  was 
brought  to  enjoin  the  merchant  from  making  such  an  announcement. 
The  lower  court  granted  the  injunction,  but  on  appeal  the  judgment 
w'as  reversed  by  the  Superior  Court  of  Celle  on  the  ground  that  the 
goods  had  not  entirely  passed  out  of  the  hands  of  the  administrator, 
since  he  still  had  a  pecuniary  interest  therein.^ 

In  another  case  the  defendant  conducted  a  shoe  store  in  which  he 
sold  some  shoes  which  his  brother  had  obtained  from  a  bankrupt 
stock.  In  announcing  the  closing-out  sale  of  these  goods  he  used  the 
following  advertisement : 

Shoes  !  The  large  stock  of  goods  obtaineil  from  a  bankrupt  stock  is  now  being 
sold  at  extremely  cheap  prices. 

This  announcement  was  held  by  the  court  to  be  a  violation  of  sec- 
tion 6  of  the  law,  since  it  referred  to  a  bankrupt  stock  when  the  shoes 
no  longer  belonged  to  such  stock.  Appeal  was  taken  on  the  ground 
that  the  reference  to  the  provenance  of  goods  in  the  statement  of  the 
reason  for  a  closing-out  sale  required  by  section  7  was  not  a  violation 
of  section  6.  The  appeal  was  rejected,  the  Imperial  Court  holding 
that  the  prohibition  of  section  6  is  sweeping  and  without  exception, 
and  that  it  is  based  on  the  consideration  that  every  reference  to  the 
provenance  of  goods  from  a  bankrupt  stock  exerts  a  real  and  unwar- 
ranted attraction  upon  the  public  and  injures  honest  business  men.^ 

1  Rcichsprericht,  TTrt.  v.  2fi.  Mai  1911 ;  cited  by  Seelow,  op.  cit.,  p.  G6. 
-  Oberlandessericht  Celle,  Urt.  v.  19.  Juni  1912  ;  cited  by  Seelow,  op  cit.,  p.  67. 
^  Urt.  V.   4.   April   1913 ;   Entscheidungen   des   Reichsgerichts   in    Strafsachen,    Bd.    47, 
S.  117. 


TRUST   LAWS  AXD  UNFAIR   COMPETITION.  631 

Section  7  regulates  the  manner  of  advertising  closing-ont  sales. 
Paragraph  1  provides  that  every  person  announcing  such  a  sale  must 
state  in  his  advertisement  the  reason  or  motive  for  closing  out  goods 
in  this  manner.  The  Imperial  Court  has  decided  that  an  announce- 
ment of  a  closing-out  sale,  which  gives  only  the  words  "  closing  out " 
and  not  the  cause,  violates  paragraph  1  of  section  7  and  paragraph  1 
of  section  10.  The  superior  court  of  Colmar  has  decided  that  the 
cause  of  a  closing-out  sale  must  not  only  be  given  as  a  matter  of 
form,  but  must  be  seriously  intended  and  really  pertinent.  Only  such 
circumstances  can  be  given  as  reasons  for  a  closing-out  sale  as  would 
justify  the  forced  sale  of  goods.^  Giving  an  untruthful  reason  is 
made  a  misdemeanor  by  section  10  and  punished  with  a  fine  of  150 
marks  or  with  arrest. 

According  to  the  second  paragraph  of  section  7  the  administration 
of  this  provision  in  certain  cases  is  delegated  to  local  authorities  who 
may  designate  a  place  for  posting  the  annovmcement  of  the  reasons 
for  selling  out,  the  time  of  the  sale,  and  a  list  of  the  goods  to  be  dis- 
posed of.  This  delegation  of  authority  was  made  in  order  to  meet  the 
special  economic  and  local  needs  of  different  business  districts.^ 

The  superior  administrative  authorities  are  not  authorized  by  the 
above  section  to  regulate  all  closing-out  sales.  The  Imperial  Court 
has  repeatedly  held  that  they  can  only  apply  the  regulations  to 
special  kinds  of  closing-out  sales.^ 

In  a  recent  case  involving  this  point  a  local  magistrate  made  a 
regulation  which  applied  to  all  closing-out  sales  conducted  for  the 
purpose  of  clearing  or  reducing  the  stock  of  goods.  The  Imperial 
Court  held  that  this  regulation  embraced  every  kind  of  closing-out 
sale,  and  for  this  reason  the  police  magistrate  had  exceeded  his 
authority.* 

Every  announcement  which  contains  the  words  "  closing  out "  or 
"selling  out,"  or  any  expression  which  conveys  the  same  idea,  comes 
within  the  meaning  of  this  provision.  The  Imperial  Court  has  held 
that  such  expressions  as  "  total  sale,"  "  clearance  sale,"  and  "  rapid 
and  cheap  sale  "  may  be  equivalent  to  closing-out  sale.^  Any  other 
form  of  sale,  such  as  fire  sale,  remnant  sale,  special  sale,  etc.,  does  not 
come  within  the  meaning  of  this  section,  but  the  false  advertising  of 
such  sales  is  prohibited  by  sections  3  and  4. 

Section  9,  first  paragraph,  provides  that  the  closing  out  may  be 
of  an  entire  business,  of  a  branch  of  a  business,  or  of  a  particular 
line  of  goods.    According  to  the  second  paragraph  of  section  0,  sea- 

1  Gowcrlilichcr  Roclitsschntz  unci  rrlioborrocht,  1011,  S.  GS. 
=  Fuld,  op.  cit.,  I).  2212. 

=  Urt.  V.  10.  Jiini  1911  ;  EntschciduiiRon  dcs  Rfichsgorichts  in  Strafsachon,  H(l.  45,  S.  Ifi. 
*  Urt.  V.  12.  Miirz  1018  ;  Entsclioidiinf?pn  dcs  Rciclisgcriclits  in  Srrafsachcn,  lid.  47,  S.  88. 
=  Urt.  V.  2G.  Mai  1911  ;  Entschoidunseu  dcs  Rciphsgoiichts  in   Strafsachcn,  I?d.  45,  S.  45  ; 
Das  Recbt,  1911,  Beilage  No.  .1146. 


632  EEPOET    OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

son  and  inventory  closing-out  sales  are  exempted  from  the  provisions 
of  section  7,  since  in  certain  lines  of  l)nsiness  they  are  considered  a 
necessary  means  of  disposing  of  goods,  such  as  those  of  changing 
style,  in  order  to  make  room  for  a  new  stock. 

Section  8  prohibits  a  person  who  intends  to  hold  a  closing-out  sale 
from  adding  goods  to  the  original  stock  after  the  announcement  of 
the  sale  has  been  made.  The  purpose  of  this  provision  is  to  prevent 
the  prolongation  of  such  sales,  which  tend  to  divert  the  trade  of 
others  engaged  in  the  same  business.  A  rather  common  in\actice 
covered  by  this  provision  was  the  buying  up  and  selling  off  of  liqui- 
dated or  bankrupt  stocks,  a  practice  which  had  resulted  in  much 
injury  to  regular  merchants.^ 

The  penalty  for  violation  of  this  section  is  imprisonment  for  not 
more  than  one  year  or  a  fine  of  not  more  than  5,000  marks,  or  both. 
Actions  to  enjoin  the  practice  and  to  recover  damages  can  also  be 
brought  against  those  violating  the  provisions  of  this  section  in  ac- 
cordance with  the  provisions  of  section  13.  According  to  section  9, 
second  paragraph,  season  and  inventory  sales  are  exempt  from  the 
provisions  of  this  section. 

There  have  been  numerous  cases  before  the  courts  involving  the 
interpretation  of  sections  8  and  9.    A  few  examples  follow : 

A  merchant  advertised  a  Christmas  closing-out  sale  at  one  of  his 
stores,  and  during  the  sale  brought  in  some  goods  from  another  of  his 
stores.  Suit  was  brought  for  violation  of  sections  8  and  9  of  the  law 
of  1909  against  unfair  competition.  The  questions  involved  were 
whether  the  Christmas  sale  should  be  considered  a  seasonal  sale  in  the 
sense  of  section  9,  and  also  whether  the  bringing  in  of  goods  from  one 
store  to  another  operated  by 'the  same  proprietor  was  a  violation  of 
section  8.  The  lower  court  held  that  a  Christmas  closing-out  sale 
could  not  be  considered  as  a  seasonal  sale,  and  also  that  the  transfer- 
ring of  goods  from  one  store  to  another  of  the  same  concern  during 
the  sale  constituted  a  violation  of  section  8,  since  the  goods  were  not 
originally  procured  expressly  for  that  store  and  were  shipped  after 
the  announcement  of  the  closing-out  sale  had  been  made.  The  Im- 
perial Court,  however,  overruled  the  lower  court  on  both  of  these 
findings.' 

The  defendant  condueted  a  shoe  business  at  a  given  place.  Pi  ior  to 
December  31, 1910,  he  had  a  second  shoe  store,  under  a  different  name, 
which  connected  with  the  former  by  a  little  interior  yard  or  court. 
The  lease  of  the  latter  store  was  to  be  given  up  on  January  1,  1911. 
Thereupon  he  advertised  in  the  show  window  of  this  second  store 
and  also  in  the  papers  a  clearance  sale  of  the  stock  at  great  reductions 

iFuld,  op.   (it.,   p.  231. 

-  Urt.  V.  20.  September  1910 ;  Entscheidungen  des  Reiehsgerieht.s  in  Strafsachon,  Bd.  44, 
S.  61. 


TEUST    LAWS  AND   UNFAIR   COMPETITION.  633 

on  account  of  giving  up  the  lease.  During  the  sale  he  brought  in  some 
new  goods  from  his  main  store  for  tlie  purpose  of  sale.  The  lo^Yer 
court  convicted  him  of  violating  section  i  and  also  sections  8  and  9. 
The  appeal  taken  by  defendant  was  on  the  ground  that  he  had  not 
advertised  a  closing-out  sale,  since  his  main  business  was  not  ended. 
The  Imperial  Court  rejected  this  plea,  holding  that  a  closing-out  sale 
can  take  place  on  the  giving  up  of  a  certain  class  of  goods  or  a  certain 
stock  out  of  an  existing  stock,  and  that  the  public  in  this  case  under- 
stood from  the  announcement  that  the  whole  stock  in  the  second  store 
was  to  be  sold  out,  there  being  no  mention  of  the  main  store.  Hence 
the  sale  advertised  b}^  the  defendant  was  a  partial  closing-out  sale 
in  the  sense  of  section  9,  paragraph  1,  and  the  bringing  in  of  other 
goods  after  the  sale  was  announced  w^as  a  violation  of  section  8.  Inci- 
dentally the  Imperial  Court  stated  that  this  decision  was  not  con- 
trary to  the  above  decision  of  September  20,  1910,  for  the  facts  were 
essentially  different  in  the  two  cases.^ 

Deception  concerning  quantity  or  quality  of  goods. — Section  11  of 
the  law  of  1909  is  identical  with  section  5  of  the  old  law  except  for  a 
few  slight  changes  in  the  language  of  the  first  paragraph.  In  con- 
Irast  with  the  preceding  sections,  which  are  intended  for  the  protec- 
tion of  competitors,  its  aim  is  more  to  protect  the  public  against  mer- 
chants who  practice  deception  in  the  quantity  of  goods.  According 
to  Wassermann,  in  certain  branches  of  trade,  especially  in  the  sale  of 
yarn  and  beer,  the  practice  had  grown  up  of  accompanying  a  price  re- 
duction with  a  reduction  in  the  size  of  the  i^ackage  or  container  in 
which  goods  were  usually  sold  and  at  the  same  time  advertising  the 
reduction  in  price  in  such  a  way  as  to  convey  the  erroneous  impres- 
sion that  the  reduction  was  made  on  the  regular-sized  packages.-  For 
instance,  a  common  practice  of  a  large  number  of  merchants  was  to 
divide  a  pound  of  cotton  knitting  yarn  or  zephyr  into  12,  13.  or  even 
14  parts,  when  it  was  usually  divided  into  10  parts  weighing  50  grams 
each,  and  at  the  same  time  offering  it  to  the  public  at  an  apparent 
reduction  in  price.^ 

The  provisions  of  section  11  are  as  follows: 

Sec.  11.  By  decision  of  the  Federal  Council  it  may  be  determined  thnt  certnin 
goods  in  retail  trade  may  lu'  sold  or  offered  for  sale  only  in  prescribed  units  of 
number,  volume,  or  wciulit,  or  with  a  de.scrijition  upon  the  article  or  its  cover- 
ins  concerninj;  the  nunil)i'r,  measure,  weight,  place  of  production,  or  place  of 
origin  of  the  article. 

For  the  retail  trade  in  beer  in  bottles  or  jugs  the  description  of  the  content 
may  be  prescribed  with  provision  of  suitable  linuts  of  toleration  for  error. 

1  Frt.  V.  0.  Oktolior  I'.ni  ;  i:n1sclu'iflun;jron  dos  Uolchsgcrichts  in  Slr.nfsaclion,  Bd.  tfi, 
S.  HiS. 

2  Wassormaiin,  <>p.   cit.,   p.   7".). 
•■'  Kingcr,  op.  rit.,  p.  143. 


634  REPORT   OF   THE   COMMISSIONER   OF   CORPORATIOISTS. 

The  regulations  prescribed  by  the  Federal  Council  are  to  be  published  in.  the 
Imperial  Gazette  and  laid  before  the  Imperial  Diet  immediately  or  at  its  next 
meeting". 

Conduct  contrary  to  the  regulations  of  the  Federal  Council  is  punished  with  a 
fine  up  to  150  marks  or  with  arrest. 

This  provision  authorizes  the  Federal  Council  (Bundesrat)  to  issue 
decrees  regidating  the  sale  of  certain  goods  in  the  retail  trade,  by 
Avhich  is  meant  trade  between  the  retailer  and  consumer.  All  whole- 
sale transactions  as  well  as  sales  in  the  export  and  import  trade  are 
excluded.  The  regulations  decreed  may  be  in  regard  to  the  (1)  unit 
of  number,  such  as  dozen,  gross,  etc.;  (2)  unit  of  w'eiglit,-such  as 
kilogram;  (3)  unit  of  measure,  such  as  meter  or  liter;  and  (i)  the 
quality  of  the  goods  in  so  far  as  shown  by  the  name  of  the  place  of 
production  or  place  of  origin  placed  on  the  wrappers  or  containers.^ 

From  189G  to  1909  the  Federal  Council  exercised  the  power  con- 
ferred on  it  by  the  corresponding  section  of  the  law  of  189G  in  only 
three  cases.-  On  November  20,  1900,  it  issued  a  decree  regulating  the 
sale  of  yarn  in  the  retail  trade.  A  supplementary  decree  was  issued 
in  1902.  On  December  4,  1901,  a  decree  w^as  issued  regulating  the 
retail  trade  in  candles.  No  regulations  have  thus  far  been  made, 
under  section  11  of  the  law  of  1909,  although  agitation  for  such 
regulation  has  existed,  especially  for  chicory  and  soap.^ 

In  addition  to  the  penalty  of  fine  or  arrest  prescribed  by  this  sec- 
tion, civil  actions  to  enjoin  the  practices  and  to  recover  damages  can 
be  brought  in  accordance  with  section  13. 

Bribing  or  corrufting  employees. — Section  12  was  inserted  in  the 
new  law  to  cover  certain  unfair  practices  which  became  prevalent 
after  the  passage  of  the  old  law  in  1890.  This  section  makes  it  un- 
lawfid  to  secure  a  competitive  advantage  in  obtaining  goods  or  in- 
dustrial services  by  corrupting  in  any  manner  the  employees  or 
representatives  of  a  business  concern.  Violation  of  this  provision  is 
punished  by  imprisonment  for  not  more  than  one  year  or  with  a  fine 
not  exceeding  5,000  marks,  or  both.  A  like  penalty  is  imposed  upon 
the  employee  or  representative  accepting  the  present  or  other  favor 
offered  for  the  corrupt  purpose. 

The  language  of  section  12  is  as  follows : 

Sec.  12.  Whoever  in  business  dealings  for  the  purpose  of  competition  offers, 
promises,  or  grants  presents  or  other  advantages  to  the  employee  or  repre- 
sentative of  a  business,  in  order  to  obtain,  through  improper  conduct  of  tlie 
employee  or  representative  an  advantage  for  himself  or  a  third  person  in  the 
supply  of  goods  or  industrial  services,  is  punished  with  imprisonment  up  to  one 

1  Fnlfl,   op.   oit.,  pp.  257.   258. 

-  Kahu  unci  Weis.s  :   Wettbewerbsgesctz,  Miinchen,  1010,  p.  172  ;  Fuld,  op.  cit.,  p.  262. 

^  Opponheimer,  The  German  Law  of  1909  against  Unfair  Competition ;  No.  6S.3  miscel- 
lanccous  seri(>s,  British  diplomatic  and  consular  reports,  reprinted  in  Hearings  before 
the  House  Judiciary  Committee,  C3d  Cong.,  2d  soss.    (1914),  pt.  29,  pp.   1474,  1482. 


TRUST   LAWS  AND  UNFAIE   COMPETITION.  635 

year  and  with  fine  np  to  5,000  marks,  or  with  one  of  these  penalties,  unless  a 
heavier  penalty  is  incurred  under  other  legal  provisions. 

The  same  punishment  applies  to  the  employee  or  representative  of  a  husiness 
establishment  who  in  business  dealings  demands,  allows  to  be  promised,  or 
accepts  presents  or  other  advantages  in  order  that  he,  through  improper  con- 
duct, may  give  another  a  preference  in  the  supply  of  goods  or  industrial  services. 

In  the  judgment  the  thing  received  or  its  value  is  to  be  declared  forfeited  to 
the  State. 

This  section  is  very  broad  in  scope.  The  term  "  business  establish- 
ment "  (geschiiftlicher  Betrieb)  embraces  every  undertaking  or  ac- 
ti\'ity  carried  on  for  profit.  Doctors,  lawj^ers,  and  notaries  come 
within  the  meaning  of  this  term,  but  a  private  household  does  not, 
so  that  the  corrupting  of  a  domestic  servant  in  order  to  receive  the 
patronage  of  the  master  would  not  be  a  violation  of  this  provision.^ 

The  term  "gifts  or  other  advantages"  (Geschenke  oder  andere 
Vorteile)  was  taken  from  section  331  of  the  Penal  Code.  It  includes 
entertainment,  theater  or  concert  tickets,  a  ride  in  an  automobile, 
the  lending  of  a  book,  in  fact,  every  favor  which  has  value  to  the 
employee  or  agent.  The  bestowal  of  such  favors  upon  the  wife,  chil- 
dren, or  other  members  of  the  family  of  the  employee  may  come 
within  the  meaning  of  this  provision." 

The  giving,  offering  or  promising  of  presents  or  other  advantages 
constitutes  a  misdemeanor  if  done  with  the  intention  of  inducing  the 
employee  to  act  corruptly  so  that  a  competitive  advantage  can  be 
secured  in  obtaining  goods  or  industrial  services,  by  which  is  meant 
such  advantages  as  a  preference  over  competitors  in  the  sending  of 
orders,  in  the  delivery,  purchase  or  examination  of  goods,  or  in  terms 
of  settlement.^  The  one  offering  the  present  is  guilty,  even  though 
his  offer  is  rejected.  It  is  the  duty  of  the  court  to  determine  whether 
the  act  desired  of  the  emplo3^ee  is  corrupt,  but  it  is  not  necessary  to 
liscertain  whether  the  act  is  contrary  to  the  employee's  obligations 
to  his  employer.  The  determination  of  corruptness  has  made  prose- 
cution under  this  provision  difficult.  In  cases  where  the  corruptness 
of  the  act  can  not  be  established  the  giving  or  receiving  of  presents 
may  be  prosecuted  under  section  1  of  the  act  as  being  contrary  to 

"good  morals," 

The  employee  is  guilty  if  he  accepts  or  in  any  way  encourages  the 
offer  of  a  present  given  for  a  corrupt  purpose.  In  other  words,  fail- 
ure to  reject  an  offer  or  promise  when  received  makes  the  employee 
liable.  It  is  not  necessary  to  show  that  the  promise  or  offer  was 
actually  fulfilled. 

In  addition  to  the  i^enalties  prescribed  by  this  section  civil  actions 
to  enjoin  the  practices  and  to  recover  damages  may  be  brought  for 
violation  of  its  provisions  in  accordance  with  section  13.     The  action 

iFuld,  op.  cil.,  pp.  272,  273.  =  Fuld,  op  cit.,  p.  272.  •'' rinf,'or,  op.  cit.,  p.  1G4. 


636  REPORT    OF    THE    COMMISSIONER   OP    CORPORATIONS. 

to  enjoin  may  be  brought  against  the  proprietor  or  manager  of  an 
estabhshment  as  well  as  against  his  employee  or  rei:)res;entative  if  the 
act  was  clone  with  his  knowledge.  According  to  the  last  paragraph 
of  section  12  the  present  given  to  an  employee  or  its  value  is  for- 
feited to  the  State. 

Although  this  section  was  inserted  in  the  law  under  great  pres- 
sure from  the  large  industrial  concerns,  it  is  stated  that  practically 
no  cases  were  brought  under  it  until  after  the  formation  of  the 
Society  for  the  Prevention  of  Bribery  (Verein  gegen  das  Bestech- 
ungsunwesen),  about  the  middle  of  1911.^  The  following  is  a  recent 
case  successfully  prosecuted  under  this  provision: 

An  agent  of  an  automobile  concern  promised  a  chauffeur  a  present 
to  persuade  his  employer  to  purchase  an  automobile  from  him  in 
preference  to  one  of  a  competing  make.  The  competing  concern 
brought  suit  against  him  under  section  12.  The  defendant  claimed 
that  this  section  was  inapplicable  on  the  ground  that  the  employer 
purchased  the  car  for  his  personal  use  and.  the  chauffeur  was  not  an 
employee  of  a  business  establishment  in  the  sense  of  this  provision. 
It  was  shown,  however,  that  the  employer  used  the  car  in  going  back 
and  forth  from  his  home  to  his  place  of  business,  that  the  expense  of 
the  car  was  paid  by  the  mining  concern  of  which  he  was  director, 
and  that  the  chauffeur  was  a  salaried  employee  of  the  mining  con- 
cern and  that  this  was  known  to  the  defendant.  The  lower  court 
convicted  the  defendant,  and  the  Imperial  Court  upon  appeal  affirmed 
the  judgment.- 

Disparagement  or  7msrepresentation. — Sections  11  and  15  of  the 
law  of  1909  correspond  in  a  general  way  with  sections  G  and  7  of 
the  law  of  1896.  These  original  sections  were  in  turn  similar  to 
sections  186  and  187  of  the  Penal  Code  and  section  821  of  the  Civil 
Code.  Section  11  of  the  new  law  prohibits  the  circulation  of  state- 
ments injurious  to  the  business  or  credit  of  a  competitor  if  the  state- 
ments can  not  be  proved  and  provides  civil  remedies  for  the  viola- 
tion of  its  provisions.  Section  15  makes  the  circulation  of  such 
statements  a  penal  offense  punishable  with  fine  and  imprisonment  if 
the  statements  were  intentionally  false.  The  two  sections  are  in- 
tended to  prevent  the  criticism  or  misrepresentation  of  a  competitor's 
business  in  contrast  with  sections  3  and  1,  which  are  aimed  at  the 
misrepresentation  of  one's  own  business. 

The  language  of  sections  14  and  15  is  as  follows: 

Sec.  14.  Whoever  for  the  purpose  of  competition  asserts  or  circulates  facts 
concerning  the  business  of  another,  concerning  the  personality  of  the  owner  or 
manager  of  the  business,  concerning  the  goods  or  industrial   services  of  an- 

1  Oppenhoimer.   op.   cit.,  pp.   1483-1484. 

=^TJi't.  V.  23.  Mai  1913;  Entscheidungen  dos  Reichsgericbts  in  Strafsachcn,  Bd.  47,  pp. 
183,  184. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  637 

other,  which  are  adapted  to  injure  the  operation  of  the  hnsinoss  or  the  credit 
of  the  owner,  is  bound,  in  so  far  as  the  facts  are  not  deuKjnstrably  true,  to  malie 
compensation  for  the  damage  arising  therefrom.  The  injured  party  may  also 
demand  that  the  assertion  or  circulation  of  the  facts  cease. 

If  it  relates  to  confidential  communications  and  if  the  communicant  or  the 
recipient  of  the  communication  has  a  rightful  interest  therein,  then  the  action 
to  desist  is  only  permissible  when  the  facts  are  asserted  or  circulated  contrary 
to  the  truth.  The  claim  for  compensation  of  damages  can  be  made  only  if  the 
communicant  knew  or  should  know  the  incorrectness  of  the  facts. 

The  provisions  of  section  13,  paragraph  3,  have  corresponding  application. 

Sec.  15.  Whoever  against  better  knowledge  asserts  or  circulates  facts  con- 
trary to  the  truth  concerning  the  business  of  another,  concerning  the  personality 
of  the  owner  or  manager  of  the  business,  concerning  the  goods  or  industrial 
services  of  another,  which  are  calculated  to  injure  the  operation  of  the  busi- 
ness is  punished  with  imprisonment  up  to  one  year  and  with  a  fine  up  to  5,000 
marks,  or  with  one  of  these  penalties. 

If  the  facts  si>ecified  in  paragraph  1  are  asserted  or  circulated  by  an  em- 
ployee or  representative  in  a  business  establishment,  then  the  owner  of  the 
establishment,  besides  the  employee  or  representative,  is  punishable,  if  the  act 
happened  with  his  knowledge. 

Sections  14  and  15  contain  the  expression  "  asserts  or  circulates 
facts,"  in  contrast  with  the  expression  "makes  incorrect  statements 
in  public  advertisements  or  in  communications  intended  for  an  ex- 
tensive group  of  persons"  found  in  preceding  sections.  It  is  a  vio- 
lation of  section  11  to  make  an  injurious  assertion  about  a  com- 
petitor even  to  a  single  individual.  The  word  "fact"  (Tatsache) 
has  a  narrower  interpretation  than  "statement"  (Angabe).  It  in- 
cludes every  external  or  internal  proceeding  or  occurrence  which  is 
susceptible  of  examination  and  proof,  but  excludes  personal  opinions, 
beliefs,  etc.,  not  capable  of  proof. ^ 

The  conditions  specified  by  section  14  are  (1)  that  the  assertions 
of  fact  must  be  regarding  the  person  of  a  proprietor  or  manager,  or 
regarding  his  goods  or  industrial  services;  (2)  that  they  must  be  of 
a  nature  to  injure  either  the  business  or  the  credit  of  the  proprietor; 
and  (3)  that  they  must  be  incapable  of  proof.  Assertions  regarding 
employees,  those  which  injure  only  the  personal  reputation  of  a  pro- 
i:»rietor,-'  and  those  which  are  demonstrably  true  are  excluded.  In 
this  respect  the  German  law  is  directly  at  variance  with  French 
procedure  under  article  1382,  which  makes  the  circulation  of  injurious 
statements  ground  for  an  injunction  even  if  they  are  true.^ 

1  Fiild,  op.  cit.,  p.  380  ;  Finser,  op.  cit.,  p.  214. 

-Assertions  which  injure  the  personal  reputation  of  another  are  made  penal  offenses 
under  section  186  of  the  Penal  Code,  the  language  of  which  is  as  follows  : 

"  Whoever  asserts  or  circulates  a  fact  in  reference  to  another  which  is  adapted  to 
bring  such  person  into  contempt  or  to  degrade  him  in  public  opinion  is  punished  for  insult 
with  a  fine  up  to  (!00  marks  or  wiUi  arrest  or  witli  imprisonment  up  to  one  year  if  this  fact 
is  not  demonstrably  true,  and  with  a  fine  up  to  l,."i00  m.-irks  or  imi)risonment  up  to  two 
years  if  the  insult  is  committed  publicly  or  by  the  circulation  of  writings,  pictures,  or 
representations." 

3  Finger,  op.  cit.,  pp.  2-'7,  242, 


638  EEPOKT   OF    THE   COMMISSIONER  OF   COEPOEATIONS, 

Certain  commiinications  of  a  confidential  nature  in  which  the  com- 
municant has  a  rightful  interest  are  exempted  from  the  general  pro- 
hil)ition  by  the  second  paragraph  of  section  1-t.  The  term  "  rightful 
interest,"  which  was  borrowed  from  section  193  of  the  Penal  Code, 
excludes  all  interests  contrary  to  right  or  to  morality  or  which  in 
no  way  a  fleet  the  communicant  himself.  According  to  Oppen- 
heimei'  this  exception  was  made  in  behalf  of  inc^uiry  agencies,  which 
collect  and  disseminate  information  regarding  the  standing  of  con- 
cerns and  which  are  regarded  in  Germany  as  performing  a  legitimate 
and  useful  service.^ 

Section  824  of  the  Civil  Code^  is  also  applicable  to  statements 
which  injure  another's  credit,  but  since  the  enactment  of  the  law  of 
1909  it  has  apparently  had  practically  no  application  to  such  state- 
ments when  made  for  the  purpose  of  competition  in  business. 

Section  15  differs  from  section  14  in  the  following  particulars: 
(1)  The  person  circulating  the  injurious  statements  must  know  that 
they  are  untrue;  (2)  the  statements  must  be  untrue  and  not  merely 
incapable  of  proof;  (3)  only  injury  to  the  business  and  not  to  the 
credit  of  the  proprietor  is  specified,  since  the  latter  is  covered  by  sec- 
tion 187  of  the  Penal  Code ;  ^  (4)  there  is  no  provision  for  rightful 
interest  such  as  is  contained  in  the  second  paragraph  of  section  14; 
and  (5)  it  is  not  necessary  that  the  act  be  for  the  purpose  of  com- 
petition. By  omitting  this  requirement  section  15  is  not  confined 
entirely  to  the  field  of  unfair  competition. 

Under  section  14  the  defendant  must  prove  that  his  statements  are 
true,  whereas  under  section  15  the  plaintiff  must  prove  that  they  are 
untrue. 

Examples  of  assertions  prohibited  by  section  14,  if  incapable  of 
proof,  are  (1)  that  a  competitor's  patent  has  expired;  (2)  that  a 
competitor's  beer  has  no  taste;  (3)  that  a  competitor  has  been  ordered 
to  efface  his  trade-mark.  The  assertion  that  the  goods  of  a  com- 
petitor are  too  dear  or  tiiat  they  are  poor  is  not  a  fact  as  above  de- 
fined, but  an  expression  of  opinion  and  therefore  not  prohibited.'* 

1  Oppenheimer,  op.  cit,  pp.  14S4-148.5. 

2  Sec.  824.  Wlioever  asserts  or  circulates  a  statement  contrary  to  the  truth  which  is 
adapted  to  injure  the  credit  of  another  or  to  bring  about  other  disadvantages  for  his 
earnings  or  prosperity  must  compensate  the  other  for  the  injury  caused,  even  if  he  does 
not  liuow  at  all  the  untruth  but  should  know  it. 

The  communicant  will  not  be  liable  for  compensation  of  damage  for  a  communication 
whose  untruth  is  unknown  to  him  if  he  or  the  recipient  of  the  communication  has  a 
lawful  interest  therein. 

2  Sec.  187.  Whoever  against  his  better  knowledge  asserts  or  circulates  an  untrue  state- 
ment in  reference  to  another  which  is  adapted  to  bring  such  person  into  contempt  or 
to  degrade  him  in  public  opinion  or  endanger  his  credit  is  punished  for  defamatory  insult 
with  imprisonment  up  to  two  years,  and  if  the  defamation  is  committed  publicly  or  by  cir- 
culating writings,  pictures,  or  representations,  with  imprisonment  for  not  less  than  one 
month. 

If  extenuating  circumstances  exist,  the  punishment  may  be  abated  to -one  day's  imprison- 
ment or  a  fine  up  to  UOO  marks  may  be  imposed. 

*  Fuld,  op.  cit.,  p.  o'^'J  ;  Finger,  op.  cit.,  pp.  L'UT,  '20'.i,  liL'2. 


TEUST    LAWS   AND   UNFAIII   COMPETITION.  639 

The  assertion  "  you  are  being  overcharged  by  your  supplier,"  in  a 
circuhir  addressed  to  customers  and  intended  to  recommend  one's 
own  goods,  has  been  held  to  be  a  statement  of  fact  Avhich  is  of  a  nature 
to  injure  a  competing  business  within  the  meaning  of  this  section. 
In  the  case  in  wdiich  this  view  was  expressed,  as  in  other  cases  the 
court  stated  that  it  is  not  material  to  consider  in  what  sense  a  state- 
ment of  fact  is  made,  but  only  in  what  sense  it  is  accepted  by  the 
business  circles  to  which  it  is  addressed.^ 

Examples  of  assertions  that  have  been  judged  in  violation  of  sec- 
tion 15  are  (1)  that  two  concerns  were  identical,  when  it  was  known 
that  they  were  not;  (2)  that  a  firm  had  been  dissolved,  when  the 
communicant  had  simply  withdrawn  from  the  firm.- 

An  interpretation  of  section  15  was  made  by  the  Imperial  Court  in 
1910.  The  defendant  told  the  customer  of  a  competitor  repeatedly, 
and  with  the  knowledge  that  it  was  contrary  to  the  truth,  that  the 
competitor  would  not  come  to  the  place  in  which  the  customer  lived 
that  year.  Suit  was  brought  by  the  competitor  under  section  15.  The 
defendant  entered  the  plea  that  the  statement  which  he  had  made  was 
not  a  disparaging  statement  and  therefore  was  not  a  violation  of  this 
section.  The  court,  however,  held  that  the  section  was  applicable  to 
all  statements,  whether  disparaging  or  otherwise,  which  were  wil- 
fully made  or  circulated  and  were  calculated  to  injure  another's 
business.  Such  statements,  for  example,  as  "  a  factory  is  burned," 
"  a  proprietor,  on  account  of  sickness,  is  not  in  a  position  to  make 
deliveries,"  "  a  concern  has  discontinued  the  manufacture  of  certain 
goods  or  has  ceased  canvassing  in  a  certain  territory,"  contain 
nothing  disparaging,  but,  nevertheless,  are  well  adapted  to  injure 
tlie  business  and  therefore,  if  untrue,  fall  under  sections  11  or  15.^ 

M isap prop rlation  of  designatlo7is. — Section  16  of  the  law  of  1909 
is  an  enlargement  of  section  8  of  the  old  law.  It  is  directed  against 
the  unauthorized  use  of  personal  names,  firm  names,  business  desig- 
nations, titles  of  works,  etc.  Such  acts  aiford  groimd  for  an  injunc- 
tion and  the  recovery  of  damages. 

Personal  names  are  also  protected  against  usurpation  by  section  12  * 
of  the  Civil  Code  and  firm  names  by  section  37  ^  of  the  Commercial 

1  Gowerblichor  Rechtsschutz  und  Urheberrecht,  1911,  S.  69. 

"  Fukl,  op.  cit.,  p.  :'.80. 

•' IJoiclisgericht,  TJrt.  v.  28.  November  1910;  cited  by  Seelow,  op.  cit.,  p.  111. 

*  Section  1  2  of  the  Civil  Code,  wliicb  protects  personal  names,  reads  as  follows  : 

"  If  the  right  to  the  use  of  a  name  by  a  person  entitled  to  it  is  disputwl  by  another,  or  if 
the  interest  of  the  one  so  entitled  is  injured  by  reason  of  the  fact  that  another  uses  the 
same  name  without  authority,  the  person  entitled  may  demand  a  discontinuance  of  the 
injury  from  the  other.     If  further  injuries  are  feared,  he  can  bring  an  action  to  restrain." 

t^  Section  .".7  of  the  Commercial  Code,  relative  to  firm  names,  reads  as  follows: 

"  Whoever  uses  a  firm  name  not  belonging  to  him  according  to  the  provisions  of  this 
chapter  (third  chapter — business  firms)  is  to  be  required  by  the  registry  court  to  cease 
tlie  use  of  the  firm  name  under  penalty  of  fines.  The  size  of  the  penalty  is  fixed  by  sec- 
tion 14,  second  sentence. 

"  Whoever  Is  injured  in  his  rights  by  reason  of  the  fact  that  another  uses  a  linn  name 
without  authority  may  demand  of  the  latter  a  discontinuance  of  the  use  of  the  firm  name. 
An  action  to  recover  damages  based  on  other  provisions  is  not  prejudiced." 


640  EEPORT   OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

Code.  These  provisions,  however,  were  considered  inadequate  when 
the  first  law  against  unfair  competition  was  enacted  in  1896.  Trade- 
marks are  protected  against  infringement  or  imitation  by  the  trade- 
mark hiwof  1894,  referred  to  above  (see  p.  621),  and  are  not  included 
in  section  16  of  the  law  of  1909.  Sections  11  and  16  of  the  trade- 
mark laAV  also  prohibit  the  unauthorized  use  of  personal  names  and 
firm  names,  decorations,  and  designations  of  provenance,  in  so  far  as 
they  are  affixed  to  or  relate  to  goods. 

Section  16  of  the  law  of  1909  relates  not  only  to  the  usurpation  of 
personal  names  and  firm  names,  but  also  affords  protection  to  all  spe- 
cial designations  of  establishments,  such  as  business  nicknames  or 
fancy  names. 

The  language  of  section  16  is  as  follows : 

Sec.  16.  Whoever  in  business  dealings  uses  a  name  of  a  person,  a  firm  name, 
or  the  special  designation  of  a  business  establishment,  of  an  industrial  under- 
taking, or  of  printed  matter  in  a  manner  which  is  adapted  to  produce  con- 
fusion Avith  the  name,  firm  name,  or  special  designation  which  another  properly 
uses,  may  be  made  subject  by  the  latter  to  an  action  to  desist  from  such  use. 

The  user  is  bound  to  compensate  the  injured  party  for  damages  if  he  knew, 
or  ought  to  know,  that  the  improper  kind  of  use  was  adapted  to  produce  con- 
fusion. 

Equivalent  to  the  special  designation  of  a  business  establishment  are  such 
business  insignia  and  other  distinctive  fittings  for  distinguishing  the  establishment 
from  other  establishments  which  are  used  within  the  business  circles  affected  as 
marks  of  distinction  of  a  business  establishment.  For  the  protection  of  trade- 
marks and  the  dress  of  goods  (sees.  1  and  15  of  the  law  for  the  protection  of 
trade-marks  of  May  12,  1894,  Imperial  Gazette,  p.  441)  these  provisions  have 
no  application. 

The  provisions  of  section  13,  paragraph  3,  have  corresponding  application. 

The  expression  "name  of  a  person"  (Name),  used  in  section  16, 
includes  the  names  of  natural  persons,  juristic  persons,  and  assumed 
names,  but  excludes  the  names  of  places  and  things.  If  personal 
names  or  designations  have  become  generic,  they  are  also  excluded. 
The  expression  "firm  name"  (Firma),  as  defined  by  the  Connnercial 
Code,  section  17,  is  the  name  under  which  a  merchant  conducts  his 
business  and  which  he  uses  as  his  business  signature. 

The  expression  "  particular  designation  "  (besondere  Bezeichnung) 
includes  any  kind  of  a  special  business  designation,  such  as  a  fancy 
name  or  pictorial  presentation  which  serves  to  mark  or  distinguish 
a  business  establishment  or  undertaking.  It  also  includes  the  title 
of  any  printed  matter,  such  as  a  book,  newspaper,  periodical,  i:)hoto- 
graph,  musical  composition,  etc. 

The  third  paragraph  adds  to  the  designations  specified  in  para- 
graph 1  business  insignia  and  other  fittings  which  are  used  to  distin- 
guish one  establishment  from  another.  The  term  "business  insig- 
nia "  (GeschJiftsabzeichen)  includes,  among  other  things,  the  shape 
and  decoration  of  a  business  wagon,  the  decoration  of  a  show  win- 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  641 

dow,  the  form  of  a  business-name  plate  or  sign,  the  form  of  emblems, 
etc.  The  term  "  fittings"  (Einrichtimgen)  includes  special  forms  of 
furniture,  such  as  the  tables  of  a  restaurant,  as  well  as  the  distinctive 
manner  or  form  in  which  the  letters,  circulars,  price  lists,  and  other 
printed  matter  of  a  business  establishment  are  gotten  up. 

Only  those  designations  which  have  a  distinctive  character  are 
protected.  The  same  designation  may  possess  this  character  in  one 
case  and  lack  it  in  another,  so  that  each  case  must  be  decided  accord- 
ing to  the  circumstances.  Fuld  states  that  German  jurisprudence 
has  not  made  as  clear  a  distinction  between  designations  that  are 
distinctive  and  those  that  are  not  as  has  French  jurisprudence.^ 

The  principal  classes  of  designations  excluded  by  German  juris- 
prudence as  not  being  distinctive  are  (1)  generic  names,  such  as 
"patent  bureau,"  "music  school,"  "hotel,"  "cafe,"  etc.;  also  family 
names  that  have  become  generic,  such  as  "  Liebig,"  used  in  the  desig- 
nation "  Liebig's  beef  extract  " ;  (2)  names  of  places,  countries,  rivers, 
mountains,  etc.,  if  not  joined  with  another  word ;  (3)  figurative  desig- 
nations that  have  lost  their  distinctive  character;  (4)  designations 
Avhich  are  neither  characteristic  nor  original.^ 

In  determining  whether  the  use  of  a  firm  name  similar  to  that  of 
some  other  firm  is  likely  to  cause  confusion  the  courts  consider,  not 
whether  confusion  would  exist  where  special  care  is  exercised  but 
whether  confusion  is  likely  to  be  created  among  buyers  who  use 
ordinary  care.  Due  consideration  is  given  to  the  fact  that  the  aver- 
age customer,  and  especially  a  new  customer,  frequently  does  not 
have  in  mind  the  designations  of  different  concerns  in  the  exact  form 
in  which  they  are  entered  in  the  trade  register,  but  only  such  general 
impressions  as  are  casually  obtained.  In  a  case  involving  this  point 
the  court  held  that  if  the  general  impression  conveyed  by  the  desig- 
nations of  two  firms  is  the  same  the  possibility  of  confusion  exists 
and  section  16  is  regarded  as  applicable.^ 

Instances  of  designations  which  have  been  held  to  be  of  a  nature 
to  cause  confusion  are :  * 

Johann  Maria  Farina  gegeniiber  dem  Jiilichplatz  with  Johann 
Maria  Farina  gegeniiber  dem  Rudolfsplatz. 

Gastwirtschaft  zum  Storch  with  Gastwirtschaft  zum  alten  Storch. 

Michels  u.  Co.  with  August  Michels  u.  Co. 

Weinstube  zu  den  drei  Kronen  with  Weinstube  zum  goldenen 
Kronengebiick. 

Schiller  Theater  with  Friedrich-Wilhelm  Schiller  Theater. 

1  Fuld,  op.  clt.,  pp.  414,  441. 

2  Fuld,  op.  cit..  pp.  4ir.,  417. 

3  OberlanrlcsRoriclit  Frankfurt  a/M,  Urt.  v.  11.  Mai  1910 ;  Gewerbllcher  Rechtsschntz 
und  Wettbewerb.  1911,  S.  G9. 

*  Fuld,  op.  cit.,  pp.  439,  440. 

30035°— 16 41 


642  KEPOKT   OF    THE   COMMISSIONEE  OF   COEPOEATIONS. 

In  one  case  a  Dresden  concern  known  as  the  American  Steam  Laun- 
dry W.  von  Biela  brought  suit  under  the  corresponding  section  of  the 
earlier  law  against  another  laundry  known  as  Schreibers  amerikanische 
Dampfwiischerei  und  Kunstpliitterei,  because  the  latter  at  one  of  its 
offices  had  placed  a  small  sign  beside  its  German  firm  name  bearing 
the  words  "American  steam  laundry."  The  court  sustained  the  plea 
of  the  defendant  that  the  small  sign  w^as  put  up,  not  for  the  purpose 
of  producing  confusion,  but  only  because  many  Englishmen  and 
Americans  resided  in  that  part  of  the  city.^ 

A  book  entitled  "  Best  Jokes  from  the  Munich  Fliegende  Blatter  " 
was  brought  out  by  a  Leipzig  publisher  in  1910.  The  jokes,  mostly 
anonymous,  were  taken  largely  from  contributions  to  this  paper 
during  the  years  1843  to  1873.  The  Fliegende  Blatter  brought  suit 
for  infringement  of  its  rights  and  obtained  judgment  against  defend- 
ant in  both  the  State  Court  of  Leipzig  and,  on  appeal,  in  the  Su- 
perior Court  of  Dresden.  The  higher  court  held  that  the  use  of  the 
name  of  this  widely  read,  humorous  weekly  in  the  title  of  the  book 
published  by  defendant  would  cause  the  reading  public  to  believe 
that  it  was  published  by  the  owners  of  the  Aveekly.- 

Unauthorized  dkclosure  of  trade  secrets. — Four  sections  of  the  law 
of  1009 — sections  17  to  20,  inclusive — relate  to  the  practice  of  divulg- 
ing trade  secrets.  Section  17  corresponds  exactly  with  the  first 
two  paragraphs  of  section  9  of  the  earlier  law,  which  made  it  a  penal 
oti'ense,  punishable  with  fine  and  imprisonment,  for  an  employee  to 
disclose  a  business  secret  to  another  for  the  purpose  of  competi- 
tion. Section  18  is  a  new  provision  which  prohibits  with  like  pen- 
alties the  selling  or  communicating  for  the  purpose  of  competition 
of  draAvings,  models,  patterns,  and  other  plans  of  a  technical  char- 
acter. It  is  especially  applicable  to  the  embroidery  and  lace  indus- 
tries. Section  19  provides  for  compensation  to  the  injured  party  in 
case  of  the  violation  of  sections  17  and  18,  and  section  20  makes  it  a 
penal  offense  for  a  person  to  induce  another  to  violate  sections  17 
and  18  for  the  purpose  of  competition. 

The  language  of  these  four  sections  is  as  follows : 

,Sec.  17.  Whoever  as  employee,  laborer,  or  apprentice,  of  a  business  estab- 
lishment, for  the  purpose  of  competition  or  with  the  intention  to  do  injury  to 
the  owner  of  the  business  establishment,  imparts  to  others  without  authority 
commercial  or  manufacturing  secrets,  which  are  confided  to  him  on  account  of 
his  employment  or  otherwise  have  become  accessible  to  him  during  the  period 
of  employment,  is  punished  with  imiTi-isonment  up  to  one  year  and  with  a  fine 
up  to  5,000  marks,  or  with  one  of  these  penalties. 

Like  penalties  affect  him  who,  without  authority,  for  the  purpose  of  compe- 
tition, makes  a  profit  from  or  imparts  to  another  commercial  or  manufacturing 
secrets,  the  knowledge  of  which  he  acquired  through  one  of  the  means  of  eom- 

lUrt.  T.  5.  .Tan.  1900;  Seufferts  Archiv.,  N.  F.,  25,  S.  296. 

2  Oberlandesgericht  Dresden,  Urt.  v.  3.  Feb.  1911 ;  Gewerblicher  Rechtsschutz  uud 
Urheberrecht.  1911,  S.  177. 


TRUST   LAWS   AND  UNFAIR  COMPETITION.  643 

municatiou  si)eelfled  in  paragraph  1,  or  through  his  own  act,  contrary  to  law 
or  in  a  manuur  repugnant  to  good  morals. 

Sec.  18.  Whoever  without  authority,  for  the  purpose  of  competition,  makes  a 
profit  from  or  imparts  to  another  plans  or  rules  of  a  technical  character,  espe- 
cially drawings,  models,  patterns,  dress  patterns,  or  recipes,  which  are  confided 
to  him  in  business  dealings,  is  punished  with  imprisonment  up  to  one  year  and 
with  a  fine  up  to  5,000  marks,  or  with  one  of  these  penalties. 

Sec.  19.  Acts  contrary  to  the  provisions  of  sections  17  and  IS  obligate  fur- 
thermore compensation  for  the  injury  arising  therefrom.  Several  obligors  are 
responsible  as  joint  debtors. 

Sec.  20.  Whoever,  for  the  purpose  of  competition,  undertakes  to  induce  an- 
other to  do  an  act  conti'ary  to  the  provisions  of  section  17,  paragraph  1,  and  sec- 
tion 18  is  punished  with  imprisonment  up  to  nine  months  and  with  a  fine  up 
to  2,<i00  marks,  or  with  one  of  these  penalties. 

Two  classes  of  business  secrets  are  specified  by  section  17 :  (1)  Com- 
mercial secrets  and  (2)  factory  secrets.  What  constitutes  a  secret 
is  not  defined  by  the  law,  but  is  left  to  the  courts  for  determination. 
I'he  Superior  Court  of  Dresden  has  defined  the  term  as  "  facts 
pecidiar  to  a  business  management  or  a  business  undertaking  and 
unknown  to  a  third  party,  which,  in  the  interest  of  the  proprietor 
and  of  the  business,  are  to  be  kept  secret  by  the  employees  therein  and 
which  can  not  be  made  public  to  others  without  breach  of  faith."  ^ 

Examples  of  what  the  German  courts  have  held  to  be  factory 
secrets  are:  (1)  Process  for  preparing  cement,  ('2)  method  for  pre- 
paring leather  polish,  (3)  method  for  making  cloth  waterproof,  (4) 
process  for  making  bottles,  (5)  models  for  parts  of  Avatches  or  for 
shoes  and  slippers.^ 

Examples  of  commercial  secrets  are  (1)  business  addresses,  names 
of  customers  on  bills  of  lading  or  price  quotations;  (2)  formula  book 
of  an  apothecary;  (3)  conditions  of  a  tender;  (4)  drawings,  plans; 
and  (5)  policies  of  an  insurance  company.^  It  has  been  held  that 
it  constitutes  a  business  secret  if  the  owner  of  a  business  intends  to 
put  a  ncAv  line  of  goods  unexpectedly  on  the  market  at  a  certain  time.* 

Three  classes  of  persons  are  specified  in  the  first  paragraph  of 
section  17  as  being  capable  of  violating  its  provisions — employees, 
laborers,  and  apprentices.  xVgents  are  not  included.  The  second 
paragraph  of  this  section,  however,  is  not  restricted  to  these  three 
classes.  It  is  intended,  also,  to  reach  ex-employees  and  others  Avho 
profit  from  or  reveal  business  secrets  for  the  purpose  of  competition. 

The  expression  used  in  paragraph  1,  "confided  to  him  *  *  * 
or  have  become  accessible  to  him,"  covers  every  means  of  acquiring 
laiowledge  of  secrets  whether  intentional  or  accidental,  whether  ac- 
quired Avithin  the  confines  of  an  establishment  or  outside.  Discov- 
eries and  inventions  by  employees  in  connection  with  their  regular 
duties 'are  secrets  Avhich  belong  to  the  j^roprietor. 

iFuId,  op.  clt.,  pp.  459,  460.  a  Finger,  op.  cit..  pp.  :^41,  342. 

a  Fingor,  op.  cit.,  p.  340.  *  Das  Recht,  1914,  Beilage  No.  456. 


644  EEPORT    OF    THE    COMMISSIONER   OF    CORPORATIONS. 

The  disclosure  of  a  secret  must  be  intentional  in  order  to  constitute 
a  violation  of  this  section.  The  employee  must  know  that  he  has  no 
authority  to  make  the  revelation.  Paragraph  1  of  section  17  specifies 
that  the  divulging  of  secrets  must  be  either  for  the  purpose  of  compe- 
tition or  with  the  intention  of  causing  injury  to  the  proprietor.  The 
second  paragraph  specifies  only  the  former  motive.  The  obligation 
to  maintain  secrecy  imposed  by  the  first  paragraph  ceases  with  the 
termination  of  one's  employment.  It  may,  however,  be  continued  be- 
yond this  point  by  agreement,  providing  the  agreement  does  not  im- 
pair the  freedom  of  contract.  In  the  absence  of  such  agreement  an 
ex-employee  would  be  free  to  make  use  of  the  information  acquired 
during  his  employment,  even  for  competitive  purposes,  against  his 
former  patron  were  it  not  for  the  second  paragraph  which  reaches 
employees,  ex-employees,  and  all  other  persons  who  reveal  or  utilize 
for  their  own  profit  business  secrets  if  secured  in  a  manner  contrary 
to  law  or  good  morals. 

In  addition  to  the  penalties  which  section  17  prescribes  for  violation 
of  its  provisions,  a  civil  action  to  recover  damages  is  provided  by  sec- 
tion 19.     The  following  is  a  case  prosecuted  under  section  17: 

While  employed  as  correspondent  for  a  company  the  defendant  en- 
tered into  contractual  relations  with  a  former  competing  employer 
to  return  to  his  employ  on  a  certain  date.  Prior  to  this  date  he  was 
requested  by  a  representative  of  the  latter  to  procure  copies  of  bids, 
etc.,  and  it  was  shown  that  he  furnished  several  copies  of  bids  and 
other  information  of  value  to  the  competitor.  Suit  was  brought 
under  section  17,  paragraph  1.  The  court  held  that  these  copies  of 
bids  were  trade  secrets  and  imposed  a  fine  of  500  marks  upon  both 
the  employee  and  the  representative  of  the  competing  concern  to 
whom  he  furnished  the  information.^ 

Section  18  prescribes  the  same  penalties  as  the  preceding  section 
for  one  who,  for  tiie  purpose  of  competition,  profits  by  the  unauthor- 
ized use  of  plans  and  rules  of  a  technical  kind  or  reveals  them  to 
another.  These  two  expressions  cover  all  manner  of  models  and 
instructions  used  in  the  production  of  goods.  The  section  specifies 
drawings,  models,  patterns,  dress  patterns,  and  formulas  as  being  of 
this  character.  To  constitute  a  violation  of  this  provision  the  plans 
or  rules  must  have  been  secured  by  being  confided  to  the  guilty  party 
in  the  course  of  business  and  must  be  used  by  him  without  authority 
or  intentionalh^  revealed  by  him  to  another  for  competitive  purposes. 
Section  18  does  not  relate  to  the  acts  of  employees.  This  point  was 
decided  by  the  Imperial  Court  in  a  case  in  which  an  employee  of 
an  automobile  concern  came  into  possession  of  its  formulas.  The 
court  held  that  the  penal  provision  of  section  18  was  applicable  only 

1  Landgericht  Coin,  Urt.  v.  30.  Sept.  1912 ;  Markenschutz  und  Wettbewerb,  Bd.  XII, 
S.  298. 


MRUST    LAWS  AND  UNFAIR  COMPETITION.  645 

to  such  persons  as  were  not  employees  at  the  time  when  the  plans  or 
rules  of  a  technical  kind  were  intrusted  to  them.^ 

This  section  supplements  the  law  of  June  19,  1901,  for  the  protec- 
tion of  designs.  In  accordance  with  section  19,  civil  action  for  dam- 
ages is  permissible  in  case  of  violation  of  section  18,  in  addition  to 
the  penalties  provided. 

A  person  to  whom  a  manufacturer  had  intrusted  some  patterns  for 
use  in  making  embroidery  utilized  them  for  his  own  profit  without 
authority.  Action  was  brought  for  violation  of  section  18.  The 
defendant  claimed  that  the  pattei-ns  were  not  intrusted  to  him  in  the 
sense  required  for  the  applicability  of  this  provision,  since  by  selling 
the  embroidery  in  job  lots  the  plaintiff  had  expressly  declared  to  the 
business  world,  as  it  were,  that  he  had  given  up  the  designs,  and, 
therefore,  there  was  no  obligation  on  the  part  of  the  defendant  to 
maintain  secrecy.  This  plea  was  rejected,  however,  the  Imperial 
Court  declaring  that  the  question  of  the  protection  of  the  design  was 
wholly  independent  of  the  protection  of  the  patterns  which  formed 
the  bases  of  the  designs,  and  that  section  18  did  not  require  that  the 
patterns,  etc.,  the  unauthorized  use  of  which  it  prohibited,  should 
have  the  characteristics  of  a  factory  or  trade  secret,  as  argued  by 
defendant.^ 

Section  20  makes  it  a  penal  offense  for  a  person  to  undertake  to 
induce  another  to  violate  the  first  paragraph  of  section  17  or  section 
18  for  the  purpose  of  competition.  The  penalt}^  prescribed  is  im- 
prisonment up  to  nine  months  and  a  fine  not  exceeding  2,000  marks, 
or  either.  By  "  undertake  "  is  meant  every  attempt,  written  or  sf)oken, 
directly  or  through  a  third  party,  to  cause  another  to  violate  these 
provisions.  In  making  the  attempt  the  motive  of  competition  either 
must  exist  through  one's  own  acts  or  by  assisting  another.  In  a  case 
involving  the  latter  motive,  decided  by  the  Imperial  Court  in  1913,  an 
employee  of  a  glass  factory,  in  order  to  secure  more  remunerative 
labor  for  himself,  induced  the  manager  to  take  up  a  new  line  of  manu- 
facture. He  intended  to  gain  his  end  by  inducing  employees  of  an- 
other glass  factory  where  he  had  been  formerly  emploj^ed  to  secretly 
deliver  to  him  some  of  the  pieces  of  glassware  to  be  used  as  models  by 
his  factory.  Action  was  brought  against  him  under  section  20.  The 
court  overruled  his  plea  that  his  act  was  not  for  the  purpose  of  com- 
petition as  required  by  this  action,  but  for  the  purpose  of  increasing 
his  own  earnings,  holding  that  b}^  inducing  his  factory  to  take  up 
the  new  line  of  manufacture  he  intended  that  it  should  carry  on  com- 
petition with  the  other  factory,  and  also  intended  to  assist  it  to  carry 
on  such  competition.  The  Imperial  Court  further  held  that,  according 
to  this  provision  of  the  law,  it  was  important  only  that  the  intention 

1  Roichsgerlcht,  Urt.  v.  12.  Dezembor  1011  ;  cited  by  Seelow,  op.  cit.,  p.  125. 

2  Keichsgericht,  Urt.  v.  4.  April  1011  ;  cited  by  Seolow,  op.  cit.,  p.  126. 


646  EEPOET   OP   THE   COMMISSIONER   OF    CORPOEATIONS. 

to  commit  an  act  of  competition  should  exist.  It  was  not  necessary 
to  consider  whether  it  was  a  final  purpose  or  a  means  to  an  end.^ 

Administrative  jyrovisions. — Section  2  provides  that  agricultural 
products,  services,  and  interests  are  included  within  the  scope  of  the 
law.  Agricultural  associations  of  various  kinds  are  empowered  by 
this  provision  to  participate  in  civil  actions. 

Section  13  provides  civil  remedies  for  violation  of  the  various  pro- 
visions preceding  it  and  designates  the  persons  competent  to  bring 
suit.  These  remedies  consist  of  actions  to  enjoin  and  to  recover 
damages.  Every  person  engaged  in  business  and  every  association 
for  the  promotion  of  business  interests,  if  enrolled  in  the  register  of 
unions  in  accordance  with  section  21  of  the  Civil  Code,^  can  bring 
suit  to  enjoin  or  can  be  enjoined.  Where  the  violations  of  these 
provisions  are  made  by  employees  or  agents  the  injunctions  may  be 
issued  against  their  employers.  For  further  reference  to  section  13 
see  page  G25. 

Section  21  provides  that  the  right  to  bring  injunction  and  damage 
suits  under  this  law  expires  in  six  months  from  the  date  on  which 
the  person  injured  had  knowdedge  of  the  injurious  act  and  of  the  per- 
son committing  it;  and,  further,  that  irrespective  of  this  knowledge 
suit  can  not  be  brought  after  three  years  from  the  date  of  the  com- 
mission of  the  injurious  act.  The  short  period  allowed  by  this  sec- 
tion is  regarded  by  some  writers  as  a  serious  weakness  of  the  law. 

According  to  section  22,  criminal  prosecution  may  be  begun  only 
upon  complaint  except  for  the  violation  of  sections  6,  10,  and  11, 
wdien  the  public  prosecutor  has  the  power  and  the  duty  to  begin 
prosecutions.  AVhere  the  violation  of  sections  4,  8,  and  12  has  oc- 
curred, not  only  the  individual  injured,  but  also  every  business  man 
who  makes  or  sells  similar  goods  or  any  association  for  promoting 
trade  interests  capable  of  bringing  civil  suits  as  specified  in  the  first 
paragi'aph  of  section  13  is  competent  to  bring  a  complaint  for  a 
criminal  prosecution.  It  is  also  permitted  to  withdraw  such  com- 
plaint. Acts  which  may  be  prosecuted  criminally  on  private  com- 
plaint may  also  be  prosecuted  in  private  suit  by  the  parties  entitled 
to  make  such  complaint.  A  public  prosecution  takes  place  only 
when  it  is  in  the  interest  of  the  public. 

Section  23  provides  that  where  a  penalty  has  been  imposed  under 
sections  4,  G,  8,  and  12  the  cost  of  making  public  the  judgment  may 
be  assessed  upon  the  guilty  party.  A  similar  provision  is  made  for 
violation  of  section  15,  and  also  in  cases  where  injunctions  are  issued. 
On  the  request  of  a  person  acquitted  the  court  may  order  the  publica- 
tion of  the  acquittal. 

1  Urt.  V.  4.  April  101  ?> ;  Entscheiduns'^n  dos  Roichssfrichts  in  Strafsaclien,  Bfl.  47,  S.  128. 

-  Section  21,  Civil  ("odo,  states  tliat  an  association  wlioso  object  is  not  tlie  carrying  on 
of  a  business  enterprise  acquires  juristic  personality  by  registration  in  tlie  register  of 
associations  of  the  competent  district  court. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  647 

Section  24  relates  to  the  jurisdiction  of  the  courts.  It  provides 
that  action  must  be  brought  in  the  court  in  whose  district  the  defend- 
ant has  his  phice  of  business,  or,  in  the  absence  thereof,  his  domicile. 
In  the  absence  of  both,  it  must  be  brought  in  the  court  of  the  place 
of  his  sojourn,  or,  if  this  is  not  known,  in  the  court  of  the  district 
in  which  the  act  occurred. 

Section  25  provides  for  temporary  orders  in  certain  cases  and 
specifies  the  courts  which  ma,y  issue  such  provisional  orders. 

Section  2G  provides  that,  in  addition  to  the  penalties  provided  by 
the  law,  the  injured  party  mav  demand  the  payment  of  compensation 
not  in  excess  of  10,000  marks.  This  remedy  excludes  a  civil  action  to 
recover  damages.  Thus  the  injured  party  is  required  to  elect  which 
remedy  he  will  pursue. 

Section  27  provides  that  civil  actions  brought  before  the  State 
courts  (Landesgerichte)  should  be  tried  by  the  commercial  chambers 
of  these  courts. 

Section  28  relates  to  the  rights  of  foreigners  under  the  law.  A  per- 
son whose  principal  establishment  is  not  in  Germany  can  invoke  the 
protection  of  this  law  only  when  by  an  announcement  in  the  Im- 
perial Gazette  it  is  established  that  German  business  men  enjoy  a 
corresponding  protection  in  the  State  in  which  his  principal  estab- 
lishment is  located.  This  section  has  been  superseded  by  section  10'"^ 
of  the  Washington  Convention  of  the  International  Union  for  the 
Protection  of  Industrial  Property,  in  so  far  as  the  signatories  of  this 
agreement  are  concerned.     (See  p.  G08.) 

Section  20  provides  that  the  central  authority  of  the  Confederated 
States  shall  determine  what  authorities  shall  be  considered  as  consti- 
tuting the  superior  administrative  authority  within  the  sense  of  the 

law.^ 

GENERAL  PROVISIONS. 

Until  1000  ther(>  was  no  general  provision  of  laAv  in  Germany 
under  which  objectionable  methods  of  competition  were  actionable. 
Although,  as  stated  above  (see  p.  620),  provisions  of  law  similar  to 
article  13S2  of  the  Civil  Code  of  France  existed  in  Prussia  and  other 
German  States  for  many  years  prior  to  1000,  they  were  not  applied  to 
cases  of  unfair  competition. 

During  the  deliate  on  the  special  law  of  1800  against  unfair  com- 
petition the  question  of  enacting  a  general  clause  applicable  to  all 
acts  not  covered  by  the  special  provisions  was  much  discussed.  The 
plan  was  opposed  l)y  the  (iovernment  and  finally  defeated.  Accord- 
ing to  a  leading  authority,-  the  meaning  of  the  term  "unfair  competi- 
tion" was  not  clearlv  undei'stood  at  that  time  and  a  feeling  of  distrust 


^  Cf.  Kahn  iind  Weisss.  op.  cit..  p.  f.SG. 

-  Lobe,   Die  Bekiimpfung  des  nnlauteren  Wettbewerbs,  Bd.  I,  S.   128. 


648  EEPOET   OF   THE   COMMISSIONEE  OP   COEPOEATIONS. 

prevailed  as  to  the  ability  of  the  courts  to  judge  business  relations 
correctly.  Consequently,  there  was  opposition  to  giving  them  too 
much  freedom  of  interpretation  through  the  enactment  of  general  and 
flexible  provisions. 

The  special  law  of  1896  against  unfair  competition  only- prohibited 
certain  specified  practices,  thus  supplementing  the  provisions  of  the 
Penal  Code  and  the  special  laws  for  the  protection  of  patent  rights 
and  trade-marks.  The  new  Commercial  Code  of  1897  contained  sev- 
eral additional  provisions  protecting  family  and  firm  names  against 
misappropriation.  Other  unfair  practices  not  specifically  covered  by 
the  above  laws  could  not  be  reached  by  the  courts  until  the  new  Civil 
Code  became  effective  on  January  1,  1900.  Sections  823  and  82G  of 
this  code  contained  provisions  of  law  which  were  broad  enough  to 
permit  suit  to  be  brought  in  many  cases  that  were  not  covered  by 
the  earlier  legislation  against  specific  evils.  The  language  of  these 
sections  is  in  part  as  follows: 

Sec.  823.  Wlioever,  contrary  to  law,  wilfully  or  negligently  injures  the  life, 
body,  health,  freedom,  property,  or  any  other  right  of  another  is  bound  to  such 
other  for  compensation  of  the  injury  arising  therefrom. 

Sec.  826.  Whoever,  in  a  manner  repugnant  to  good  morals,  wilfully  inflicts 
an  injury  upon  another  is  bound  to  such  other  for  compensation  of  the  injury. 

The  application  of  these  sections  to  cases  of  unfair  competition  met 
Avith  opposition,  but  was  finally  affirmed  by  a  decision  of  the  Imperial 
Court  rendered  April  11, 1904,  which  laid  down  the  principle  that  the 
gaps  which  the  special  law  contained  were  filled  by  the  Civil  Code, 
especially  section  826.^ 

At  the  time  of  the  passage  of  the  law  of  1909  the  necessity  of 
adding  a  general  clause  was  much  discussed  in  view  of  the  applica- 
bility of  section  820  of  the  Civil  Code  to  cases  of  unfair  competition. 
According  to  Finger,  the  general  clause  was  finally  adopted  because 
section  82G  Avas  considered  too  unwieldy  in  that  it  required  the  proof 
of  intent  and  provided  for  an  injunction  only  in  the  case  of  already 
existing  injury.-    The  language  of  this  section  is  as  follows: 

Sec.  1.  Whoever  in  business  affairs,  for  the  purpose  of  competition,  commits 
acts  which  are  repugnant  to  good  morals  may  be  subject  to  an  action  to  desist 
therefrom  and  to  pay  damages. 

The  term  "business  affairs"  (geschiiftlicher  Verkehr),  found  in 
section  1,  is  A^ery  broad,  embracing  practically  e\"ery  industrial  or 
commercial  activity.  By  a  liberal  interpretation,  artistic,  scientific, 
legal,  and  medical  activities  may  also  be  included  Avhere  conducted 
for  profit. 

The  expression  "repugnant  to  good  morals"  (gegen  die  guten 
Sitten)  is  the  same  as  that  found  in  section  826  of  the  Civil  Code. 

iFuld,  op.  cit.,  pp.  10,  11.  2  Finger,  op.  cit.,  p.  14. 


TRUST   LAWS  AND  UiSTFAIR   COMPETITION.  G49 

The  courts  have  defined  good  morals  as  that  which  is  founded  in 
the  moral  consciousness  of  the  public,  and  is  in  harmony  with  the 
ideas  of  proper  conduct  held  by  all  honest  and  upright-thinking 
people.^  An  absolute  rule  for  determining  Avhat  constitutes  an  act 
repugnant  to  good  morals  does  not  and  can  not  exist.  Many  acts 
are  uot  "  immoral "  in  one  case  while  clearly  so  in  another.  Conse- 
quently the  question  always  is  not  whether  an  act  of  itself  is  contrary 
to  good  morals,  but  whether,  as  an  act  of  competition,  it  is  so  con- 
sidered. 

The  important  differences  between  sections  1  and  826  are  as  fol- 
lows :  (1)  Section  1  relates  only  to  unfair  competitive  acts  in  business, 
while  section  826  relates  to  all  acts  repugnant  to  good  morals;  (2) 
section  1  does  not  require  the  proof  of  wrongful  intent,  which  is  re- 
quired by  section  826;  and  (3)  section  1  provides  for  both  an  injunc- 
tion and  the  recovery  of  damages,  while  section  826  provides  onl}'^  for 
the  latter.  In  the  application  of  section  826,  however,  the  courts  have 
applied  injunctive  relief.-  Furthermore,  in  the  case  of  section  1,  an 
injunction  can  be  had  if  only  ground  for  apprehension  exists,  while, 
as  stated  above,  an  action  can  not  be  brought  under  section  826  until 
the  injurious  act  has  actually  begun.  Section  826  of  the  Civil  Code 
has  one  important  advantage  over  section  1  of  the  new  law  against 
unfair  competition.  The  statute  of  limitations  does  not  apply  to  cases 
brought  under  the  former  until  the  expiration  of  three  years,  whereas 
in  accordance  with  section  21  of  the  law  of  1909  the  statute  of  limita- 
tions applies  to  cases  brought  under  section  1  at  the  expiration  of  six 
months  after  the  injured  party  has  knowledge  thereof,^ 

The  adoption  of  section  1  of  the  new  law  does  not  exclude  sections 
823  and  826  of  the  Civil  Code  from  application  to  cases  of  unfair  com- 
petition. This  has  been  affirmed  by  the  courts  on  several  occasions.^ 
As  a  result  there  are  three  general  provisions  available  for  all  cases 
to  which  the  special  provisions  of  law  do  not  apply.  They  ma,v,  how- 
ever, be  used  conjointly  with  the  special  provisions. 

An  examination  of  the  principal  court  decisions  shows  that  section 
1  of  the  law  of  1909  and  section  826  of  the  Civil  Code,  either  sepa- 
rately or  conjointly,  have  been  applied  to  a  variety  of  cases  which  are 
not  covered  by  special  provisions  of  law.  Among  these  are  the  cut- 
ting of  fixed  resale  prices,  enticing  customers,  etc.  These  two 
provisions  have  also  been  applied  frequently  in  conjunction  with 
various  provisions  of  the  trade-mark  law  and  the  law  against  unf:iir 
competition  to  cases  of  confusion,  fi-audulcnt  advertising,  (lisi)ai-age- 
ment,  etc.     All  such  unfair  acts,  although  covered  by  s])ecial  pro- 

1  Fuld,  op:  cit.,  p.  48:  rinsror,  op.  cit.,  p.  20. 

2  Fuld,  op.  cit.,  pp.  24-26,  49. 

sAllfeld,  op.  cit.,  pp.  IGl,  1G2 ;  Das  Recht,  1914,  Beilage  No.  7G7. 

"  Entsclicidiinfren  dcs  Ueichsgericlits  iu  Zivilsacben,  Bd.  74,  S.  4:!4  ;  I'.d.  7'.i.  S.  .■'.•_'<; ;  Das 
Recht,  litilagc  No.  7G7. 


650  EEPORT   OP    THE   COMMISSIONER  OF   CORPOEATIONS. 

visions,  are,  apparently,  regarded  by  the  courts  as  repugnant  to  good 
morals  and,  therefore,  in  contravention  of  these  two  general  sections. 

Section  826  appears  to  be  little  used  now  except  in  conjunction  with 
section  1  of  the  new  law  in  the  prosecution  of  unfair  practices  in  busi- 
ness, since  the  latter  offers  the  advantages  noted  above.  Section  826, 
however,  has  been  frequently  applied  to  strikes,  lockouts,  boycotts, 
black  lists,  etc.  Since  the  passage  of  the  law  of  1909  section  823  has 
also  been  little  used  alone  in  the  prosecution  of  unfair  competitive 
practices.  It  is  occasionally  found  used  in  conjunction  with  one  or 
both  of  the  other  general  provisions.  Following  are  some  of  the  trade 
practices  to  which  these  general  provisions  against  unfair  competition 
have  been  applied. 

Cutting  fixed  resale  prices. — The  act  of  selling  below  the  price 
fixed  by  the  manufacturer  for  resale  is  not  of  itself  considered  to 
be  unfair  competition  in  Germany.  Recent  decisions  of  the  courts 
have  definitely  affirmed  this  view.  Prior  decisions  were  not  clear  on 
this  point,  for  the  reason  that  in  the  cases  prosecuted  the  act  of  cut- 
ting prices  was  usually  accompanied  by  other  acts  of  a  fraudulent  or 
injurious  nature  which  constituted  unfair  competition.^  In  opposi- 
tion to  the  position  taken  by  the  courts  it  has  been  argued  that  the 
cutting  of  fixed  resale  prices  of  itself  should  be  considered  unfair 
competition,  since  by  so  doing  dealers  convey  the  impression  to  con- 
sumers that  their  competitors  who  maintain  prices  are  selling  too 
dear.^ 

Contracts  by  which  producers  bind  the  persons  to  whom  they  sell 
not  to  resell  at  less  than  a  fixed  minimum  price  are  considered  legal 
in  Germany,  and  the  breach  of  such  contracts  constitutes  an  act  of 
unfair  competition,  which  affords  a  ground  for  an  injunction  and  the 
recovery  of  damages  under  section  1  of  the  law  of  1909  and  section 
826  of  the  Civil  Code.  Such  contracts,  however,  are  not  binding  upon 
third  parties. 

Whenever  unfair  means  are  used  in  procuring  goods  to  sell  below 
the  price  fixed  b)^  the  producer  or  supplier,  the  courts  consider  the  act 
of  selling  such  goods  or  of  offering  them  for  sale  below  the  fixed 
resale  prices  repugnant  to  good  morals,  even  when  there  is  no  breach 
of  contract  involved.^ 
.   The  following  cases  will  illustrate  these  principles : 

A  dealer  sold  some  cigarettes  below  the  price  fixed  by  the  Austrian 
Government  monopoly.  Suit  was  brought  for  damages  under  sec- 
tion 1  of  the  law  of  1909.  The  court  held  that  the  sale  of  an  article 
of  commerce,  such  as  the  cigarettes  in  question,  below  the  fixed  price 

^  Gewerblicher  Reclitsscliutz  und  Urhoberrocht,  April,  1014,  S.  111. 

2  Ibid. 

3  For  a  list  of  cases  involving  such  practices,  see  Markenschutz  und  Wettbewerb,  Bd. 
XIII,  S.  592. 


TSUST   LAWS   AND  UNFAIR   COMPETITION.  651 

need  not  in  itself  be  repugnant  to  good  morals,  but  may  become  so  if 
particular  circumstances  accompany  it  which  are  recognized  as  un- 
lawful. In  this  case  the  defendant  had  bound  himself  to  maintain 
the  fixed  price.  It  was  only  on  this  condition  that  the  goods  were  de- 
livered to  him.  Therefore,  by  breaking  his  contract,  he  committed  an 
immoral  (unsittlich)  act,  making  him  liable  for  damages.^ 

A  retailer  who  was  not  bound  by  contract  sold  some  goods  below 
the  resale  price  fixed  by  the  factory.  The  factory  brought  suit  under 
section  1  of  the  law  of  1909  and  section  82G  of  the  Civil  Code  on  the 
ground  that  the  defendant  was  cognizant  that  all  the  customers  of 
the  factory  were  bound  not  to  sell  below  a  fixed  price.  The  court 
rejected  this  view  and  held  that  a  factory  could  not  prohibit  a  third 
party  with  whom  it  had  no  contract  from  selling  its  products  at  a 
lower  price  than  the  minimum  which  it  had  fixed,  for  the  goods  might 
have  been  secured  from  some  middleman  who  was  not  bound  by  the 
party  that  Ijought  the  goods  from  the  factory,  or  the  goods  might 
have  been  purchased  at  a  bankrupt  sale.-     The  court  said  in  part : 

In  any  case  we  can  not  agree  with  plaintiff  that  an  act  repngnant  to  good 
morals  19  involved  merely  in  the  ivselling  of  the  goods  for  less  than  the  price 
imposed  by  the  plaintiff  upon  his  customers.  The  defendant  has  the  right  to 
sell  the  goods,  which  he  has  procured  in  an  honest  way,  at  any  price  satisfac- 
tory to  him.  If  he  is  to  act  in  a  manner  contrary  to  good  morals,  an  element  of 
unfairness  nmst  be  involved,  such  as  causing  the  party  from  whom  the  goods 
were  purchased  to  break  his  contract  with  the  plaintiff".  In  the  absence  of  such 
an  element,  such  agreements  between  manufacturers  and  wholesalers  would, 
from  the  standpoint  of  the  plaintiff,  have,  so  to  speaiv,  a  material  effect,  and  a 
shackling  of  business  would  result  which  would  be  altogether  unendural)le,  and 
which  in  certain  cases  might  itself  even  be  considered  as  repugnant  to  good 
morals. 

Plaintiff,  who  had  secured  the  exclusive  agency  in  Germany  for 
the  sale  of  the  products  of  the  Austrian  Government  tobacco  mo- 
nopoly, obligated  all  purchasers  not  only  to  maintain  the  estaljlished 
prices,  but  also  to  bind,  in  turn,  every  subdealer  to  do  the  same.  A 
retailer,  who  purchased  from  the  vendee  of  plaintiff,  advertised  and 
sold  some  cigarettes  of  this  make  at  less  than  the  minimum  price. 
The  court  enjoined  him  from  advertising  or  selling  these  cigarettes 
below  the  fixed  price,  unless  obtained  from  a  sheriff's  sale,  on  the 
ground  that  under  the  conditions  of  sale  imposed  he  could  only  pro- 
cure the  goods  in  an  unusual  manner  which  was  repugnant  to  good 
morals  in  violation  of  section  1.^  The  court,  however,  declined  to 
accept  the  view  that  price  cutting  itself  constituted  unfair  competi- 

1  Roschluss  des  KammerRPrichts  v.  22.  November,  191.1;  Gewerblidier  Rechtssehnlz  uiul 
Urheberreclit,  1914,  S.  19S. 

2  Ilamhiirtr.  T^rt.  v.  20.  .Tiini  1914  ;  Das  Rocht.  1914.  neilnre  No.  244.-|. 

3  01)('rlaiulos.i,'('richt  .lona,  Urt.  v.  4.  Mai  191."};  Gcwcrljl ichor  Rechtsschutz  uud  Urhebor- 
recbt,  1014,  S.  89,  00,  01. 


652  EEPOET   OF   THE   COMMISSIONER  01*   COEPORATIONS. 

tion,  but  supported  the  position  taken  previously  by  other  courts.    On 
this  matter  the  court  said,  in  part : 

Many  find  an  act  repugnant  to  good  morals  even  in  the  fact  that  the  dealer 
who  sells  such  an  article  below  the  customary  current  price  creates  the  misleading 
appearance  that  on  all  his  goods  he  offers  more  advantageous  prices  than  other 
dealers,  and,  on  the  other  hand,  makes  it  appear  as  if  the  other  dealers  (who 
faithfully  keep  their  agreements  to  maintain  the  prices  fixed  by  the  supplier) 
were  charging  extraordinarily  high  prices.  Those  who  hold  this  view  see  an 
act  repugnant  to  good  morals  in  the  deception  caused  thereby.  From  this 
standpoint  they  deem  it  illogical,  and  also  immaterial,  whether  the  party  that 
sells  more  cheaply  procured  the  goods  through  his  own  or  some  middleman's 
breach  of  contract,     *     *     *     or,  without  such,  perchance  from  a  bankrupt  sale. 

But  the  court  can  not  go  that  far.  It  rather  supports  the  current  view  of 
the  courts  that  the  immoral  factor  of  such  an  act  of  competition  is  to  be  found 
in  the  circumstance  that  the  party  that  sells  cheai>er  not  only  takes  advantage 
of  the  circumstance  that  his  competitors  are  bound  by  contract,  but  does  this 
knowing  that  only  a  breach  of  contract  enables  him  to  underbid  other  dealers 
who  abide  by  their  contracts,  no  matter  whether  he  himself  breaks  the  con- 
tractual obligation  resting  upon  him  or  some  middleman  does  this  by  not  in 
turn  binding  his  customer  to  comply  with  the  price  agreement.  For  such  profit- 
ing from  a  breach  of  contract  by  others,  in  order  thereby  to  drive  out  of  the 
field  competitors  who  can  not  lower  their  prices  unless  they  also  are  willing  to 
break  their  agi'eement,  is,  according  to  the  views  of  all  reasonable  and  fair 
merchants,  contrary  to  business  propriety,  and  therefore  repugnant  to  good 
morals.  The  interpretation  of  the  court  leaves,  of  course,  the  possibility  open 
that  branded  articles  ( INIarkenartikel )  may  be  sold  below  the  fixed  resale  price 
without  being  repugnant  to  good  morals  if  the  resale,  which  took  place  without 
imposing  an  obligation  to  maintain  tlie  price,  presented  no  breach  of  contract. 
This  is  the  case  if  the  goods  are  sold  at  a  forced  sale  or  from  a  bankrupt  stock. 

In  another  case  of  the  same  kind  the  defendant,  in  selling 
cigarettes  at  a  discount,  removed  the  identifying  number,  so  that  it 
was  impossible  for  the  exclusive  agent  to  ascertain  which  middle- 
man was  breaking  his  contract  •  by  not  binding  subdealers.  The 
court  held  that  the  defendant  had  committed  an  act  repugnant  to 
good  morals  by  wilfully  abetting  the  breach  of  contract  of  his  sup- 
pliers, by  buying  at  various  times  from  them  the  cigarettes  of  the 
plaintiff  sold  in  violation  of  the  agreement  made  with  the  plaintiff, 
by  removing  the  identifying  number  in  order  to  prevent  anyone  from 
finding  out  his  source  of  supply,  and  by  selling  the  goods  at  less 
than  the  fixed  price.  Such  acts,  the  court  held,  were  not  in  harmony 
with  the  rules  of  propriety  observed  by  all  just  and  reasonable  men 
and  were  a  violation  of  section  1.^ 

An  association  of  manufacturers  of  pharmaceutical  products  sold 
its  trade-marked  or  identified  articles  to  middlemen  only  on  condition 
that  they  should  not  resell  to  the  public  below  a  fixed  minimum  price, 
that  they  should  impose  this  same  condition  upon  all  dealers  and 

1  Oberlandesgoricht  Breslau,  Beschliiss  v.  12.  Dez.  1913  ;  Gewerblicher  Rechtsschutz  und 
Urheberrecht,  1914,  S.  123. 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  653 

should  not  deliver  goods  to  certain  firms  which  the  association  black- 
listed. A  retail  druggist  in  Danzig  sold  these  articles  below  the  estab- 
lished price.  Suit  was  brought  under  section  1  of  the  law  of  1909  by 
the  manufacturers'  association,  and  also  by  an  association  of  retail 
druggists  organized  for  the  purpose  of  fighting  unfair  competitive 
methods.  It  was  shown  that  the  defendant  was  fully  cognizant  of 
the  conditions  which  attached  to  these  identified  articles,  that  he  had 
procured  his  supply  by  unfair  means,  especially  by  deception  and  by 
causing  a  breach  of  contract  on  the  part  of  certain  middlemen.  In 
answer  to  these  charges  the  defendant  claimed  that  the  prices  fixed 
by  the  manufacturers'  association  were  excessively  high  and  that  the 
means  used  to  maintain  these  prices  were  unfair.  The  court  en- 
joined the  defendant  from  securing  these  articles  by  unfair  means 
and  permitted  the  manufacturers'  association  to  publish  the  judg- 
ment in  five  different  papers  for  a  period  not  exceeding  two  months.^ 

Compelling  price  juaintenance  by  boycott  or  intimidation. — 
The  boycott  is  the  weapon  most  frequently  used  to  compel  price  main- 
tenance. Intimidation  is  also  used  for  this  purpose.  Both  acts  may 
be  prosecuted  as  unfair  competition  under  the  general  provisions. 
The  following  cases  illustrate  its  ap])lication : 

A  book  dealers'  cartel  sought  to  maintain  the  prices  fixed  by  the 
publishers  by  binding  its  members  not  to  give  rebates.  To  compel 
nonmembers  to  maintain  the  fixed  prices  it  entered  into  an  agreement 
with  a  large  number  of  publishers  not  to  deliver  to  those  dealers  who 
were  designated  by  the  cartel  committee  as  having  cut  prices,  or  to 
deliver  to  them  only  at  a  reduced  discount.  The  cartel  also  issued 
a  circular  letter  at  stated  intervals  containing  the  names  of  dealers 
to  be  boycotted.  A  dealer  who  was  thus  discriminated  against 
brought  suit  against  the  cartel  on  the  ground  that  the  boj^^cott  was 
repugnant  to  good  morals  in  the  sense  of  sections  823  and  826  of  the 
Civil  Code  and  the  circulation  of  his  name  as  a  price  cutter  was  a  dis- 
paragement in  the  sense  of  section  821  of  the  Civil  Code  and  section  6 
of  the  law  against  unfair  competition  of  189G.  The  Imperial  Court 
refused  to  accept  this  view  of  defendant's  acts.  It  said,  however,  that 
if  the  i)lan  adopted  by  the  cartel  had  threatened  the  existence  of  plain- 
tiffs business,  to  the  extent  of  weakening  or  undermining  it  and  of 
substantially  injuring  his  credit  or  his  standing  in  the  business  world, 
it  Avould  have  been  repugnant  to  good  morals  and  contrary  to  sec- 
tion 826  of  the  Civil  Code.= 

An  association  of  merchants  in  Dresden  addressed  a  circular  letter 
to  the  proprietors  of  certain  concerns  which  gave  special  price  reduc- 
tions, announcing  that  it  would  publish  the  names  of  such  proprietors 
and  would  expose  the  unfairness  of  this  practice.     In  the  newspapers 

1  Landgerlcht  Danzig,  Urt.  v.  6.  JuU  1911 ;  Markenschutz  uiid  Wcttbewcib,  Bd.  XI,  S.  17. 
'  Urt.  V.  14.  Dez.  1902  ;  Entscheidungen  des  Reicbsgerichts  in  Civilsachen,  Bd.  56,  S.  271. 


654  EEPOKT   OF   THE   COMMISSIONER   OF   COEPOEATIONS.  ^ 

it  stated  that  this  practice  was  not  permissible  and  was  against  good 
morals.  An  association  representing  those  favoring  the  practice  of 
giving  special  rebates  brought  suit  against  the  defendant  associa- 
tion under  sections  1  and  14  of  the  law  of  1909  against  unfair  compe- 
tition. The  lower  court  enjoined  the  defendants  from  publishing  the 
names  of  the  rebate-giving  proprietors  and  from  stating  that  this 
practice  of  giving  rebates  was  unlawful,  holding  that  such  acts 
would  be  repugnant  to  good  morals  and  a  violation  of  section  1. 
Upon  appeal  the  Imperial  Court  affirmed  this  view.  It  also  stated 
that  section  14  was  not  applicable  in  this  case,  because  the  plaintiff 
only  under  the  general  provisions.  The  following  cases  illustrate 
this  form  of  unfair  competition: 

Enticing  customers. — This  is  another  class  of  cases  prosecuted 
only  mider  the  general  provisions.  The  following  cases  illustrate 
this  form  of  unfair  competition: 

Defendanfs  store  was  located  across  the  street  from  the  store  of 
a  competitor.  On  one  occasion  defendant's  husband  followed  two 
persons  who  were  going  in  the  direction  of  the  other  store  and 
induced  them  to  visit  defendant's  store.  On  another  occasion  an 
employee  of  defendant  distributed  handl)ills  to  persons  going  to  the 
plaintiff's  store,  which  contained  statements  laudatory  of  defendanfs 
business.  Most  of  these  handbills  were  distributed  directly  in  front 
of  plaintiff's  show  windows  and  entrance.  Tlie  employee  distribut- 
ing them  even  advised  persons  not  to  patronize  plaintiff',  but  to  go  to 
defendant's  store,  where  they  could  buy  more  cheaply.  Suit  was 
brought  under  section  1  of  the  law  of  1909.  The  court  held  that 
these  acts  exceeded  permissible  competition  and  enjoined  defendant 
from  such  practices." 

The  former  agents  of  an  insurance  company  sent  a  circular  letter 
to  the  policyholders  of  this  company  advising  them  to  cancel  their 
policies  and  take  out  new  policies  with  them.  The  policyholders  were 
asked  to  forward  the  notices  of  cancellation  to  the  former  agents  and 
were  supplied  with  envelopes  for  this  purpose.  They  were  also  ad- 
vised that  the  former  agents  would  call  upon  them  personally  for  the 
purpose  of  taking  out  the  new  policies.  Action  was  brought  under 
section  1  of  the  law  of  1909.  The  court  held  that  it  was  repugnant  to 
good  morals  for  the  defendants  to  thus  solicit  the  policyholders  of 
the  plaintiff  company  to  sever  their  business  connections  with  it  and 
to  establish  business  connections  with  them ;  that  defendants  had  at- 
tempted systematically  to  entice  a  whole  group  of  customers,  and, 
furthermore,  by  requesting  the  policyholders  to  mail  them  the  notice 

1  noielisscricht,  Urt.  v.  3.  Mai  1912  ;  Markenscbiitz  unci  Wettbewerb,  Bd.  XII,  S.  247. 
-  Kammci-jiericht,    Urt.    v.    4.    Februar    I'Jll  ;    Maikeusclmtz    uud    Wettbewerb,    Bd.    X 
(1911),  S.  220. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  655 

of  cancellation,  had  attempted  to  procure  a  weapon  which  they 
miffht  use  at  an  opportune  time  to  bring  pressure  to  bear  upon  the 
plaintiff.^ 

Subsidizing  a  strike  against  competitors. — The  unlawful  acts  of 
strikers  may  be  actionable  under  section  826  of  the  Civil  Code.  If 
the  strike  is  instigated  or  subsidized  by  a  competitor,  it  constitutes 
an  act  of  unfair  competition,  which  can  be  prosecuted  either  under 
section  826  of  the  Civil  Code  or  section  1  of  the  law  of  1909,  or  both. 
This  practice  is  not  covered  by  any  of  the  special  provisions.  The 
following  is  a  typical  case  (see  also  p.  262)  : 

A  goldbeaters'  cartel  induced  a  labor  union,  which  was  conducting 
a  strike  against  two  competing  concerns  not  members  of  the  cartel, 
to  continue  the  strike  for  a  year.  The  latter  concerns  brought  suit 
against  certain  directing  members  of  the  cartel  under  section  826 
of  the  Civil  Code.-     The  Imperial  Court  said  in  part : 

If  a  business  proprietor  or  a  number  of  them  wilfully  induce  a  union  of 
workmen,  especially  one  of  such  size  and  influence  as  the  German  Metal  Work- 
ers' Union,  to  forbid  workmen  belonging  to  the  union  to  take  employment  with 
a  certain  employer,  and  if  this  haiipens  for  the  purpose  of  making  the  operation 
of  the  latter's  business  impossible  or  difficult,  and  thereby  eliminates  competi- 
tion, then  this  act  of  the  proprietors  concerned  not  only  is  repugnant  to  the 
princiitles  by  which  persons  of  high  mind  and  fine  sense  of  pro])riety  are  guided 
in  business,  but  it  far  exceeds  that  which  according  to  the  general  public 
conscience  and  the  moral  conceptions  of  all  reasonable  and  upright  thinking 
persons  is  permissible  in  business  comi)etition. 

Compelling  exclusive  patronage. — To  injure  a  competitor  by 
threatening  to  discriminate  against  persons  patronizing  the  latter, 
in  order  to  compel  exclusive  patronage,  is  unfair  competition. 

A  steamship  company  which  operated  from  Hamburg,  Bremen, 
and  Antwerp  to  several  Australian  ports  threatened  a  large  shipper 
with  higher  rates  than  those  given  in  its  regular  tariil  if  he  continued 
to  patronize  a  competing  group  of  sailing  vessels.  The  shipper 
brought  action  under  section  826  of  the  Civil  Code  to  enjoin  the 
steamship  company  from  discriminating  against  him.  The  Imperial 
Court  granted  relief,  holding  that  the  act  of  the  defendant  was 
repugnant  to  good  morals.^     The  court  said  in  part : 

According  to  the  prevailing  ideas  of  propriety  and  honesty  in  business  the 
act  of  a  shiijping  company  which  excludes  an  individual  or  even  a  certain  group 
of  individuals  from  the  general  tariff  rates  announced  to  the  public  is  an 
infraction  of  good  morals  if  it  is  done  for  the  purpose  of  unfair  competition. 

1  Kaminorfroricht,  Urt.  v.  .*?.  .Tan.  1912;  Die  Rechtsprochung  der  OberlandoSRoricbte,  Bd. 
25   (1912),  S.  341. 

-  Urt.  V.  2.  Feb.  1905  ;  Enlschoitliiugou  dus  lieiclisgericlits  iu  Civilsaclieu,  Bd.  00,  S. 
94,  104. 

"  Urt.  V.  11.  April  1901 ;  Entscheldunjien  des  Eeichsgerlcbts  iu  Civilsachcn,  Ud.  48, 
S.  114.  127. 


656  EEPOET   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

Disloyalty  of  formek  employees. — The  unfair  acts  of  employees 
in  accepting  bribes  for  giving  a  competitive  advantage  to  another  or 
in  revealing  the  secrets  of  commerce  and  industry,  as  already  noted, 
are  made  penal  offenses  by  section  12,  second  paragraph,  and  section 
17,  first  paragraph,  respectively  of  the  law  of  1909.  The  second 
paragraph  of  section  17  also  makes  it  a  penal  offense  for  ex-employees 
to  disclose  or  utilize  trade  secrets  confided  to  them  or  obtained 
unfairly  by  them  during  their  employment.  Other  unfair  practices 
of  ex-employees,  however,  may  be  ground  for  civil  suits  under  the 
general  provisions.    A  case  of  this  kind  follows : 

A  mechanical  engineer  while  employed  in  a  factory  acquired 
knowledge  of  the  construction  of  a  machine.  At  the  conclusion  of 
his  employment  he  made  use  of  this  information  for  his  own  profit, 
and  also  hired  one  of  the  employees  of  the  factory  to  help  him  operate 
the  machine.  Suit  was  brought  against  him  under  section  826  of  the 
Civil  Code.  The  Imperial  Court  held  that  it  Avas  not  repugnant  to 
good  moriils  for  anyone  to  make  use  of  the  knowledge  which  he  had 
acquired  in  the  business  of  i^nother,  even  if  it  was  a  secret  of  manufac- 
ture or  trade,  unless  while  employed  he  secretly  and  without  the  con- 
sent of  his  employer  made  drawings  of  the  machine  or  committed 
some  other  act  of  similar  nature.  The  court  also  held  that  it  was  not 
repugnant  to  good  morals  to  hire  the  employee  of  the  factory,  since 
it  was  not  shown  that  there  was  any  breach  of  contract  or  other  viola- 
tion of  contractual  obligations.  The  court  declared,  however,  that  if 
it  was  established  that  the  defendant  from  the  beginning  proceeded 
with  the  idea  of  competing  against  the  plaintiff  and,  during  his  em- 
ployment, through  a  violation  of  his  contractual  obligations,  pro- 
cured the  data  needed  for  this  purpose,  the  decision  would  be  justified 
that  his  whole  course  of  action  was  contrary  to  good  morals.^ 

Disparagement. — Cases  involving  disparaging  statements  appear 
to  be  prosecuted  more  frequently  under  section  1  of  the  law  of  1909 
and  section  826  of  the  Civil  Code  than  under  the  special  provisions  of 
sections  14  and  15  of  the  law  of  1909.  A  large  number  of  cases  of 
disparagement  are  prosecuted  annually  under  these  two  general  pro- 
visions.   A  few  examples  follow : 

Defendant  placed  two  large  placards  in  his  store,  where  they  might 
easily  be  seen  and  read  by  every  visitor,  as  follows : 

No  business  can  give  away  5  per  cent  as  a  present.  Trading  stamps  must 
alwjiys  be  paid  for.  A  wise  buyer,  tlierefore,  buys  only  wliere  no  trading  stamps 
are  given. 

Suit  was  brought  under  section  1.  The  court  held  that  this  an- 
nouncement of  the  defendant  did  not,  as  the  defendant  claimed,  rep- 
resent simply  an  opinion,  which  the  one  who  reads  it  may  or  may  not 

1  Reichsgericht,  Urt  v.  29.  Marz  1912  ;  Markenschutz  und  Wettbewerb,  Bd.  XII,  S.  404. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  657 

share.  On  the  contrary,  the  defendant  had  made  the  i)ositive  state- 
ment of  fact  that  every  person  who  buys  in  a  store  that  grants  trad- 
ing stamps  must  pay  a  higlier  price  than  he  who  buys  in  a  store  that 
does  not  gi-ant  trading  stamps.  The  defendant  was  also  aware  that  it 
was  impossible  to  adduce  proof  of  his  claim.  He  had,  nevertheless, 
made  his  statement,  relying  upon  the  gullibility  of  a  part  of  the 
public,  in  order  to  discredit  the  trading-stamp  stores  by  passing  off  a 
wlioll}'^  vague  statement  as  an  established  fact  and  in  exploiting  the 
gullibility  of  the  public.  By  that  means  he  attempted  to  draw  to 
himself  the  customers  of  the  trading-stamp  stores.  Such  a  method, 
amounting  to  a  deception  of  the  public,  w^as  held  by  the  Imperial 
Court  to  be  unfair  and  repugnant  to  good  morals.^ 

A  person  who  had  obtained  a  court  decision  against  a  competitor 
for  unfair  competition  published  the  decision  as  an  advertisement  in 
the  newspapers  during  the  Christmas  shopping  season,  several 
months  after  the  judgment  was  obtained.  The  advertisement  was 
set  in  heavy  type,  a  conspicuous  title  and  a  heavy  black  border,  so 
that  it  would  attract  special  attention.  Suit  was  brought  under  sec- 
tion 1  and  the  court  held  that  the  unauthorized  publication  of  the 
decision  at  the  particular  time  and  in  the  manner  noted  was  contrary 
to  good  morals  and  therefore  a  violation  of  the  section  invoked.- 

Defendant  on  two  occasions  published  some  disparaging  statements 
regarding  the  product  of  a  competitor.  Suit  was  brought  under 
sections  1  and  14  of  the  law  of  1909  against  unfair  competition  and 
section  826  of  the  Civil  Code.  It  was  shown  that  as  the  statements 
were  true  there  was  no  violation  of  section  1-1.  But  the  lower  court 
held  that  under  certain  circumstances  the  circulation  of  true  state- 
ments might  be  repugnant  to  good  morals  in  the  sense  of  section  1, 
and  on  this  ground  enjoined  the  defendant  from  publisliing  certain 
of  the  statements.  Upon  appeal  the  Imperial  Court  overruled  this 
view,  holding  that  the  circulation  of  true  statements  for  the  purpose 
of  competition  was  permissible,  except  under  special  circiunstances, 
such  as  when  the  facts  were  no  longer  of  interest  to  the  public  and 
such  circumstances  were  not  found  in  this  case.^ 

Brewing  interests  in  attacking  the  mineral-water  manufacturers, 
w'ho  made  besides  so-called  nonalcoholic  drinks,  published  and  dis- 
tributed a  pamphlet  containing  the  following  statements : 

And  as  for  the  so-called  uoualcoLolic  drinks,  very  suspicions  chemicals  were 
found  therein,  in  .addition  to  an  a'/coholic  content  of  as  much  as  2  per  cent — 
that  is,  as  much  as  iu  a  light  heer — and  a  customary  quite  insipid  taste.  Anilln, 
to  give  a  very  heautiful  color,  which  is  always  the  best  in  this  "hell  brew"; 

1  RoiclisRoricht,  Frt.  v.  28.  Oktobcr  1913  ;  Das  Recht,  1914,  Boilaso  No.  268. 

2  Obcrlaiidosuoricht  Kid,  Fit.  v.  25.  Miirz  lyi.j  ;  Markeuscluitz  uiul  Wettbcwerb,  Bd. 
XIII,  S.  .".28. 

3  Reicbsgoiiclit,  Urt.  v.  20.  Marz  1914  ;  Markenschutz  und  Wcttbewerb,  Bd.  XIII,  S.  489. 

30035°— 16 42 


658  KEPOET  OF   THE   COMMISSIONER   OF   COEPOEATIONS, 

poisonous  saponin,  to  produce  the  foam ;  impurities  resulting  from  the  use  of 
impure  water;  and  otlier  unappetizing  ingredients  are  not  at  all  uncommon. 
That  these  "  nonalcoholic  "  driul^s  usually  cause  very  severe  indigestion,  every- 
one who  uses  them  often  will  admit.     *     *     * 

The  mineral- water  manufacturers  brought  suit,  under  section  1 
of  the  law  of  1909  and  section  826  of  the  Civil  Code,  to  enjoin  the 
publication  of  these  statements  on  the  ground  that  they  were  repug- 
nant to  good  morals.  The  Imperial  Court  held  that,  while  the  acts  of 
opposing  groups,  such  as  these,  might  contravene  these  sections,  the 
particular  statements  circulated  could  not  be  regarded  as  against  good 
morals,  since  the  defendants,  although  pointing  out  definite  faults,  did 
not  refer  to  particular  drinks,  but  only  carried  on  the  fight  against  the 
opponents  of  alcohol  in  general.^ 

A  certain  almanac  in  the  edition  for  1910  contained  an  article  which 
compared  the  value  of  Sunlight  soap  made  in  England  with  German 
grain  soap,  and  stated  in  conclusion  that  the  former  was  no  better 
than  the  latter  but  was  much  dearer.  Suit  was  brought  by  the 
English  concern  against  the  editor  and  publisher  of  this  almanac,  un- 
der section  1  of  the  law  of  1909  and  sections  823  and  826  of  the  Civil 
Code.  The  defendants  were  able  to  prove  to  the  satisfaction  of  the 
Imperial  Court  that  the  statements  contained  in  the  article  w^ere  true. 
The  court  therefore  held  that  the  above-mentioned  sections  were  inap- 
plicable.- 

Implied  disparagement. — The  disparagement  of  a  competitor  by 
implication  may  be  unfair  competition  under  certain  circumstances. 

A  newspaper  publisher  printed  for  advertising  purposes  a  time- 
table poster,  containing  also  a  list  of  the  long-distance  telephone  sub- 
scribers for  the  district  L,  from  which  he  intentionally  omitted  the 
name  and*  telephone  number  of  his  competitor.  The  court  held  that 
the  incomplete  list,  which  was  intended  for  use  in  public  places,  was 
of  a  nature  to  lead  the  public  to  believe  that  the  plaintiff  had  no  tele- 
phone connection.  This  would  convey  the  impression  that  his  busi- 
ness was  only  of  limited  importance  or  not  up  to  date  and  result  in 
an  actual  loss  of  trade.  The  act  of  omitting  the  name  of  plaintiff 
was  therefore  held  to  be  repugnant  to  good  morals  in  the  sense  of 
section  1  of  the  law  of  1909.^ 

Deceptia'e  advertising. — Although  this  form  of  unfair  competition 
is  usually  prosecuted  under  sections  3  and  4  of  the  law  of  1909,  such 
cases  are  sometimes  brought  under  section  1.    A  few  examples  follow. 

A  dealer  advertised  in  a  Frankfurt  a.  O.  paper  that  he  would  sell  a 
coffee  mixture  at  78  pfennigs  per  pound.    This  mixture  contained  54 

1  Reichsgericht,  Urt.  v.  7.  Feb.  1913  ;  Markenschutz  und  Wettbewerb,  Bd.  XII,  S.  520. 

-  Reichsgericht,  Urt.  v.  26.  November  1912;  Markenschutz  und  Wettbevrerb,  Bd.  XII, 
S.  337. 

3  Oberlandesgericht  Hamm,  Urt.  v.  15.  Miirz  1912 ;  Gewcrblicber  Bechtsschutz  und 
Urheberrecht,  1912,  S.  376. 


u 


TKUST   LAWS  AND   UNFAIR   COMPETITION.  659 

per  cent  of  pure  coffee,  the  remainder  consisting  of  a  substitute.  Suit 
was  brought  under  section  1.  The  court  held  that  in  using  the  words 
coffee  mixture"  and  "superfine  coffee  mixture"  the  defendant  had 
made  an  untruthful  statement;  that,  taken  in  its  entirety,  the  adver- 
tisement was  of  a  nature  to  lead  the  public  to  believe  that  pure  coffee 
was  being  offered  to  the  public  at  a  remarkably  Ioav  price.^ 

As  a  result  of  the  activities  of  British-American  Tobacco  Co.  inter- 
ests in  Germany  in  acquiring  control  of  cigarette  manufacturers,  the 
independent  concerns  adopted  the  policy  of  advertising  themselves  as 
"independent  of  a  trust"  (trustfrei).  A  cigarette  concern  in  Dres- 
den, a  majority  of  whose  stock  had  been  secretly  acquired  by  the  trust 
in  order  to  obtain  the  patronage  of  hostile  dealers,  advertised  and 
proclaimed  itself  as  independent.  Suit  was  brought  by  an  independ- 
ent manufacturer  for  violation  of  sections  1  and  3  of  the  Law  of  1000. 
The  lower  court  enjoined  the  defendant  from  advertising  itself  in  this 
manner,  and  upon  appeal  the  decision  was  affirmed  b}''  the  highest 
court.- 

Creating  confusion. — Cases  involving  confusion  of  products  are 
usually  brought  under  the  various  provisions  of  the  trade-mark  law 
(see  p.  621)  ;  those  involving  confusion  as  to  establishments  under  sec- 
tion IG  of  the  hnv  of  1000.  Frequently,  however,  confusion  cases  of 
both  kinds  are  brought  under  the  two  general  sections  either  alone  or 
in  conjunction  witli  the  special  provisions.  Numerous  cases  of  this 
kind  have  dealt  Avith  the  use  of  the  designation  "  Pilsener  "  for  beer 
not  brewed  in  Pilsen.  According  to  one  writer,  the  Imperial  Court 
in  the  beginning  appears  to  have  followed  the  view  that  such  use  of 
the  designation  "  Pilsener  "  Avas  contrary  to  section  16  of  the  law  of 
1000,  but  more  recently  it  has,  apparently,  been  inconsistent  in  its 
decisions,  declaring,  for  instance,  that  the  designation  "  Radeberger 
I*ilsener  "  Avas  permissible  Avliile  "  Engelhardt  Pilsener  "  Avas  not,  that 
the  desiguations  "  IIansa(]nell  "  and  "  Germania  "  Pilsener  would  mis- 
lead the  public,  Avhile  "  Tinzer  Pilsener  "  Avould  not.^ 

A  feAv  cases  involving  confusion  either  in  respect  to  products  or 
establishments  Avhicli  have  been  brought  under  the  general  provisions 
follow. 

A  brewery  in  Bochum  sold  its  beer  under  the  designations  "  Schle- 
gel-Pilsener"  and  "  Deutsch-Pilsener."  It  also  desired  that  its  beer 
should  be  sold  in  the  taA'erns  as  "  Pilsener."  Suit  was  brought  by  the 
brcAveries  in  Pilsen  to  enjoin  the  use  of  the  designation  "Pilsener" 
under  section  1  of  the  hnv  of  1000  and  section  826  of  the  Civil  Code. 
In  keeping  with  former  decisions,  the  court  held  that  the  use  of  such 

'  01iorlanrlps£:oricht  Kiel,  TTrt.  v.  irj.  Jnni  1011;  Gewerblichcr  Rcchtsschutz  und  Frhe- 
borredil,   l!H-_>.  S.  73. 

-  Uoi(lisi;(  riclit,  lit.  v.  :'.(».  Mlirz  11)1.->:  Monatssehrift  fiir  Handelsrccht  und  Bankwcsen, 
1915,  S.  1126 ;  also  KarteU-Uundscliau,  1915,  p.  106. 

3  Markenscliutis  und  Wettbewcrb,  Bd.  XIII,  S.  307. 


G60  EEPOKT    OF    THE    COMMISSIONER   OF    CORPORATIONS. 

words  as  "  Pilsener  "  or  "  Miinclmer  "  for  designating  beers  not  brewed 
in  Pilsen  or  JMunich  is  permissible  if  by  means  of  prefixes,  especially 
those  indicating  definitely  the  location  of  the  brewery,  it  is  made  clear, 
beyond  a  doubt,  that  these  words  designate  only  a  quality  and  not  the 
provenance  of  the  beer,^  But  in  this  case,  as  shown  by  the  selling  of 
the  beer  in  the  taverns  as  "  Pilsener,"  the  defendant  intended  to  de- 
ceive the  public  by  establishing  a  confusion  between  his  products  and 
the  "  world-renowned  "  real  Pilsener  beer,  which  involved  an  act  re- 
pugnant to  good  morals  within  the  scope  of  section  826  of  the  Civil 
Code,  and  especially  within  the  scope  of  section  1  of  the  Law  against 
Unfair  Competition.- 

Some  breweries  in  Berlin  used  the  name  "Engelhardt  Berliner 
Pilsener  "  on  their  containers,  price  lists,  etc.  Suit  was  brought  by 
the  breweries  in  Pilsen  to  enjoin  the  use  of  this  designation  on  the 
ground  that  it  was  a  violation  of  section  16  of  the  trade-mark  law, 
sections  1  and  3  of  the  law  of  1909,  and  section  826  of  the  Civil  Code, 
since  it  was  a  false  statement  of  proveiumce  made  for  the  purpose  of 
deception  and  was  also  repugnant  to  good  morals.  The  lower  court 
held  that  the  suit  was  properly  brought,  but  that  the  use  of  this  des- 
ignation was  not  a  violation  of  these  sections,  since  it  did  not  refer 
to  the  provenance  but  to  the  manner  in  which  the  beer  was  brewed. 
Upon  appeal  the  plaintiffs  sought  to  prove  that  the  beer  was  not 
brewed  in  the  manner  of  Pilsener  beer  and  that  consequently  the 
name  v.as  a  false  designation  of  process  in  the  sense  of  section  3  of 
the  law  of  1909.  The  Imperial  Court,  however,  ruled  out  this  new 
evidence.^ 

A  person  having  the  name  Adolf  Hommel,  jr.,  placed  on  the  mar- 
ket a  pharmaceutical  product  bearing  his  firm  name  and  the  name 
"  Haematogen,"  in  competition  with  a  well-known  product  of  the 
same  name  manufactured  by  the  Hommel  Haematogen  Co.  The 
latter  brought  suit  against  Adolf  Hommel  under  sections  1,  13,  and 
16  of  the  law  of  1909  and  section  826. of  the  Civil  Code.  The  lower 
court  held  that  the  words  ''  Hommel "  and  "  Haematogen  "  used  by 
the  defendant  on  his  product  created  a  confusion  Avith  the  original 
product  and,  therefore,  was  a  violation  of  section  16;  also,  that  the 
act  of  wilfully  creating  confusion  in  this  manner  Avas  repugnant  to 
good  morals  and  a  violation  of  section  1.  The  Imperial  Court  af- 
firmed the  decision.* 

Before  the  above  decision  was  rendered  the  defendant  dissolved 
the  firm  of  Adolf  Hommel,  jr.,  and  organized  the  company  of  Adolf 

1  See  Eutschcidnnsen  des  Rcichsgerichts  in  Civilsachen,  Bd.  79,  S.  253. 

2  Reichsgericht,  Urt.  v.  28.  Nov.  1913;  Gewerbliclier  Reclitsschutz  und  Urheberreclit, 
1914,  p.  1G2. 

3  Reichsgcricbt,  Urt.  v.  15.  April  1912  ;  Marljenschutz  und  Wettbewerb,  Bd.  XII,  S.  515. 
*  Reicbsgericht,  Urt.  v.  10.  Juli  1913;  Marlicuscliutz  und  Wtttbewerb,  Bd.  XIII,  S.  66. 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  661 

Hommel  &  Co.  Another  suit  was  then  brought  by  the  plaintiff  under 
sections  1  and  IG  of  the  law  of  1909  to  enjoin  the  new  companj'' 
from  the  use  of  the  names  "  Hoimnel "  in  connection  with  "  Haema- 
togen."  This  the  court  did,  and  further  ordered  the  dissolution  of 
the  new  company  and  forbade  the  defendant  to  use  the  name  "  Hom- 
mel "  in  case  another  new  company  should  be  formed,  on  the  ground 
that  otherwise  the  same  confusion  would  result.  Upon  appeal  this 
decision  was  affirmed  by  the  Imperial  Court  on  the  same  date  as  the 
decision  in  the  original  suit.  The  court  held  that  while  the  defendant 
had  the  right  to  use  the  word  "  Hommel "  in  business  undertakings, 
that  being  his  name,  and  even  in  the  Haematogen  business,  he  must 
not  use  it  in  such  a  way  as  to  cause  confusion  with  the  business  and 
products  of  a  competitor.^ 

A  manufacturer  of  spring  mattresses  registered  a  trade-mark  which 
was  an  imitation  of  a  competitor's  desigTi.  Suit  was  brought  to  have 
the  trade-marlv  canceled  on  the  ground  that  its  registration  was 
against  good  morals.  The  Imperial  Court  held,  in  accordance  with 
numerous  decisions  of  the  same  nature,  that  the  extinction  of  a  trade- 
mark, although  properly  registered  in  conformity  with  the  provisions 
of  the  trade-mark  law,  could  be  demanded  on  the  basis  of  section  826 
of  the  Civil  Code,  as  well  as  section  1  of  the  law  against  unfair  com- 
petition, if  the  effect  of  the  registration  was  a  breach  of  good  morals.^ 

Arrituation  boards. — The  most  recent  development  in  Germany 
regarding  the  suppression  of  unfair  competition  consists  in  having 
complaints  of  unfair  competitive  practices  arbitrated  and  settled 
by  a  so-called  board  of  arbitration  (Einigimgsamt),  the  members  of 
which  consist  partly  of  business  men.^ 

This  new  method  of  settling  unfair  competition  cases,  originated 
by  pi-actical  business  men,  has  proved  so  successful  and  has  given 
such  general  satisfaction  that  it  is  being  substituted  for  the  regular 
court  trials  more  and  more  throughout  the  Empire.  It  is  argued  in 
favor  of  this  method  that  it  does  away  with  expensive  and  long  liti- 
gation and  the  animosities,  as  well  as  the  pub.lic  disgrace,  arising 
therefrom,  and  that  it  offers  speedy  relief  instead  of  the  cumbersome 
procedure  and  traditional  rigid  formality  of  ordinary  court  trials. 
In  addition  to  arbitrating  disputes  the  main  functions  of  the  board 
of  arbitration  are  to  exercise  an  educating  and  enlightening  in- 
fluence upon  the  business  world  regarding  fair  and  lawful  compe- 
tition. 

These  new  arbitration  boards  have  proved  to  be  especially  useful 
in  cases  where  the  decisions  of  the  Imperial  Court,  in  conformity 

iRoicliscoiiolil.  Urt.  v.  10.  .TuH  101.",;  lyrnrkonschutz  und  WctUieworb,  Pd.  XTTT.  S.  0.7. 
2  Reiclisi;ericlit,  Vvt.  v.  IG.  .Tun.  101.'!;  Markonsfhutz  inul  Wetlboworb,  R.d.  XII,  S.  471. 
''norliniT  .lalirlMich  fiir  Iliind.'l  nnd  Indiistrio,  Borieht  dcr  Altesten  dcr  Kaufmannschaft 
von  Lierliu,  lOlL',  lid.  I,  S.  :{47,  and  1913,  Cd.  I,  S.  357. 


662  REPORT   OF   THE   COMMISSIONER   OP   CORPORATIONS. 

with  the  letter  of  the  law,  were  not  broad  enough  and  had  not  kept 
l^ace  with  the  progress  of  current  business  methods  and  customs. 

The  first  of  these  arbitration  boards  was  organized  October  8, 
1910,  by  the  Seniors  of  the  Merchants  of  Berlin.  Up  to  the  close  of 
1911  it  had  acted  in  20  sessions  on  156  complaints,  of  which  106 
were  settled  by  arbitration.  During  the  year  1913  the  board  received 
82  complaints  against  119  for  the  preceding  year.  In  40  cases  an 
agreement  was  reached  and  in  16  other  cases  the  claims  were  settled. 
This  Berlin  experiment  rapidly  found  favor  among  business  men 
and  chambers  of  commerce  throughout  Germany,  and  within  two 
years  (1910-1912)  similar  boards  were  established  in  16  German 
cities,  among  them  Diisseldorf,  ]\Iunich,  Frankfurt  a.  M.,  Frankfurt 
a.  O.,  Strassburg,  etc. 

Six  other  cities  are  planning  to  establish  similar  boards. 

Regulations  of  the  Berlin  Board  of  Arhitration. — For  the  settle- 
ment of  contests  on  account  of  unfair  competition  a  board  of  arbi- 
tration (Einigungsamt)  in  matters  of  unfair  competition  is  estab- 
lished by  the  Corporation  of  the  Merchants  of  Berlin:^ 

Art.  1.  The  Ijoard  of  ar])itratioii  meets  -whenever  its  mediation  is  agreed 
upon  by  the  parties  in  interest.  In  case  only  one  party  appeals  to  the  board  the 
chairman  shall  notify  the  other  party,  and  shall  at  the  same  time  make  an 
effort,  to  the  best  of  his  ability,  that  the  second  party  also  agree  to  appeal  to 
the  board  ctf  arbitration. 

Akt.  2.  The  board  of  arbitration  consists  of  the  chairman  and  four  associates. 

The  chairman  is  the  syndic  of  the  Corporation  of  the  INIerchants  of  Berlin;  his 
substitute  as  chaiianan  is  the  deputy  syndic  or  a  jurist  who  is  eligible  for  a 
judgeship. 

In  each  case  the  Seniors  of  the  Jlerchants  of  Berlin  and,  in  urgent  cases, 
their  presidents,  shall  appoint  foiu*  business  men  as  associate  members;  of 
these,  if  possible,  two  shall  belong  to  the  same  l)ranch  of  business  as  that  in 
which  the  act  of  unfair  competition  is  alleged  to  have  been  committed.  The 
associate  members,  who  shall  belong  to  the  branch  of  business  in  question,  are 
to  be  selected  primarily  from  the  lists  pi'oposed  by  the  branch  association.  In 
the  same  way  four  substitutes  are  appointed. 

It  is  permissible  to  appoint  as  associate  members  also  employees  in  a  qualified 
position. 

Art.  3.  The  plaintiff  shall  file  the  complaint,  together  with  motivation  and 
any  proofs,  if  possible,  in  three  copies,  with  the  chairman  of  the  ai'bitration 
board. 

Art.  4.  The  proceedings  before  the  board  of  arbitration  shall  be  oral  and 
secret.  Associations  for  promoting  business  interests  are  entitled  to  be  present ; 
upon  request  they  are  also  to  be  heard. 

Art  5.  The  parties  may  be  represented  by  business  men  or  persons  with  a 
knowledge  of  law. 

Art.  6.  A  record  is  to  be  kept  concerning  the  proceedings  before  the  board  of 
arbitration.  By  being  incorporated  in  the  record,  the  results  of  the  proceedings, 
especially  agreements  and  decisions,  are  to  be  established. 

1  Bcrlinor  Jahrbueh  fiir  Handel  nnd  Industrie,  Bericht  dor  AUesten  der  Kaufmannschaft 
von  Berlin,  1910,  Bd.  I,  S.  538. 


TRUST    LAWS   AND   UNFAIR   COMPETITTON.  663 

Art.  7.  If  an  agreement  is  not  reached  the  board  of  arbitration  may  issue  an 
award,  provided  the  parties  have  signed  the  following  written  declaration : 

"  We  agree  that  the  arl)itration  of  tlie  legal  contests  existing  between  lis  re- 
lating to  unfair  competition  shall  be  effected  through  the  board  of  arbitration 
of  the  Corporation  of  the  Merchants  of  Berlin  in  matters  of  unfair  competition, 
which  shall  also  decide  as  regards  the  costs  of  the  trial ;  furthermore,  that  we 
shall  be  liable  as  joint  debtors  for  the  expenses  of  the  board  of  arbitration — re- 
serving any  claims  on  our  part  for  restitution;  also,  that  the  Royal  Lower  Court 
of  central  Berlin,  or  the  Provincial  Court  I  of  Berlin,  shall  be  considered  the 
proper  court  for  filing  the  decision." 

Art.  8.  No  fees  are  collected  for  the  trial  by  the  board  of  arbitration.  The 
chairman  may  demand  a  suitable  advance  for  covering  expenses. 

Section  11.  Austria. 

Introductory. — Unfair  competitive  practices  in  Austria  are  prose- 
cuted under  various  provisions  of  the  Penal  Code  and  special  laws. 
There  appears  to  be  no  general  provision  of  la^v  applicable  to  such 
practices.  The  Civil  Code  contains  in  section  1295  a  general  pro- 
vision similar  to  article  1382  of  the  French  Civil  Code,  which  reads 
as  follows: 

Sec.  1295.  Every  person  is  entitled  to  demand  from  the  injurer  compensation 
of  the  injury  which  tlie  latter  has  done  liim  as  a  result  of  a  wrong;  the  injury 
may  liave  ))een  caused  by  a  breacli  of  a  contract  obligation  or  without  any 
I'elation  to  a  contract. 

This  section  has  not  been  utilized  as  a  means  of  protection  against 
unfair  competition  on  account  of  the  narrow  interpretation  given  it 
by  the  courts.  Austrian  jurisprudence  has  always,  in  theory  and 
practice,  interpreted  the  term  "wrong"'  (Yerschulden)  in  this  sec- 
tion in  such  a  manner  that  to  constitute  liability  for  compensation 
it  requires  the  breach  of  a  contract  obligation  or  the  violation  of  an 
explicit  provision  of  a  law  or  of  a  legal  decree.^  The  Administrative 
Court  (Verwaltungsgerichtshof )  declared  it  to  be  a  generally  estab- 
lished principle  that  "  every  kind  of  competition  is  permissible  which 
does  not  conflict  with  tiie  legally  protected  rights  of  others." - 

Austria  as  yet  has  no  comprehensive  special  law  against  unfair 
competition.  In  order  to  prepare  such  a  law,  the  Austrian  minister 
of  commerce,  in  a  decree  of  Septemljer  7.  1899  (Z.  47800),  called  upon 
the  chambers  of  commerce  and  trade  for  their  opinions  and  sugges- 
tions concerning  certain  kinds  of  unfair  competition,  and  a  bill  was 
drafted  in  190G.' 

1  "  Cntacliten  fiber  die  mit  dem  Erlasse  des  K.  K.  Handelsministorinms.  C.  Okt.  1000, 
vorscndetou  (Josotzentwiirfe  betrollend  don  Seluitz  gegcn  uulautureu  Wdtbewerb,"  Wien, 
1000,  S.  22. 

-'Erkonntnis  v.  4.  Okt.  1S,S2,  Z.  151:',,  nudwiuski :  Die  Erkcnntnisse  d.  K.  K.  Verwalt- 
ungSKeriflitsbofes,  1882,  Nr.  l;")!:!,  S.  44.'',. 

•■•Enlwurf  cincs  Oosctzos  bi'trefTcMKl  don  Scbutz  gogon  uiilantoron  Wottboworb  :  No.  2r>00 
der  Beilage  zu  den  stenograph.  Protokollen  des  Abgeordnoteubauses,  XVIL  session,  1906. 
See  also  U'ouhard,  Dor  Uulautere  Wottbewcrb  uud  seine  Bckauipfuug,  1903,  S.  90  fol. 


664  REPORT   OF    THE   COMMISSIONER   OP   CORPORATIONS. 

This  bill  contains  civil-law  provisions  against  fraudulent  advertis- 
ing-, appropriating  and  misusing  distinctive  marks  of  others,  and 
betra,yal  of  business  and  trade  secrets.  Penalties  of  fine  and  impris- 
onment are  provided  where  these  acts  are  intentionally  done. 

The  l)ill  also  makes  obligatory  the  designation  of  certain  goods 
with  reference  to  their  quantity,  quality,  or  provenance. 

A  general  provision  in  section  16  reads  as  follows :  ^ 

Every  act  committed  in  the  course  of  condxicting  a  business  enterprise  which 
is  grossly  repugnant  to  good  morals  and  ada])ted  to  injure  the  sales  or  other 
business  activity  of  one  or  more  competitors  is  to  be  regarded  as  unfair  com- 
petition. 

Penal,  Code. — Section  197  of  the  Penal  Code  -  is  applicable  to  cases 
of  injury  to  the  property  of  another  person,  as,  for  instance,  a  run 
on  a  bank  caused  by  subtle,  false  pretenses.^  Section  308  is  applicable 
to  cases  involving  the  circulation  of  disparaging  statements  regard- 
ing the  credit  or  products  of  another.  The  language  of  this  section 
is  as  follows : 

Sec.  308.  Whoever,  in  a  public  announcement  (by  means  of  wall  posters,  public 
speeches  or  lectures,  etc.),  disseminates  or  spreads  a  false  rumor  disturbing 
public  safety,  without  sufficient  reasons  for  considering  it  to  be  true,  or  an 
alleged  prediction  of  like  kind,  is  guilty  of  a  misdemeanor,  and  is  to  be  punished 
with  close  arrest  of  from  eight  days  to  three  months. 

This  section  was  held  to  be  applicable  in  a  case  where  an  Austrian 
Regie  cigarette  was  artificially  caused  to  explode  in  order  to  give 
rise  to  the  rumor  that  cigarettes  of  a  dangerous  nature  were  to  be 
found  among  the  products  of  the  Iiegie  factories.* 

Trade  law  of  March  15,  1883. — The  so-called  trade  law  of  March 
15,  1883,^^  amending  the  Industrial  Code,  contains  several  provisions 
relating  to  tlie  misappropriation  or  misuse  of  various  business  desig- 
nations. Of  these,  sections  4G  and  49  are  the  most  important.  The 
language  of  these  sections  is  as  follows : 

Sec.  4G.  No  tradesman  is  entitled,  for  the  exterior  designation  of  his  place  of 
business  or  dwelling,  whether  in  circulars,  public  announcements,  or  price  lists, 
to  unlawfully  appropriate  tlie  name,  firm  name,  coat  of  arms,  or  special  desig- 
nation of  the  establishment  of  some  other  domestic  tradesman  or  producer,  or 
to  falsely  designate  in  the  above-named  manner  the  pi'oducts  of  his  trade  estab- 
lishment as  having  come  from  another  establishment. 

Such  an  offense  gives  the  injured  party  the  right  to  call  upon  the  proper 
trade  authorities  to  stop  the  further  use  of  the  unlawful  designation  or  to 
prohibit  the  false  announcement. 

1  Cf.  Lobe,  Dio  P.pkampfiins-  flos  unlanteren  Wettbewerbs,  1907.  Bd.  I,  p.  108. 

2  Das  Strafgcsetz  vom  27.  Mai  18.52,  Reichsgesetzblatt,  1852,  Nr.  117. 
^  Leonhard,  op.  cit.,  p.  49. 

*  Entsclieid.  des  Obcrsten  fJcrichtsbofos  vom  12.  Mai  1809,  Z.  .^iOS,  Sg.  2:;.5:; ;  citod  iu 
Loffler  u.  Lorenz,  Das  Strafgesetz  vom  27.  Mai  18.52.     Wien  1912,  S.  52:5. 

^  "  Gesotz  vom  15.  Miirz,  188.'i,  betrpffend  die  AbUnderung  und  ErgLinzuiig  dor  Gewerbe- 
ordnung,"  Reicbsgesetzblatt,  1883,  No.  39,  S.  113. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  665 

The  protection  acrordotl  the  injni'od  party  is  not  precluded  by  the  fact  that, 
in  addition  to  tlio  unlawful  desif^nation  or  false  declaration,  the  name,  firm 
name,  coat  of  arms,  special  designation  of  the  establishment,  or  the  mention  of 
another  trade  establishment,  are  made  with  such  additions,  omissions,  or  other 
changes  as  are  not  discernible  with  ordinary  attention. 

Sec.  49.  Furthermore,  an  offense  is  committed  by — 

1.  Every  tradesman,  who  in  cases  which  have  not  already  been  covered  by 
section  4G  or  by  the  law  for  the  protection  of  trade-marks,  for  the  exterior 
designation  of  his  place  of  business  or  dwelling,  for  the  designation  of  products, 
or  generally  in  conducting  his  business  and  in  affixing  his  signature,  makes  use 
of  a  name  to  which  he  is  not  entitled,  i;nless  authorized  thereto  by  the  prior 
recording  of  his  firm  name  in  the  trade  register. 

2.  Every  tradesman  who,  in  the  cases  mentioned  under  1,  appropriates  to 
himself  marks  of  distinction  which  have  not  been  conferred  upon  him. 

3.  Every  tradesman  who,  in  the  cases  mentioned  under  1,  uses  a  designation 
which  permits  the  inference  of  a  partnersliip  relation,  whereas  in  reality  none 
such  exists. 

4.  Every  tradesman  who  fails  to  use  his  full  first  name  and  surname,  unless 
jiistified  by  the  prior  recording  of  his  firm  name  in  the  trade  register. 

5.  Every  tradesman  who,  in  the  cases  mentioned  under  1,  while  a  partner- 
ship relation  exists,  uses  a  designation  which  contains  not  only  names  of 
partners  but,  besides,  an  addition  which  suggests  the  existence  of  a  partner- 
ship, witliout  being  authorized  to  use  such  a  firm  name  in  the  sense  of  the 
Commercial  Code. 

In  a  decision  of  March  G,  190S,  the  Ministry  of  Commerce  held  that 
the  use  of  the  name  "Grand  Hotel  Slavia,"  in  the  city  of  Turnau, 
constituted  an  infringement  on  the  rights  of  an  older  establishment 
in  the  same  town,  known  as  "  Grand  Hotel,"  according  to  section  46 
of  the  trade  law,  because  the  words  "  Grand  Hotel "  constitute  an 
essential  element  of  the  older  firm's  name  and  because  the  addition, 
"  Slavia,"  is  not  discernible  with  ordinary  attention.^ 

A  certain  manufacturer,  Eisner,  used  as  a  sign  on  his  shop  the 
words  "  Siegfried  Eisner,  to  the  busy  Fischer,"  the  word  Fischer 
which  was  the  name  of  a  competitor  who  previously  occupied  the 
same  shop,  being  in  letters  seven  times  as  large  as  the  other  words  on 
the  sign.  The  Ministry  of  the  Interior  held  that  this  act  constituted 
a  violation  of  section  ±0  of  the  trade  law^  because  the  word  "  Fischer" 
would  Ixi  taken  to  denominate  the  competitor.^ 

Judgment  was  given  against  a  dealer  who  advertised  his  beer  in 
the  newspapers  as  being  "  according  to  the  type  of  IMlsener  beer," 
the  words  ''according  to  the  type  of"  being  printed  in  small  type, 
whereas  the  words  "  Pilsener  beer  "  w^ere  in  heavy  type.^ 

A  certain  R.  in  Pilsen,  who  named  his  drug  store  "  Drogorie  zum 
goldenen  Krebs,"  was  found  guilty,  according  to  section  40  of  the 

1  Entspli.  d.  IlMiKlclsministoiiums  v.  G.  Miirz  lOOS,  Z.  liSlO ;  Ostor.  I'ateutblatt,  1008, 
p.  070. 

sKntsch.  (1.  IMiiiisliTimns  d.  Fmicrn  v.  5.  Nov.  1002;  ("(st-T.  I'atiiitlilal  t.  T.mi:^.,  p.  225. 
sEutsch.  d.  Stattlialterei  in  Lembeig,  v.  5.  Miirz  1012;  ihtev.  Pateutblatt,  1012,  p.  701. 


666  EEPOET   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

trade  law,  of  infringing  the  trade  rights  of  Richter  &  Co.,  owners 
of  the  "  Drogerie  ziim  rotcn  Krebs."  The  Administrative  Court  held 
that  the  names  "  Zum  roten  Krebs  "  and  "  Zinn  goldenen  Krebs  "  were 
likely  to  give  rise  to  confusion,  all  the  more  in  this  case  because  the 
defendant  was  then  conducting  his  business  in  the  former  shop  of 
the  plaintiff.  The  court  said  further  that  in  considering  the  pos- 
sibility of  confusion  between  the  names  of  two  establishments  it  is 
not  so  important  to  consider  their  specific  details  as  to  weigh  the 
impression  caused  b}^  these  details  collectively,  and  also  to  consider 
local  conditions.^ 

The  trade  law  of  1883  was  amended  in  1902  -  by  the  addition  of 
several  new  sections  in  place  of  sections  59  and  60.  The  second  para- 
graph of  the  new  section  59  -  contains  the  following  provision  which 
has  been  applied  by  the  courts  to  the  so-called  block  system : 

The  solicitins  of  ordere  for  goods  of  persons  who  do  not  have  use  for  sxich 
goods  in  their  business  is  unconditionaUy  forbidden  to  proprietors  or  tlieir 
representatives  witli  respect  to  tlie  sale  of  groceries  and  dry  goods  inside  as 
well  as  outside  of  the  place  of  business ;  with  respect  to  other  goods  the 
soliciting  of  orders  of  the  above-mentioned  persons  outside  of  the  place  of 
business  is  permitted  only  in  special  cases  where  an  express  written  request 
naming  specific  goods  has  been  directed  to  the  proprietors. 

The  so-called  "  block  system,"  which  was  much  complained  of  by 
Austrian  merchants  as  being  an  unfair  method  of  trade  development, 
was  held  by  the  Administrative  Court  to  be  repugnant  to  section  59 
of  the  law  of  February  25,  1902.  This  system  operates  as  follows: 
By  presenting  a  stem  coupon  costing  1  krone  25  heller  and  5  kronen 
additional  the  buyer  receives  a  block  consisting  of  four  coupons,  at  1 
krone  25  heller  each.  The  buyer  is  advised  to  pass  on  to  other 
prospective  buyers  each  of  these  coupons  for  1  krone  25  heller,  so  that 
he  receives  back  his  5  kronen.  If  a  new  block  is  bought  under  like 
conditions  by  the  holders  of  each  of  the  four  coupons,  the  original 
buyer  receives  20  kronen  worth  of  goods,  the  value  of  which  has 
been  paid  by  the  other  four  blocks.  If  all  of  the  four  blocks  are  not 
sold,  the  original  buyer  receives  5  kronen  v/orth  of  goods  for  each 
block  sold.^ 

A  dry  goods  merchant  of  Chrudim  appealed  from  an  order  of  the 
Ministry  of  Commerce  restraining  him  from  making  further  use  of 
the  "  block  "  system  in  his  business.  The  appeal  was  dismissed  partly 
on  the  following  ground :  The  block  system  is  unlawful  and  directly 
at  variance  with  section  59  of  the  trade  law  of  February  25,  1902, 
because  the  method  employed  in  selling  the  "  blocks  "  involves  the  use 

1  Erkenntnis  d.  Verwaltinig-sErorirhtsliofos  v.  7.  Mai  1913,  Z.  4809  ;  Oster.  PatPntMatt, 
1914,  p.  1G4. 

^Gesetzvom  25.  Febr.  1002;  ncirhsgpsotzblatt,  1902,  Nr.  49. 

"  Erkenntnis  d.  Verwaltungsgerichtsliofes  v.  7,  Jiinner  1909 ;  Oster.  Patentblatt,  1909, 
p.  1117. 


TEUST   LAWS  AND  UNFAIR  COMPETITION.  66 Y 

of  numerous  auxiliary  solicitors  whose  function  is  to  drum  up  trade 
for  the  tradesman  in  various  localities  differing  from,  and  Avithout 
regard  to,  the  location  of  his  business.  Section  59  permits  orders  for 
goods  to  be  solicited  only  by  persons  who  are  officially  licensed  em- 
ployees of  the  tradesman.  Furthermore,  orders  shall  be  solicited 
from  private  persons  only  upon  special  written  request  to  the  trades- 
man with  explicit  mention  of  the  goods  desired.^ 

Trade-mark  law. — The  law  of  January  6,  1800,-  relating  to  the 
protection  of  trade-marks,  as  amended  July  30,  1895,  contains  a  num- 
ber of  sections  prohibiting  the  wrongful  use  of  trade-marks. 

Section  3  excludes  from  registration  trade-marks  which  are  cur- 
rently used  in  commercial  intercourse  for  designating  certain  kinds 
of  goods,  as  well  as  those  which  contain  immoral  and  offensive  or 
other  representations  contrary  to  public  order,  or  inscriptions  or 
statements  such  as  are  contrary  to  actual  business  conditions  or  to 
truth,  and  wdiich  are  calculated  to  deceive  consumers. 

Section  10  prohibits  the  misappropriation  of  various  designations 
as  follows: 

Sec.  10.  No  person  may,  without  permission  from  the  interested  party,  make 
use  of  the  name,  linn  n;uiie,  coat  of  ai"nis,  or  huslness  name  of  the  establislnuent 
of  anotlier  producer  or  merchant  for  designating  goods  or  products. 

Sections  23  and  24  relate  to  the  sale  or  offer  for  sale  of  goods  bear- 
ing fraudulent  trade-marks.  The  language  of  these  sections  is  as 
follows: 

Sec.  23.  Whoever  Icnowingly  circulates  or  offers  for  sale  goods  which  have 
been  designated  witiiout  authority  with  a  trade-marlc  with  respect  to  wliich  the 
exclusive  right  of  use  belongs  to  another,  or  whoever  knowingly  counterfeits 
a  trade-mark  for  this  purjiose,  is  guilty  of  an  offense  and  is  punished  with  a 
fine  of  from  500  to  2,000  tlorins,  or  with  imprisonment  of  from  three  months 
to  one  year,  to  which  may  be  added  a  fine  not  to  exceed  2,000  florins. 

The  simultaneous  application  of  the  more  severe  provisions  of  the  Penal 
Code,  especially  those  relating  to  the  crime  of  fraud  (sec.  197  fol.)  are  not 
hereby  excluded. 

Sec.  24.  The  provisions  of  section  23  have  application  also  to  the  one  who 
knowingly  circulates  or  offers  for  sale  goods  which  have  been  designated  with- 
out authority  with  the  name,  firm  name,  coat  of  arms,  or  business  name  of  the 
establishment  of  a  producer  or  merchant,  also  to  whoever  for  this  purpose 
knowingly  makes  such  designations. 

Laav  regulating  closing-out  sales. — The  law  of  January  16, 1895,^ 
regulates  the  advertising  and  conduct  of  closing-out  sales.  Section  1 
provides  that  such  sales  can  only  be  held  with  the  approval  of  the 

1  Josof  Kfeuek  ca.  Ilandelsmlnistoriiim,  Erkenntnis  v.  2.  Okt.  1907,  Z.  8911  ;  Riulwinski, 
op.  cit.,  Bd.  XXXI,  S.  887,  No.  n.'iSS. 

2  Oosotz  vom  0.  .Tiinnor  ISOO,  niit  Krsan^mv^  mid  .Miiindcrmiy:  voni  '.',().  .Tiili  l.SII.j  ;  Reiclis- 
{,'psi't/.l)Iatt,  is'.tr.,  Nr.  1!>. 

"(ii'sctz  vom  1().  .Tiiniicr  lS<)r>,  botroffcnd  die  Uci^'chin^,'  diT  Aiisverkiiufe  ;  Reichsgesetz- 
blutl,  1895,  No.  liO,  S.  83. 


668  REPORT   OP   THE   COMMISSIONER  OF   CORPORATIONS. 

trade  authorities.     The  application  for  permission  must,  according 
to  section  2,  contain  the  following  declarations: 

1.  Designation,  according  to  quantity  and  quality,  of  tlie  goods  to  be  sold. 

2.  Exact  statement  of  the  place  of  the  closing-out  sale. 

3.  Period  of  time  during  which  the  closing-out  sale  .shall  take  place. 

4.  The  persons  who  own  the  goods  or  other  chattels  to  be  sold ;  also  the 
persons  who  are  to  carry  on  the  closing-out  sale  (for  instance,  the  owner  of  the 
business,  his  employees,  business  manager,  etc.). 

5.  The  reasons  why  the  closing-out  sale  is  to  take  place,  such  as  death  of 
the  owner,  going  out  of  business,  taking  over  of  the  business  by  a  new  owner, 
removal  of  the  business,  unforeseen  events  of  nature,  etc. 

Section  4  provides  that  the  local  trade  authorities  can  not  grant 
permits  for  a  closing-oiit  sale  for  a  period  longer  than  three  months. 
The  Provincial  authorities,  however,  can  extend  this  period  in 
particidar  cases  to  one  year. 

A  sale  can  not  be  begun  until  the  permit  is  granted  and  can  not 
extend  beyond  the  period  allowed.  Furthermore,  the  sale  must  be 
limited  to  the  goods  originally  advertised,  otherwise  it  can  be  termi- 
nated immediately,  the  proprietor  fined,  and  the  unadvertised  goods 
which  have  been  added  to  the  stock  forfeited. 

Copyright  laav. — The  law  of  December  26,  1895,^  regarding  copy- 
right on  works  of  literature,  art,  and  photography  contains  two 
provisions  of  interest.    They  are  as  follows: 

Sec.  22.  If  there  is  given  to  a  work  without  any  inherent  necessity  the  desig- 
nation, especially  the  title  or  tlie  outward  appearance,  of  a  work  that  has  ap- 
peared earlier,  and  if  this  is  adapteil  t(»  deceive  tlie  pujjlic  regarding  the  identity 
of  the  works,  the  author  of  the  earlier  work  is  entitled  to  claim  compensation. 

The  same  holds  good  if  the  designation  or  outward  appearance  of  the  work 
wliich  appeared  earlier  was  reproduced  with  such  minor  or  indistinct  changes 
that  b,v  close  scrutiny  only  can  the  difference  be  noticed  by  the  public. 

If  a  continuous  or  periodic  work  is  concerned,  the  interdiction  of  tlie  further 
use  of  the  misleading  designation  or  outward  appearance  can  be  demanded  of  the 
criminal  court. 

Sec.  58.  Whoever,  with  the  intention  of  deceiving,  provides  another  person's 
work  with  his  own  name,  or  one  of  his  own  works  with  some  other  person's 
name,  in  order  to  place  it  in  circulation,  or  whoever  knowingly  places  such  a 
work  in  circulation,  is  guilty  of  an  offense,  even  if  there  is  no  violation  of  a 
copyright,  providing  more  stringent  provisions  of  the  Penal  Code  do  not  apply. 

Whoever,  with  the  same  intention,  makes  a  false  application  at  the  public 
copyright  ofiice  is  also  guilty  of  this  offense. 

The  penalty  for  this  offense  is  a  fine  of  from  100  florins  to  2,000  florins  or 
imprisonment  from  one  to  six  months. 

Foodstuffs  laav  of  January  16,  1896. — The  law  of  January  16, 
1896,-  which  is  intended  primarily  for  the  protection  of  the  consumer 
against  the  adulteration  and  misbranding  of  goods,  contains  in  sec- 

^  Oesptz  vom  20.  Doccmher  ISOfi,  botroffond  das  Urheborrpcbt  an  Werken  der  Literatiir, 
Kunst  uud  I'hotosrapliic ;  Roiohsgcsotzblntt.   1S05,  No.   107. 

2  (Jesetz  vom  ](>.  .Tiinner  ISOO,  botrofnnid  don  A'prkolir  mit  Lebensmittelu  uud  eiuigen 
Gebrauchsgegensttlnden ;  Reichsgesetzblatt,  1897,  No.  89,  S.  437. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  G69 

tion  11  some  provisions  prohibiting  certain  unfair  practices  that 
result  in  injury  to  competitors.  The  language  of  this  section  is  as 
follows : 

Sec.  11.  He  is  guilty  of  an  offense  and  is  punisha1)le  by  inipi-isonnient  from 
one  weeli  to  tlu-ee  niontlis,  to  which  may  be  added  a  tine  up  to  OUO  tlorius,  or  by 
fine  alone  from  5  florins  to  500  florins. 

1.  Who  imitates  or  adulterates  articles  of  food  for  purposes  of  deception  in 
trade  and  connntrce. 

2.  Who  knowingly  offers  for  sale  in  a  form  or  undi-r  a  designation  adapted 
to  deceive,  articles  of  food  which  are  imitated,  adulterated,  decayed,  unripe,  or 
have  suffered  in  their  nutritive  value. 

3.  Who  sells  or  offers  for  sale  food  producls  under  a  false  designation  for  tlie 
purpose  of  deception. 

4.  Who  knowingly  sells  articles  of  food  which  are  imitated,  adulterated,  de- 
cayed, unripe,  or  have  suffered  in  their  nutritive  value,  unless  the  buyer  knew 
or  obviously  should  have  known  of  this  condition. 

Section  12  provides  penalties  for  the  negligent  violation  of  the 
prohibitions  of  section  11,  as  follows: 

Sec.  12.  Whoever  negligently  conunits  the  acts  designated  in  section  11,  sub- 
sections 2  and  4,  or  negligently  sells  or  offers  for  s;ile  articles  of  food  wliich 
have  been  provided  with  a  false  designation  for  purposes  of  deception  is  guilty 
of  an  offense  and  shall  be  punished  by  imprisonment  of  from  3  to  14  days,  to 
which  may  be  added  a  fine  up  to  100  florins,  or  by  a  fine  alone  of  from  5  florins 
to  300  florins. 

A  number  of  instances  of  the  application  of  section  11  to  cases  of 
unfair  competition  follow : 

In  the  case  of  a  wine  merchant  who  sold  Hungarian  champagTie 
in  bottles  labeled  "  Carte  Blanche  vin  Sec.  Bougemont  et  Cie., 
Reims,"  to  dealers  who  knew  from  the  low  price  that  the  wine  was 
not  French  champagne,  the  court  held  that  the  purpose  and  possi- 
bility of  deception,  as  Avell  as  the  mere  oifer  for  sale  of  the  falsely 
labeled  wine,  were  sufficient  to  constitute  a  breach  of  section  11  of  the 
pure- food  law.^ 

Designating  beer  not  brewed  in  Pilsen  as  "  a  la  Pilsen  "  or  "  alia 
Pilsen  "  was  held  to  be  a  breach  of  the  pure-food  law  of  January  16, 
189G,  it  being  unnecessary  to  show^  actual  injury  either  to  the  health 
or  to  the  inu'se  of  tlie  purchaser.- 

In  a  case  where  a  brewer  was  fined  for  labeling  his  beer  "  Hanns- 
dorfer  Pils,"  the  District  Court  of  Olmiitz,  April  15,  1912,  held  that 
"  the  meaning  of  a  word  used  for  designating  beer  depends  exclu- 
sively upon  the  views  of  the  public  that  drinks  beer.  'Pils' 
denotes  a  beer  produced  in  Pilsen.  Like  '  Pilsen '  it  denotes  prove- 
nance and  is  not  a  generic  term.  These  words  do  not  lose 
this  meaning  if  combined  with  a  second  word  denoting  provenance, 


lEntsch.  d.  Oltorsten  Gerichtshofos.  Urt.  v.   10.   Tuli   1011;   i')^tcr.  Tatcntblatt,   1912, 
p.  982. 

-  Urt.  dcs  Landesgericlites  Laibacli  v.  4.  Marz  1912 ;  Oster.  Patentblatt,  1912,  p.  096. 


670  EEPOET    OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

as  '  Hannsdorfer  Pilsner.'  No  addition  whatever  to  the  word 
'Pils'  can  exchide  the  possibility  of  confusion  arising  out  of  its 
meaning  as  denoting  provenance.  Nor  is  the  possibility  of  confusion 
excluded  by  the  fact  that  the  incorrectly  designated  beer  is  cheaper 
in  price  than  Pilsner  beer."^ 

Section  12.  Hungary. 

The  Hungarian  trade  law  of  1884:  -  contains  the  following  provi- 
sions applicable  to  unfair  competition : 

Sec.  58.  No  tradesman  or  merchant  shall  use  upon  his  firm  name,  his  sta- 
tionery, or  his  advertisements  such  designations,  marks,  or  data  as  du  not  cor- 
respond to  the  true  business  rehitions  or  to  actual  facts. 

Sec.  157.  *  *  *  (d)  AMioever  uses  upon  his  tlrm  name,  stationery,  or  ad- 
vertisements such  designations,  marks,  or  data  as  do  not  correspond  to  the  true 
business  relations  or  to  actual  facts,  is  to  be  punished  with  fines  of  from  20  to 
200  florins. 

Section  13.  Denmark. 

Penal  Code. — The  Penal  Code  of  Denmark^  contains  several  sec- 
tions relative  to  particular  forms  of  unfair  competition.  Among  these 
may  be  mentioned  section  277,  which  prohibits  the  construction  or 
use  of  false  weighing  and  measuring  apparatus,  and  section  278, 
which  prohibits  tlie  adulteration  of  goods  or  the  use  of  stamps  or 
marks  on  goods  for  the  purpose  of  deceiving  the  purchaser  as  to 
their  quality. 

Sec.  277.  He  who,  with  fraudulent  intention,  constructs  incorrect  measures  or 
weighing  apparatus  or  alters  correct  measures  or  weighing  apparatus,  as  well  as 
he  who  makes  use  of  such  false  or  falsified  apparatus  to  deceive  others  there- 
with, is  punished  with  imprisonment  on  water  and  bread  not  under  five  days  or 
with  correction-house  work  up  to  two  years.  Under  specially  aggravating  cir- 
cumstances, as  also  in  case  of  repetition  of  the  offense,  the  punishment  may  be 
increased  up  to  six  years  of  "  hard  labor." 

He  who  in  his  occupation  uses  a  weight  or  measure  which  is  not  lawfully 
tested,  or  which  by  time  or  use  has  become  changed,  is  punished  the  first  time 
with  fines  up  to  100  Rd.,  and  in  case  of  repetition  with  higher  fines  or  impris- 
onment. 

Sec.  278.  To  the  punishment  prescribed  in  the  first  paragraph  of  the  foregoing 
section  is  also  liable  he  who  adulterates  goods  or  who  falsely  furnishes  goods  or 
r.lher  objects  with  an  official  stamp  or  mark  that  shall  guarantee  the  genuineness 
or  quality  of  the  same,  or  who  fraudulently  appropriates  for  himself  such  stamp 
or  seal  on  objects  which  are  not  suited  thereto,  as  well  as  he  who,  without 
authority,  places  a  mark  or  stamp  of  others  on  goods  that  are  of  considerably 
inferior  quality  than  that  which  is  indicated  by  the  stamp  or  mark. 

If  the  goods  on  which  the  mark  or  stamp  of  others  is  placed  without  authority 
are  not  of  considerably  inferior  quality,  the  punishment  prescribed  in  section 

1  Kreisgericht  Olmiitz,  Urt.  v.  l.'i.  April  1012:  Oster.  Patontblntt.  1012,  p.  60S. 
=  Gesetz-Artikcl  vom  .Tahre  18S4,   iibor  das  Gcwerbeseselz  ;  Landesgesetz-Sammlung  fiir 
das  .Tahr  1884,  p.  181  fol. 

3  Almindelig  borgerlig  Straffelov  a£  10.  Februai*.  1866( 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  671 

277,  second  clause,  is  to  be  applied,  and  prosecution  only  takes  place  provided 
the  one  who  is  injured  thereby  demands  it.  The  penal  provision  just  mentioned 
becomes  applicable  also  with  respect  to  minor  adulteration  of  goods  occurring 
in  the  relail  trade  by  Avhich  only  an  insignificant  loss  is  inflicted  on  anyone. 

Unfair  competition  law  of  1912. — Denmark  has  a  special  law 
regarding  unfair  competition  ^  which,  however,  is  not  as  complete  as 
the  German  law  of  1009.  It  is  the  only  law  in  Europe,  apparently, 
which  expressly  prohibits  the  giving  of  premiums,  coupons,  and 
trading  stamps.  The  practices  against  which  the  law  is  directed  and 
the  provisions  relating  thereto  are  as  follows: 

Sections  1  to  5,  inclusive,  relate  to  the  incorrect  designation  of 
goods  sold  or  put  on  sale. 

Sec.  1.  AVhoever  sells  or  offers  goods  for  sale  must  not  have  designations 
affixed  to  these,  their  labels  or  wrappers  or  by  signboards  or  on  billheads,  in- 
voices, or  other  business  documents,  which — 

1.  Either  contain  an  incorrect  statement  with  reference  to  the  place  (or 
country)  of  production  of  the  goods,  character,  material,  or  method  of  manu- 
facture, or  are  of  such  a  character  that  they  are  calculated  to  give  an  erroneous 
impression  in  any  of  the  named  respects ;  or 

2.  Are  calculated  to  give  the  buyer  the  impression  that  one  and  all  of  the 
various  kinds  of  goods  handled  in  the  business  originate  in  the  same  place  (or 
country )  of  production  or  have  the  same  methods  of  manufacture  although  this 
is  the  case  only  in  part ;  or 

3.  Incorrectly  state  that  the  goods  have  received  awards  at  expositions  or 
have  received  recommendations  from  authorities  or  have  obtained  patent  protec- 
tion still  in  force. 

Violations  hereof  are  punishable  with  fines  of  from  50  to  2,000  kroner.  The 
punishment  may,  however,  under  aggravating  circumstances,  namely,  in  case  of 
frequent  repetition  of  the  offense,  be  increased  up  to  simple  imprisonment  for 
six  months. 

Furthermore,  the  person  convicted  shall,  if  the  incorrectly  designated  goods 
are  still  in  his  possession  or  in  other  ways  are  at  his  disposal,  be  obligated  by 
the  judgment  to  correct  the  incorrect  designations,  or  if  the  goods  are  not 
manufactured  in  this  country,  then  to  export  them  from  the  country,  if  he  so 
prefers. 

Sec.  2.  If  the  incorrect  designations  of  the  goods  have  been  circulated  by 
advertisements  in  the  newspapers,  by  handbills  or  signboards  of  especially  con- 
spicuous nature,  this  shall  be  regarded  as  an  aggravating  circumstance. 

Sec.  3.  Designations  that  give  an  incorrect  impression  of  the  place  of  pro- 
duction (incorrect  place  name)  of  the  goods  do  not  come  under  the  application 
of  the  penal  clauses  above  mentioned  when  the  designation  in  question  fol- 
lowing the  usual  interpretation  or  custom  and  usage  in  business  indicates  (lie 
nature  of  the  goods  and  method  of  manufacture  or  the  like  and  not  the  place 
of  pi'oduction. 

Where  public  policy  makes  it  desirable,  however,  a  royal  edict  shall  stipulate 
that  certain  designations  are  excepted  from  this  regulation.  Violation  of  such 
an  edict  is  punished  as  provided  in  section  1. 

Designations  that  consist  of  statements  as  to  currency,  measure,  or  weight 
are  not  considered  as  statements  of  the  place  of  production  of  the  goods.    That 

1  Lov  om  Straf  for  Brug  af  urigtig  Varebctegnelse,  Nr.  137,  8  Juni,  1912. 


672  EEPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

the  designations  used  are  iu  the  language  of  a  country  other  than  that  in 
which  the  goods  are  manufactured  or  from  wliicli  they  are  imported  is  not  in 
itself  regarded  as  an  incorrect  designation  of  goods,  but  the  decision  relative 
thereto  depends  on  the  external  form  and  content  of  the  designation. 

A  designation  which  by  itself  must  be  regarded  as  an  incorrect  statement  of 
the  place  of  production  of  the  goods  shall  not  be  regarded  as  such  when  by  a 
clear  and  valid  additional  statement  information  Is  given  concerning  the  actual 
place  of  production  of  the  goods. 

Sec.  4.  In  this  country  it  is  forbidden  to  sell  or  offer  for  sale  goods  on  which 
or  on  the  labels  or  wrappers  of  which  is  placed  the  red  cross  on  a  white  field 
described  in  the  Geneva  convention  of  July  6,  1906,  of  announcement  No.  174, 
of  July  24,  1907,  as  an  emblem  and  badge  for  the  army's  sanitary  service, 
formed  by  reversing  the  colors  of  the  arms  of  the  Swiss  Confederacy,  or  the 
designations  "  lied  Cross,"  "  Geneva  Cross,"  or  marks  of  similar  designation  or 
description.    Violation  of  this  regulation  is  punishable  by  fnu's  up  to  100  kroner. 

The  same  punishment  is  imposed  upon  the  one  who  makes  unauthorized  use 
of  the  named  mark,  designation,  or  description  on  signs,  in  announcements,  on 
billheads,  invoices,  or  other  business  documents. 

Sec.  5.  If  the  stock  of  a  bankrupt,  a  compromise  estate,  or  of  a  deceased 
person  is  being  sold,  no  other  goods  must  be  added,  provided  the  sale  take  place 
because  of  the  breaking  up  of  business.  A  list  of  the  goods,  under  oath  from 
the  executors  of  the  estate,  must  be  given  to  the  proper  police  authorities  before 
the  beginning  of  the  sale  and  is  subject  to  inspection  by  them  or  the  directors 
of  the  local  commercial,  industrial,  or  labor  organizations  or  their  authorized 
agents,  who,  in  the  opinion  of  the  authorities  are  most  interested  in  the  in- 
spection. 

At  a  sale  of  stocks  of  merchandise  tliat  have  been  bought  from  a  bankrupt  or 
compromise  estate  or  from  the  estate  of  a  tleceased  person,  it  is  forbidden  in  the 
public  advertisements,  communications,  and  the  like  to  refer  to  the  origin  of 
the  stocks  from  such  an  estate  provided  the  sale  includes  other  goods  than 
those  originating  in  the  estate. 

Sections  6  to  9,  inclusive,  relate  to  the  conduct  of  dissolution  sales, 
clearance  sales,  and  auctions: 

Sec.  6.  If  a  sale  is  announced  to  take  place  for  the  disposition  of  damaged 
goods  or  for  other  alleged  reasons  such  as  the  discontinuance  of  a  business, 
moving,  etc.,  there  shall  be  given  to  the  local  police  authorities  before  the 
beginning  of  the  sale  an  itemized  list  of  the  goods  inider  oath  that  shall  be 
open  to  inspection  in  the  same  manner  as  designated  in  section  5.  No  goods 
must  be  added  to  the  sale  thereafter. 

Sec.  7.  No  merchant  is  permitted  to  hold  more  than  two  yearly  season  sales, 
and  none  of  these  nmst  last  over  one  month. 

Exceptions  to  this  may  be  permitted,  according  to  the  circumstances,  by  the 
local  police  authorities. 

Sec.  8.  At  auctions  where  the  articles  for  sale  originate  from  several  different 
named  estates  or  persons  the  advertisements  and  catalogues  shall  clearly  desig- 
nate from  which  estate  or  person  the  articles  originate. 

If  the  articles  for  sale  are  manufactured  or  procured  for  the  purpose  of  being 
sold  at  an  auction  it  shall  be  distinctly  announced  whether  they  are  sold  for 
the  account  of  the  party  demanding  the  sale  by  auction  or  for  the  account  of 
some  one  else. 

Sec.  9.  Violation  of  the  provisions  contained  in  sections  5  to  8  is  punished 
by  fines  up  to  000  kroner. 


TRUST   LAWS   AND   UNTAIR   COMPETITION.  673 

Section  10  relates  to  the  misuse  of  a  family  name,  firm  name,  busi- 
ness emblem,  etc. 

Sec.  10.  In  business  relations  everyone  is  forbidden  to  malve  use  of  a  name, 
firm  name,  or  business  emblem,  or  the  like,  that  does  not  belon.i;  to  him;  like- 
wise to  make  use  of  a  designation  which  rightfully  belongs  to  liim  in  such  a 
way  that  it  is  intended  and  calculated  to  lead  to  confusion  with  a  legitimate 
designation  of  another  business  house. 

Violations  hereof  are  punished  by  fines  up  to  600  kroner. 

Section  11  relates  to  the  disparagement  of  another's  business. 

Sec.  11.  He  who  in  order  to  acquire  another's  customers  spreads  incorrect 
information  about  his  business  house  calculated  to  injure  tlie  business,  whether 
these  concern  the  proprietor  of  the  business,  its  goods,  or  other  factors  of  the 
business,  is  punished  with  fines  up  to  4,000  kroner,  under  aggravating  circum- 
stances with  simple  imprisonment  up  to  sis  months. 

Section  12  relates  to  the  unauthorized  disclosure  of  business  secrets. 

Sec.  12.  He  who,  intentionally  or  by  gross  carelessness,  gives  or  uses  infor- 
mation about  the  business  or  trade  secrets  gained  by  reason  of  contractual  rela- 
tions of  confidence  ig  punished  wath  fines  up  to  4,000  kroner,  under  aggravating 
circumstances  with  simple  imprisonment  up  to  six  months. 

Sections  13  and  14  relate  to  giving  premiums  and  cutting  prices 
of  certain  articles. 

Sec.  13.  In  the  retail  trade  the  so-called  premium  (tilgift)*  is  forbidden, 
except  ^^•llen  it  has  customarily  existed  and  occurs  in  the  form  of  mere  trifles 
that  are  not  intended  to  attract  the  customers  of  other  merchants  to  one's  self. 

Violations  hereof  are  punished  by  fines  up  to  100  kroner. 

Likewise  it  is  forbidden  to  sell  or  offer  for  sale  goods  in  the  original  wrap- 
pers from  producers  or  wholesalers,  on  which  the  fixed  price  for  retail  sale  is 
indicated,  for  a  lower  price,  unless  the  sale  falls  under  the  provisions  of  section 
6  or  the  producer's  or  wholesaler's  permission,  or  an  equivalent  authority  has 
been  obtained  tlierefor. 

Violation  of  this  may,  according  to  the  circumstances,  be  punished  by  fines 
up  to  2,000  kroner. 

Sec.  14.  The  Minister  for  Commerce  and  Navigation  is  authorized,  after  con- 
ference with  the  chief  organizations  of  Danish  commerce,  industry,  and  labor, 
to  stipulate  that  certain  goods  in  the  retail  trade  may  be  sold  or  offered  for 
sale  only  in  specified  units  of  number,  measure,  or  weight,  or  with  a  statement 
on  the  article  or  its  wrapper  as  to  the  number,  measure,  or  w'eight,  or  as  to  the 
place  of  production  or  origin  of  the  article. 

Violations  hereof  are  punished  with  fines  up  to  600  kroner. 

In  case  of  violation  of  the  above  sections,  the  courts  are  authorized 
by  section  15  to  award  damages  to  the  injured  party  to  the  extent  of 
1,000  kroner,  even  where  the  extent  of  the  damage  can  not  be  ascer- 
tained. 

A  number  of  decisions  have  been  rendered  since  the  passage  of  this 
law  relative  to  the  scope  of  section  13,  prohibiting  the  giving  of 
premiums.    Several  of  these  cases  follow : 

iTllglft  has  no  English  equivalent;  literally  it  means  good  measure  or  extras. 
30035°— 16 13 


674  REPORT    OF    THE    COMMISSIONER   OF    CORPORATIONS. 

The  Danish  Supreme  Court  ^  gave  judgment  against  the  American 
Tobacco  Co.  for  giving  away  a  coupon  with  each  box  of  cigarettes 
sold,  and  promising  to  give  free  a  pliotogravure  for  100  of  these 
coupons. 

The  same  court  fined  a  dealer  in  coffee,  tea,  and  cocoa,  etc.,  who  gave 
to  each  of  his  regular  customers,  so-called  "  coffee  customers,"  who 
bought  at  least  one-fourth  kilogram  of  coffee,  one-eighth  kilogram  of 
tea,  or  one- fourth  kilogram  of  cocoa,  coupons  to  the  value  of  12  or  25 
0re,  which  were  good  in  paj^ment  for  certain  glass,  porcelain,  or 
leather  goods.  The  court  held  that  these  coupons  constituted  a  pre- 
mium or  "  tilgift "  in  the  sense  of  section  13.^ 

Similarly,  a  merchant  was  held  guilty  of  imfair  competition  who 
gave  to  his  regular  customers,  provided  they  bought  at  least  2  kroner 
worth  of  goods  during  the  week,  a  Saturday  "  tilgift,"  consisting  of 
some  merchandise.^ 

Defendant  had  given  gratis  a  box  of  matches  with  every  sale  of 
three  cigars  at  17  0re.  The  court  held  this  was  in  the  nature  of  a 
"tilgift"  according  to  section  13  of  the  law  of  June  8,  1912,  and  im- 
posed a  fine  on  defendant.* 

Defendant  gave  gratis  coupons  with  each  sale  of  Stollwerck's  cocoa. 
In  return  for  these  coupons  certain  articles  of  merchandise  w^ere 
given  on  which  was  stamped  either  the  name"StollAverck"or  "Trojel 
&  Meyer,"  the  latter  being  the  business  name  of  defendant,  who  was 
local  agent  for  Stollwerck.  Defendant  claimed  that  these  gifts  were 
distributed  at  the  factory's  expense  for  the  sole  purpose  of  advertising 
Stollwerck's  cocoa  without  thereby  increasing  the  prices  of  goods,  and 
that  every  retailer  who  sold  this  cocoa  w^as  obligated  by  the  factory 
to  distribute  such  advertising  articles  to  purchasers  of  the  factory's 
products.  The  court  held  that  section  13  of  the  law  of  June  8,  1912, 
prohibits  the  giving  of  a  "tilgift"  (premium)  by  retailers  without 
considering  for  Avhose  account  or  in  whose  interest  this  is  done,  and 
that  retail  dealers  under  this  law  should  not  assist  in  distributing 
advertising  material  of  the  kind  under  consideration.  The  main  pur- 
pose of  this  law,  the  court  said,  is  to  put  an  end  to  the  premium  abuse 
among  retailers.    The  defendant  was  held  guilty  and  fined.^ 

The  selling  of  goods  by  retail  merchants  below  the  fixed  resale  price 
stamped  upon  the  wrappers  is  punishable  under  part  3  of  section  13. 

1  ITojesteret,  7.  Nov.  1913,  Nr.  281,  Direktor  American  Tobacco  Comp.  Alfred  Christen- 
sen  mod  de  Kobenhavnske  Handelsforeningers  Faellesrepraesentation ;  Hojesteretstidende, 
1913,  p.  600. 

-  Hojesteret,  6  Okt.  1913,  Bache  mod  Christiansen ;  Hojesteretstidende,  1913,  p.  456  fol. 

2  Hojesteret,  21  Okt.  1914,  No.  273,  Baclie  mod  .Tohan  Gresel ;  Hojesteretstidende,  1914, 
p.  504. 

*  Det  Offentlige  mod  Tiltalte  Cigarliandler  Carl  Rasmussen,  3.  Juni  1913 ;  Ugeskrift  for 
Retsvaesen,   1913,   p.  669. 

6  Det  Offentlige  mod  Tiltalte  Materialist  Hans  Trojel,  28.  Januar  1913 ;  Ugeskrift  for 
Retsvaesen,  1913,  p,  320. 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  675 

This  provision  was  applied  in  the  case  of  a  bicycle  dealer  who  had 
sold  bicycle  tires  for  9  kroner  35  0re  on  which  the  manufacturer  had 
stamped  a  fixed  retail  price  of  12  kroner.^ 

Section  14.  Norway. 

Several  provisions  of  the  Norwegian  Penal  Code  and  Trade-Mark 
Ltiw,  relate  to  certain  particular  acts  of  unfair  competition.  A  spe- 
cial law  covering  the  whole  subject  is  also»in  the  course  of  prepara- 
tion. 

Penal  Code. — Section  201  of  the  Penal  Code  prohibits  a  person 
from  inducing  another  to  do  an  unlawful  act  or  from  disclosing  or 
using  trade  secrets  without  authority.  The  language  of  this  section 
is  as  follows: 

Sec.  294.  With  fine  or  imprisonment  up  to  six  months  is  punislied  whoever — 

(1)  In  order  to  cause  or  confirm  an  error  unlawfully  induces  another  to 
conmiit  an  act  by  means  of  wliicli  pecuniaxy  loss  is  caused  to  the  one  wlio  does 
the  act  or  to  the  one  for  whom  lie  acts,  or  who  aids  sucli  an  act ;  or 

(2)  Uses  in  an  unauthorized  way  any  business  or  trade  secret  of  an  estab- 
lishment in  which  he  is  employed  or  interested  or  has  been  employed  or  inter- 
ested during  the  preceding  two  years,  or  reveals  such  a  secret  for  the  purpose 
of  enabling  anyone  else  to  make  xise  of  it,  or  whoever  by  seduction  or  instiga- 
tion aids  or  abets  sucli  an  act. 

I'ublic  prosecution  takes  place  only  if  the  injured  party  demands  it  and  public 
considerations  seem  to  require  it. 

Section  370  prohibits  the  circulation  of  misleading  statements 
regarding  articles  offered  for  sale  and  the  misuse  of  the  Geneva  cross 
on  articles  for  sale. 

Sec.  370.  "Whoever,  in  regard  to  articles  offered  for  sale,  publishes  or  dis- 
seminates incorrect  statements  concerning  their  composition,  industrial  legal 
protection,  or  awards  of  distinction,  or  whoever  publishes  or  disseminates  desig- 
nations or  statements  which  in  such  respects  are  adapted  to  nusleail,  is  pun- 
ished by  fine.  The  same  applies  to  him  who  upon  articles  intended  for  sale  or 
iipon  their  covering  places  without  authority  the  Geneva  cross  or  marks,  which 
create  the  supposition  that  the  articles  enjoy  industrial  protection,  or  who  has 
for  sale  articles  whicli  are  marked  in  this  manner. 

Section  247  prescribes  a  penalty  of  fine  or  imprisonment,  not  to 
exceed  six  months,  for  inducing  a  person  to  believe  anything  calcu- 
lated to  injure  the  good  name  and  reputation  of  another  or  to  expose 
him  to  hatred  or  contempt  or  the  loss  of  confidence  necessary  for  his 
position  or  business.  Section  302  prohibits  the  wilful  and  negligent 
sale  of  foodstuffs  as  pure  or  unadulterated,  when  they  are  not,  and 
also  the  manufacture  of  such  articles,  if  intended  to  be  sold  as  pure  or 
unadulterated. 

1  Ilojostoret,  ?.  Okt.  lOl.H,  Nr,  I'.MO,  Bache  mod  Uircktor  Carl  Cliristiaii  Uauimcl ;  Uojos- 
teredstidendc,  1913,  p.  450  fol. 


676  EEPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS, 

Trade-mark  law. — Section  5  of  the  trade-mark  law  of  1010^  re- 
lates to  the  rights  of  the  owner  of  a  registered  trade-mark. 

Sec.  5.  The  protection  obtained  by  registration  brings  with  it  the  effect  that 
no  one  else  than  the  owner  of  the  mark  can  phice  the  same  marli  on  goods  of  the 
same  or  simikir  Ivind  that  are  or  are  to  be  offered  for  sale,  or  upon  their  wrap- 
pers, or  upon  advertisements,  signs,  price  lists,  business  letters,  recommenda- 
tions, bills,  and  the  like,  or  can  offer  for  sale  or  sell  goods  so  marked. 

This  protection  is  not  to  hinder  anyone  from  using  his  name  or  his  firm 
name  as  a  mark  for  his  goods. 

Sections  22  to  24  relate  to  the  unauthorized  use  of  trade-marks, 
names,  or  firm  names. 

Sec.  22.  He  who  on  goods  that  are  offered  or  are  to  be  offered  for  sale,  upon 
their  wrappers  or  the  other  objects  treated  in  section  5,  unauthorizedly  places : 

(a)  Another's  mark,  protected  by  registration,  for  goods  of  the  same  or  like 
character ; 

(b)  Another's  name  or  firm  name;  or 

(c)  Anything  that  is  calculated  in  ordinary  transactions  to  create  con- 
fusion in  these  particulars,  or  who  unauthorizedly  offei's  for  sale  or  deals  in 
goods  so  marked,  may,  after  prosecution  by  the  injured  party,  forfeit  his  right 
thereto. 

If  he  has  had  knowledge  of  the  other's  better  right,  he  is  punished  with  fines 
or  imprisonment  up  to  three  months.  In  this  event,  as  well  as  if  he  by  his 
negligence  has  made  himself  guilty,  he  is  liable  for  the  damage  caused.  Public 
prosecution  takes  place  only  on  the  demand  of  the  injured  party. 

Sec  23.  Goods  that  are  offered  or  are  to  be  offered  for  sale,  their  wrappers 
or  the  other  objects  treated  in  section  5,  must  not  unauthorizedly  be  given  the 
mark  or  outward  appearance  which  within  the  business  circles  concerned  is 
known  as  the  special  mark  of  another  establishment  for  goods  of  the  same  or 
like  character,  nor  must  tlie  goods  so  marked  or  of  such  an  outward  appear- 
ance be  offered  for  sale  or  sold,  if  thereby  there  is  danger  of  confusion  with 
reference  to  the  business  house  from  which  the  goods  originated. 

He  who  acts  in  contravention  to  this  may,  after  prosecution  by  the  injured 
party,  forfeit  the  right  to  use  the  mark  or  emblem  or  to  offer  the  goods  for  sale. 

If  he  has  had  knowledge  of  the  other's  better  right,  he  is  punished  with  fines 
and  is  liable  for  the  damage  caused.  Public  prosecution  takes  place  only  on  the 
demand  of  the  injured  party. 

Sec.  24.  He  who,  on  the  goods  that  are  offered  or  are  to  be  offered  for  sale, 
on  their  wrappers  or  the  other  objects  treated  in  section  5,  places  his  name  or 
his  firm  name  in  such  a  way  that  it  is  calculated  to  cause  confusion  with  a 
trade-mark  that  another  rightfully  uses  for  goods  of  the  same  or  like  kind, 
or  who  offers  or  sells  goods  so  marked,  may,  after  prosecution  by  the  injured 
party,  forfeit  the  right  thereto. 

If  it  has  been  his  intention  to  bring  about  such  confusion  as  named,  he  is 
punished  l)y  fines  and  is  liable  for  the  damage  caused.  Public  prosecution 
takes  place  only  on  demand  of  the  injured  party. 

Section  25  of  this  law,  Avhich  prohibits  the  sale  or  offering  for  sale 
of  goods  bearing  false  indications  of  origin,  is  as  follows : 

Sec  25.  On  goods  that  are  offered  or  are  to  be  offered  for  sale,  on  their 
wrappers,  or  other  objects  treated  in  section  5,  incorrect  information  must  not 
be  placed  regarding  the  place  of  origin  of  the  goods,  nor  must  anything  be  stated 

1  Lov  om  varemcrker  og  om  utilborlige  varekjendetegn  og  forretningsnavn,  av  2.  juli, 
1910 ;  Thorsen,  Lov  om  Det  industiielle  retsvein,  Kristiania,  1011,  p.  39. 


TiRUST   LAWS   AND   UNFAIR   COMPETITION.  677 

that  is  calculated  in  any  particular  to  create  confusion,  nor  must  goods  so 
marked  be  offered  for  sale  or  sold. 

He  who  acts  in  contravention  to  this  can  be  compelled  to  refrain  from  using 
the  incorrect  statement  in  connection  with  the  offer  of  the  goods  for  sale. 

If  he  has  used  the  incorrect  statement  against  his  better  knowledge,  he  can 
be  held  liable  for  the  damage  caused. 

If  he  has  had  the  intention  to  deceive  others  with  reference  to  the  nature 
of  the  goods,  their  contents,  composition,  or  value,  he  is  punished  therefor  by 
fines. 

Under  the  foregoing  provision  are  not  included  such  place  names  which,  ac- 
cording to  the  usual  business  customs,  are  intended  to  describe  the  nature  of 
the  goods  but  not  their  origin. 

The  King  may,  however,  with  reference  to  agreements  with  a  foreign  country, 
stipulate  that  imports  into  the  Kingdom  of  goods  with  such  statements  as  were 
treated  in  the  preceding  paragraph  shall  not  be  permitted  unless  the  goods  are 
accompanied  by  completely  satisfactory  explanations '  that  they  are  genuine 
goods  originating  in  the  country  or  section  of  country  concerned.  In  the  same 
manner  the  King  may  forbid  the  offering  for  sale  or  the  sale  within  the  King- 
dom of  goods  under  such  statements  as  named  unless  the  goods  ai"e  genuine  or 
originate  in  the  country  or  section  of  country  concerned. 

Violation  of  the  prohibition  specified  in  the  preceding  paragraph  is  punished 
with  fines. 

Sections  20  and  27  relate  to  the  unlawful  use  of  names  calculated 
to  produce  confusion. 

Sec.  26.  He  who  gives  his  occupation  or  business  undertaking  such  a  name 
that  it  is  calculated  to  cause  confusion  with  a  name  that  another  already  right- 
fully uses  for  his  occiipation  or  his  business  undertaking  of  the  same  or  similar 
character,  may,  after  prosecution  by  the  injured  party,  forfeit  the  right  thereto. 

If  it  has  been  liis  intention  to  cause  such  confusion,  he  is  punished  by  fines 
and  is  liable  for  the  damages  caused.  Public  pi'osecution  takes  place  only  on  the 
demand  of  the  injured  party. 

Sec.  27.  He  who  has  used  trade-marks  or  business  emblems  in  violation  of  the 
present  law  is  obliged  on  the  demand  of  the  injured  party  to  change  or  with- 
draw the  designation.  If  the  withdrawal  or  change  can  not  take  place,  the 
objects  on  which  it  is  found  may  be  ordered  confiscated. 

The  confiscated  objects  may,  after  an  agreement  between  the  convicted  and 
the  injured  parties,  be  surrendered  to  the  latter  for  sale  as  compensation  due 
him. 

Section  15.  Sweden. 

Swedish  law  contains  very  few  provisions  applicable  to  unfair  com- 
petitive practices.  The  Government  has  appointed  a  committee, 
which  is  now  engaged  in  preparing  a  special  law  against  unfair  com- 
petition. 

The  royal  ordinance  respecting  the  prohibition  of  importation  into 
the  realm  of  goods  bearing  a  false  indication  of  origin  of  November 
9,  1888,  provides :  ^ 

Sec.  I.  (1)  "When  upon  goods  imported  into  the  realm  from  abroad  for  sale 
here  there  is  affixed  the  name  of  a  place,  of  real  estate  [landed  estate],  of  a  com- 

1  Reports  from  His  Majosty's  representatives  abroad  on  the  laws  in  force  in  tlio  principal 
foreign  countries  to  prevent  the  sale  of  goods  bearing  a  false  indication  of  origin,  London, 
1911,  p.  144. 


678  REPOET   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

mercial  establishment,   or   of  a   tradesman,   situated   witliin   tlie   Kingdom   of 

Sweden,  or  any  otlier  indication,  wiiich  sliall  give  tlie  goods  tli<^  api)earance  of 

having  been  produced  in  Sweden,  such  goods  shall  on  their  importation  be  seized 

and  condemned  as  forfeit. 

(2)   What  is  laid  down  in  pargraph  1  shall  not  apply- 
When  evidence  can  l)e  produced   that  the  goods  in  question   are  really  of 

Swedish  manufacture  and  had  previously  been  exported  from  the  Kingdom; 
When  in  addition  to  the  above-mentioned  indication  of  Swedish  origin  on  the 

goods  it  is  there  stated  in  a  plain  and  obvious  manner  that  the  goods  are  of 

foreign  production  ;  or 

If  it  was  otherwise  made  manifest  that  there  was  no  intention  to  mislead  by 

false  indication  of  origin. 

Section  16.  Eussia. 

Russia  has  no  special  law  against  unfair  competition.  Several  pro- 
visions of  the  Penal  Code,  the  Code  of  Manufacture,  and  the  Copy- 
right Law  of  1911  relate  to  particular  practices  of  an  unfair  nature. 
Section  684  of  the  Civil  Code  ^  also  contains  a  general  provision  of 
law  similar  to  that  used  in  France  and  other  countries  for  the  prose- 
cution of  cases  involving  unfair  competition.  It  is  not  known,  how- 
ever, whether  this  jDrovision  has  ever  been  applied  to  unfair  competi- 
tive practices  or  not. 

Copyright  Law. — The  Copyright  La'w  of  March  20, 1911,-  modified 
sections  G20  and  622  of  the  Criminal  Code.  Section  620  now  prohibits 
the  infringement  of  the  rights  of  authorship,  the  publishing  or  multi- 
plying of  an  infringed  literary  production  for  the  purpose  of  selling 
it,  and  the  arbitrary  publication  of  another's  works  under  one's  own 
name,  and  section  622  prohibits  a  merchant  from  knowingly  import- 
ing, keeping  for  sale,  or  selling  articles  produced  in  violation  of 
authorship  or  patent  rights. 

Code  of  Manufacture. — Section  161  ^  of  the  Code  of  Manufac- 
ture"- prohibits  the  use  of  trade-marks  bearing  inscriptions  or  de- 
signs which  are  repugnant  to  public  order,  good  morals  or  propriety, 
or  are  false  and  intended  to  deceive  the  purchaser  or  which  are  repro- 
ductions of  honorific  distinctions  granted  to  manufacturers  or  mer- 
chants to  be  Avorn  by  them  or  reproductions  of  awards  and  honorary 
medals  which  do  not  show  the  year  of  the  award. 

Penal  Code. — The  Russian  Penal  Code*  contains  several  provi- 
sions relating  to  unfair  competition.     The  infringement  of  patent 

1  Section  G84  of  the  Civil  Code  is  as  follows  : 

"  Ever.v  person  shall  make  compensation  for  injury  and  loss  caused  to  another  by  his 
act  or  omission,  even  though  the  act  or  omission  does  not  constitute  either  a  crime  or  a 
misdemeanor,  provided  it  is  proved  that  he  was  not  forced  to  do  it  by  the  requirements 
of  tlie  law  or  the  Government  or  in  self-protection  or  by  a  combination  of  circumstances 
which  he  could  not  prevent."  (Svod  Zakonov  Grazhdanskikh  ;  Svod  Zakonov,  Vol.  X, 
rt.  I,  p.  110.      2d  unofficial  ed.  by  A.  A.  Dobrovolskii,  St.  Petersburg,  1913.) 

^Zakon  ob  avtorskom  prave  ;  Sobranie  Uzakoneuii,  1911,  Ft.  I,  ch.  TpOO. 

^  Ustav  o  promyshelennosti ;  Svod  Zakonov.  Vol.  XI,  Pt.  II,  2d  unofficial  ed.  by  A.  A. 
Dobrovolskii,   St.  Petersburg,   191.*5. 

*  Ulozhenie  o  nakazaniiakh  ugolovnykh  i  ispravitelnykh  ;  Svod  Zakonov,  Vol.  XV,  Pt.  I, 
subdiv.  VIII,  ch.  14. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  679 

rights  is  prohibited  by  section  1353,  the  counterfeiting  of  registered 
trade-marks  by  section  1354,  and  the  counterfeiting  of  registered 
designs  and  patterns  by  section  1357.  Section  1355,  which  prohibits 
the  disclosure  of  factory  secrets,  is  as  follows : 

Rkc.  1355.  Any  person  belonging  to  a  factory,  works,  or  manufacturing  estab- 
lishment who  discloses  a  process  of  manufacture  used  for  the  production  or 
finishing  of  goods  made  in  such  factory,  works,  or  manufacturing  establishment, 
and  kept  secret  and  confided  to  him  as  secret,  without  positive  consent  of  those 
to  whom  this  secret  rightfully  belongs  and  consequently  to  their  detriment,  shall 
be  punished  by  imprisonment  for  from  four  to  eight  months. 

Sections  1357^  and  1357^  relative  to  the  counterfeiting  and  fraudu- 
lent use  of  trade-marks  are  as  follows : 

Sec.  1357\  The  manufacturer  or  merchant  guilty  of  using  on  goods  produced 
by  him  or  kept  by  him  for  sale,  or  on  their  wrappers  or  containers,  or  in  busi- 
ness advertisements,  price  lists,  or  business  forms,  a  trade-mark  which  is  an 
exact  reproduction  or  evident  likeness  of  a  similar  trade-mark,  known  to  the 
guilty  party  to  be  in  the  exclusive  use  of  another  manufacturer  or  merchant 
shall  be  punished  by  imprisonment  from  four  to  eight  months. 

The  same  punishment  shall  apply  to  a  merchant  or  manufacturer  guilty  of 
keeping  in  a  manufacturing  or  commercial  estalilishment  or  of  selling  goods 
with  the  above-mentioned  trade-mark  known  to  him  to  be  arbitrarily  used. 

Sec.  1357^  The  manufacturer  or  merchant  who  is  guilty  of  having  placed  on 
goods,  or  on  the  WTappers  and  receptacles  which  contain  them,  or  in  a  com- 
mercial announcement,  price  list,  or  business  form,  marks  bearing  forbidden 
inscriptions  or  designs,  and  also  who  is  guilty  of  keeping  goods  in  an  industrial 
or  commercial  establishment  or  of  selling  goods  bearing  such  marks,  shall  be 
liable  for  the  first  offense  to  a  fine  of  not  to  exceed  100  rubles,  and  for  the 
second  and  subsequent  offenses  to  a  fine  not  to  exceed  200  rubles. 

Section  17.  Greece. 

Several  sections  of  the  Penal  Code  of  Greece  and  several  special 
laws  relate  to  certain  unfair  competitive  practices.  Among  the  spe- 
cial laws  the  most  important  are  the  law  of  February  10,  1893,  relat- 
ing to  the  fraudulent  imitation  or  use  of  trade-marks,  and  the  new 
law  of  December,  1913  (Jan.  8, 1914),  concerning  unfair  competition. 
The  latter  enactment  which  covers  a  variety  of  practices  resembles 
the  German  law  of  1909,  after  which  it  was  evidently  modeled. 

Penal  Code. — Among  the  provisions  of  the  Penal  Code,^  article 
396  deals  with  fraud,  article  43'2  relates  to  unlawful  copying  of  works 
of  art  or  of  the  intellect,  and  article  4-1:6  provides  against  the  dis- 
closure of  trade  secrets : 

Art.  300.  Whoever  knowingly  circulates  false  statements  as  being  true  or 
unlawfully  withliolds  or  suppresses  true  statements  with  intent  to  injure  an- 
other or  gain  an  unlawful  advantage  for  himself  and  thereby  either  injures  this 
other  perspn  or  gains  an  unlawful  advantage  for  himself,  is  guilty  of  fraud. 

Also,  whoever  knowingly  makes  use  of  the  fraud  of  another  for  his  own 
advantage  or  to  the  disadvantage  of  a  third  party,  is  to  be  considered  as  a 
defrauder. 

1  "  Strafgesetzbuch  des  Koiiigieiihes  (Jriechetiland,"  Naiiplia,  lSr!4.  Official  text  In 
Greek  and  German. 


680  EEPORT    OP    THE    COMMISSIONER   OP    COEPOEATIONS, 

Art.  432.  Whoever  puts  books  or  other  publications,  nmsical  compositions, 
copper  etchings,  drawings,  or  cliarts  Into  circulation,  through  multiplication  by 
means  of  printing  or  in  any  other  manner  without  changing  them  into  a  new 
form,  within  15  years  from  the  time  of  their  publication,  unless  a  longer  period 
lias  been  fixed  in  the  privilege  granted,  without  authority  from  the  author, 
maker,  or  publisher,  or  from  those  who  have  succeeded  to  their  rights,  or  their 
heirs ;  or  whoever  within  the  above-mentioned  period  circulates  copies  or  repro- 
ductions of  works  of  art  or  of  the  intellect  thus  made  by  others,  without  author- 
ity, is  punished  by  a  fine  of  from  200  to  2,000  drachmas,  unless  in  the  privilege 
granted  the  penalty  is  specifically  fixed. 

In  every  case  circulation  is  to  be  stopped  by  seizure  at  the  instance  of  the 
injured  party,  and  after  the  decree  of  condemnation  has  become  effective  the 
disposal  of  the  property  is  to  be  left  to  the  injured  party. 

Art.  446.  Whoever  while  in  the  service  of  a  factory  or  trade  establishment 
by  unauthorized  ways  or  means  pries  into  its  secrets,  or  who  lias  acquired  them 
under  obligation  of  secrecy  and  betrays  such  secrets  to  others,  upon  complaint 
or  demand  of  the  owner  of  the  factory  or  trade  establishment  is  punished  by 
imprisonment  up  to  three  months,  and  in  case  of  actual  damage  by  imprison- 
ment from  three  months  to  three  years. 

Unfair  competition. — The  most  recent  of  the  more  elaborate  for- 
eign laws  against  unfair  competition  is  the  Greek  law  of  December 
26,  1913.1 

Article  1  of  this  law  relates  to  acts  of  competition  repugnant  to 
good  morals. 

Art.  1.  In  commercial,  industrial,  and  agricultural  intercourse  every  act  of 
competition  is  prohibited  which  is  repugnant  to  good  morals.  For  every  offense 
suit  may  be  brought  to  demand  cessation  of  and  compensation  for  the  damage 
caused. 

Articles  3  to  5  relate  to  deceptive  advertising  of  one's  own  goods. 

Art.  3.  In  public  advertisements  or  announcements  which  are  intended  for 
extensive  groups  of  persons,  every  incorrect  representation  which  might  convey 
the  inii)ression  of  an  unusually  favorable  offer  is  prohibited  with  respect  to 
the  various  kinds  of  business  referred  to  in  article  1,  especially  concerning  the 
quality,  the  origin,  the  kind  and  method  of  production  or  the  scale  of  prices 
of  the  goods  or  industrial  products,  the  kind  and  source  of  supplies,  the  pos- 
session of  prizes  and  other  honorific  distinctions,  or  the  purpose  of  the  sale, 
or  the  quantity  of  goods  for  disposal.  In  case  of  an  offense  suit  may  be  brought 
for  retraction  of  the  incorrect  statements  and  for  reparation  of  the  damages 
.sustained. 

Art.  4.  Whoever,  for  the  purpose  of  conveying  the  impression  of  an  unusu- 
ally favorable  offer,  knowingly  publishes,  under  the  circumstances  mentioned 
in  article  3,  incorrect  statements  which  are  adapted  to  deceive  the  public,  is 
punished  by  imprisonment  not  to  exceed  six  months  and  by  a  fine  not  to  exceed 
3,000  drachmas,  or  by  one  of  these  punishments. 

If  the  incorrect  statements  mentioned  in  the  foregoing  paragraph  are  made 
by  an  employee  or  by  some  other  authorized  person,  not  only  the  employee  or 
authorizetl  person  is  punished,  but  also  the  employer  or  manager  of  the  enter- 
prise, provided  the  publication  was  made  with  his  knowledge. 

iLaw  No.  146  of  Dec.  26,  101?,  (Jan.  8,  1014),  relating  to  unfair  competition.  Official 
Gazette,  Feb.  9,  1914  ;  taken  from  the  German  translation  in  Oster.  Patentblatt,  1914, 
p.  166  fol. 


TRUST   LAWS  AND   UNFAIE   COMPETITION.  681 

Art.  5.  Pictorial  representations  and  otlier  methods  tliat  are  intended  to 
replace  statements  are  treated  like  the  latter,  and  in  such  cases  articles  3  and 
4  are  applied  in  an  analogous  manner.  The  use  of  names  which  in  business 
intercourse  serve  to  designate  goods  or  industrial  products,  provided  prove- 
nance is  not  to  be  implied  therewith,  is  not  subject  to  the  provisions  of  ai'ticles 
3  and  4, 

In  case  of  violation  of  articles  3  and  4  it  is  provided  by  article  10 
that  not  only  fellow  tradesmen  but  also  chambers  of  commerce,  busi- 
ness men's  associations,  and  trade  associations  generally  may  sue  for 
injunction.  It  is  further  provided  that  compensation  for  dam- 
ages shall  be  made  by  those  violating  article  3,  who  knew  or  should 
have  known  that  their  advertisement  was  false.  Editors,  publishers, 
printers,  and  agents  of  journals  are  liable  for  damages  only  if  they 
loiew  of  the  falsity  of  their  statements.  Owners  or  managers  of 
business  undertakings  or  houses  are  liable  for  acts  of  their  em- 
ployees. 

Articles  6  to  8  relate  to  the  manner  of  advertising  and  conducting 
closing-out  sales  and  sales  of  goods  from  a  bankrupt  stock : 

Art.  6.  If,  by  means  of  public  advertisements  or  announcements  that  are  in- 
tended for  extensive  groups  of  persons,  a  sale  of  goods  is  announced,  which 
come  from  a  bankrupt  sale  but  which  no  longer  belong  to  the  bankrupt  stock, 
it  is  prohibited  to  announce  the  goods  as  having  come  from  the  bankrupt  sale, 
and  the  offender  is  punished  with  a  fine  not  to  exceed  1,500  drachmas  or  with 
imprisonment  not  to  exceed  two  months,  or  with  both  of  these  punishments. 

Art.  7.  It  is  prohibited  to  announce  a  sale  of  goods  under  the  pretext  that 
the  business,  or  a  part  of  the  same,  is  to  be  dissolved,  unless  the  cause  for  the 
dissolution  is  stated  and  the  business  man  concerned  has  previously  made  a 
declaration  to  the  president  of  a  court  having  jurisdiction,  which  contains 
the  following  facts :  The  cause  of  the  dissolution,  the  place  where  it  occurs,  the 
time  when  it  begins,  the  list  of  goods  to  be  sold,  and  assurance  that  neither 
the  declarant  nor  the  former  owner  of  the  business  has  during  the  past  two 
years  conducted  a  similar  closing-out  sale,  either  directly  or  indirectly,  i>er- 
sonally  or  through  another  person. 

The  declaration  is  to  be  furnished  in  duplicate.  One  of  these,  signed  by  the 
president,  is  delivered  to  the  declarant.  The  copy  filed  with  the  president  may 
be  examined  hj  anyone. 

The  president,  at  the  expense  of  the  declarant,  verifies  the  correctness  of 
the  declaration  through  two  exjx^rts.  Said  experts  are  selected  from  a  list 
compiled  during  the  month  of  January  of  each  year  by  the  chambers  of  com- 
merce or  merchants'  associations.  Where  no  chamber  of  commei'ce  or  mer- 
cliants'  association  exists,  the  president  selects  the  experts  according  to  liis 
own  choice.  If  the  declaration  is  held  incorrect,  the  president  i)rohibits  the 
closing-out  sale.  At  the  same  time  third  parties  have  the  right  to  institute 
fnjunction  proceedings. 

A  closing-out  sale  conducted  according  to  the  above-name<l  conditions  must 
not  continue  for  longer  than  nine  months.  The  president  may.  however,  in 
view  of  special  circumstances,  grant  jtermission  for  an  extension  of  this 
period. 

The  closing-out  sale  can  be  permitted  for  a  period  of  two  years  only  in  case 
of  death,  of  bankruptcy,  and  of  actual  discontinuance  of  the  business. 


682  EEPORT   OF   THE   COMMISSIONER  OP   CORPORATIONS. 

The  closing-out  sale  is  permitted  according  to  the  provisions  of  the  preceding 
iirticles  only  in  the  place  in  which  the  declarant  exercised  his  business  during 
six  months,  unless  the  president,  on  written  opinion  of  the  experts,  shall  make 
some  other  disposition. 

Concerning  season  closing-out  sales  at  reduced  prices  customary  in  trade  the 
above  provisions  have  no  application.  It  is  permitted,  however,  that,  upon  the 
recommendation  of  the  Minister  of  National  Economy  and  upon  the  assent  of 
the  Council  of  Ministers,  the  yearly  number,  the  time  of  the  beginning  and 
the  ending  of  siich  closing-out  sales  be  fixed  by  royal  decree. 

If  the  enterprise  is  located  in  a  place  where  there  is  no  court  of  first  instance, 
then  the  justice  of  the  peace  has  jurisdiction. 

Art.  8.  Whoever  fails  to  make  the  declaration  required  by  article  7,  or  know- 
ingly makes  it  incorrectly ;  and  whoever  at  a  forbidden  time  or  place  sells  or 
offers  for  sale  goods  which  were  bought  at  the  dissolution  only  for  the  purpose 
of  conducting  a  closing-out  sale,  or  which  were  not  inserted  in  the  list  of  the 
declaration,  is  punished  by  imprisonment  up  to  six  mouths  or  by  a  fine  up  to 
3,000  drachmas,  or  both. 

According  to  section  10,  injunctive  relief  is  provided  for  violations 
of  articles  6  and  8  and  also  for  article  7,  unless  the  declaration  of 
the  cause  of  a  sale  has  been  submitted  to  the  president  of  the  court 
of  the  first  instance  or  to  the  justice  of  the  peace.  Action  for 
damages  lies  against  those  who  wilfully  or  negligently  violate 
articles  G,  7,  and  8. 

Article  9  relates  to  deception  with  respect  to  goods  in  the  retail 
trade : 

Art.  9.  Upon  recommendation  of  the  Minister  of  National  Economy,  and  with 
the  assent  of  the  Council  of  Ministers,  a  royal  degree  may  require  that  the 
authorized  retail  sale  of  certain  classes  of  goods  shall  be  made  only  in  definite 
units  of  number,  weight,  or  measure,  or  only  if  measure  or  weight  and  place 
of  manufacture  or  provenance  are  indicated  upon  the  goods,  their  wrappers  or 
containers. 

Whoever  violates  the  provisions  of  the  foregoing  paragraph  is  punished  by 
Cue  up  to  300  drachmas  and  by  imprisonment  up  to  two  months,  or  by  either 
of  these  punishments. 

Articles  11  and  12  relate  to  disparagement  and  misrepresentation 
of  another's  goods  and  services: 

Art.  11.  Whoever,  for  purposes  of  competition,  circulates  or  publishes  reports 
concerning  the  business  and  undertakings  of  another,  the  proprietor  of  the 
business  or  its  manager,  the  goods  or  industrial  services  of  a  third  person, 
which  are  likely  to  injure  his  business  and  business  credit,  is  liable,  provided 
the  correctness  of  the  statements  has  not  been  proved,  for  compensation  to  the 
injured  party  for  the  injury  sustained.  Besides,  the  injured  party  is  entitled 
to  institute  injunction  proceedings  against  any  further  circulation  of  the  in- 
correct statements. 

If  it  is  a  case  of  confidential  communications,  in  which  the  party  making  or 
receiving  them  has  a  justifiable  interest,  discontinuance  of  the  communication 
may  be  demanded  only  if  said  facts  pi-ove  to  be  incorrect. 

If  the  person  who  imparted  the  information  knew  or  must  have  known  that 
it  was  incorrect,  he  is  obliged  to  make  compensation  for  any  injury  committed. 

The  provisions  of  the  last  paragraph  of  article  10  have  analogous  application. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  683 

Aet.  12.  Whocvei*  knowingly  circulates  or  publishes  false  reports  concern- 
ing the  undertaking  or  business  of  another,  or  the  owner  or  manager  of  the 
business  or  undertaking  personally,  or  concerning  the  goods  or  industrial 
services,  whicli  are  done  to  injux'e  the  undertaking,  is  punished  by  imprisonment 
up  to  six  months  and  by  fine  up  to  3,000  drachmas,  or  with  both  of  these 
penalties. 

Owners  and  managers  of  undertakings  are  subject  to  the  same  punishment  if 
with  their  knowledge  the  rumors  or  assertions  in  question  were  circulated  by 
one  of  their  employees  or  representatives. 

Injunctive  relief  is  provided  by  section  10  in  the  case  of  violation 
of  this  section.  Damages  may  also  be  recovered  if  the  act  was  will- 
fully or  negligently  done. 

Articles  13  and  14  relate  to  the  misappropriation  of  names,  com- 
mercial designations,  and  distinguishing  marks  and  signs. 

Art.  13.  AVhoever  in  his  business  uses  a  name,  trade  term,  or  any  other  special 
distinguishing  mark  iu  such  a  way  as  to  cause  confusion  with  the  name,  trade 
term,  or  special  distinguishing  mark  lawfully  used  by  another  may  be  en- 
joined by  the  latter  from  using  the  same.  He  is  also  bound  to  compensate  the  in- 
jured party  for  the  injury  caused  if  he  knew  or  should  have  known  that  the 
misuse  might  cause  confusion.  In  general  those  marks  of  a  business  or  under- 
taking are  also  to  be  considered  as  special  distinguishing  marks  which  are  so 
considered  by  the  trade. 

The  form  or  special  make-up  of  the  goods  and  tlie  packing  and  covering  are 
considered  as  special  distinguishing  marks  in  so  far  as  they  are  recognized  in  the 
respective  trades  to  distinguisli  these  goods  from  similar  goods. 

The  provisions  of  the  last  paragraph  of  article  10  have  analogous  application. 

Art.  14.  Whoever,  in  business  intercourse,  knowingly  and  willfully  appropri- 
ates the  name,  trade  term,  or  special  distinguishing  mark  of  any  publication,  or 
trade  undertaking,  for  the  purpose  of  causing  confusion  with  the  name,  trade 
designation,  or  special  distinguishing  mark  lawfully  used  by  another  person,  is 
punished  by  imprisonment  up  to  six  months  and  a  penalty  up  to  3,000  drachmas, 
or  with  one  of  these  penalties. 

The  provisions  of  the  preceding  paragraph  and  of  the  above  articles  have  no 
application  with  respect  to  tlie  protection  of  marks  of  trade  and  industry  for 
which  the  respective  existing  legal  provisions  remain  in  force  and  have  appli- 
cation. 

The  application  of  the  provisions  of  the  first  paragraph  and  of  the  above 
article  is  not  excluded  in  the  cases  where  the  use  of  a  foreign  name,  a  foreign 
trade  term,  or  a  foreign  special  distinguishing  mark  and  token  occurs  with  slight 
variations,  in  so  far  as  thereby  the  danger  of  confusion  does  not  seem  to  be 
excluded. 

Article  15  authorizes  the  court  in  case  of  conviction  under  articles 
13  and  14  to  remove  the  distinguishing  mark,  or,  if  this  is  impossible, 
to  order  the  destruction  of  the  product  bearing  it,  provided  the  misap- 
propriation was  intentional. 

Articles  10  to  18  relate  to  the  unauthorized  disclosure  of  trade 
secrets. 

Art.  10.  Whoever  as  employee,  workman,  or  apprentice  in  a  trade  or  indus- 
trial establishment  or  undcri.iking.  withoiil  anthorily,  divulges  to  third  parties 
for  purposes  of  competition,  or  with  the  intention  to  injure  the  owner  of  the 


684  KEPOET    OF   THE   COMMISSIONER   OF    CORPOEATIONS. 

establishment  or  undertaking,  the  business  or  factory  secrets  which  were  in- 
trusted to  him  during  his  employment,  or  which  he  learned  in  any  other  way 
during  the  period  of  his  employment,  is  subject  to  imprisonment  up  to  six  months 
and  fine  up  to  3,000  drachmas,  or  either  of  the  two  penalties. 

Whoever,  without  authority,  for  purposes  of  competition,  uses  these  secrets  or 
transmits  them  to  third  parties,  whether  he  got  them  in  the  manner  mentioned 
in  the  preceding  paragraph  or  as  a  result  of  personal- observation  by  unlawful 
means  or  means  repugnant  to  good  morals,  is  subject  to  the  same  penalty. 

Art.  17.  Whoever,  without  authority,  makes  use  of  or  transmits  to  third 
parties  business  secrets  such  as  plans  and  designs  of  a  technical  nature,  sketches, 
originals,  and  specifications  intrusted  to  him  on  account  of  his  business  connec- 
tions, is  subject  to  the  penalty  contained  in  the  above-mentioned  article. 

Art.  18.  Whoever  violates  the  provisions  of  sections  16  and  17  shall  also  be 
required  to  compensate  for  the  injury  caused. 

The  penalty  provided  in  article  16,  but  reduced  one-half,  is  imposed  upon  any- 
one who  for  purposes  of  competition  induces  another  to  do  an  act  prohibited  by 
article  16,  paragraph  1,  and  article  17. 

The  remaining  articles  of  this  haw  deal  with  procedure. 

Section  18.  RoTimania. 

Trade-mark  law. — The  Eoiimanian  trade-mark  \av7  of  April  15-27, 
1879/  contains  the  following-  provisions  relating  to  the  fraudulent 
use  of  trade-marks: 

Art.  6.  Persons  have  not  the  right  to  appropriate  the  trade-mark  adopted 
by  another  merchant  or  manufacturer  to  mark  their  products  or  when  the 
name  is  adopted  for  the  title  of  a  firm. 

Art.  12.  A  fine  of  from  .50  to  2.500  francs  and  imprisonment  for  from  three 
mouths  to  three  years  or  either  of  these  penalties  may  Ite  imposed  as  follows: 

(1)  On  those  who  counterfeit  a  trade-mark  or  who  use  a  counterfeit  trade- 
mark ; 

(2)  On  those  who  fraudulently  apply  to  their  articles  of  manufacture  or 
commerce  a  trade-mark  belonging  to  others ; 

(3)  On  those  who  have  knowingly  sold  or  have  taken  for  sale  one  or  more 
products  bearing  a  fraudulent  mark. 

Art.  13.  A  fine  of  from  .50  to  1..500  francs  and  imprisonment  from  one  month 
to  one  year  or  either  of  these  two  penalties  may  be  imposed  as  follows : 

(1)  On  those  who,  while  not  having  counterfeited  a  trade-mark,  have 
Imitated  in  a  fraiidulent  manner  the  make  of  the  article  so  as  to  deceive  the 
piu'chaser  or  who  have  employed  a   fraudulent  imitation  of  the  trade-mark ; 

(2)  On  those  who  employ  a  trade-mark  calculated  to  deceive  the  purchaser 
as  to  the  nature  of  the  product ; 

(3)  Those  who  have  knowingly  sold  or  taken  for  sale  one  or  more  products 
bearing  the  fraudulent  imitation  of  a  trade-mark,  being  calculated  to  deceive 
tlie  purchaser  as  to  the  nature  of  the  product. 

Art.  25.  No  article  having  a  simulation  of  the  trade-mark  of  a  Roumanian 
product  can  be  imported  into  Roinuania  and  all  such  articles  are  prohibited 
from  transportation  and  may  be  seized  wherever  found,  either  by  the  customs 
officials  or  by  the  Public  Minister  at  the  suit  of  the  parties  injured.     *     *     * 

1  See  Patent  and  Trade-Mark  Review,  Vol.  XI,  p.  346  fol. 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  685 

Section  19.  Bulgaria. 

Penal  Code. — ^Article  243  of  the  Bulgarian  Penal  Code^  pro- 
vides against  undermining  another's  mercantile  or  business  credit. 

Akt.  243.  Wliuever  kiuiwiuiily  makes  an  untruthful  assertion  which  under- 
mines the  mercantile  or  business  credit  or  the  reputation  of  a  person,  company 
or  establishment,  or  the  confidence  in  the  ability  of  a  person  respecting  his 
profession  or  trade,  is  punished  by  imprisonment  from  one  month  to  one  year 
and  by  a  fine  up  to  1.000  lew. 

If  this  is  done  publicly  by  distribution  of  printed  matter,  a  picture  or  a 
writing  with  the  knowledge  of  the  perpetrator,  imprisonment  from  one  month 
to  two  years  and  a  fine  up  to  2,000  lew  applies. 

Trade-mark  law. — Articles  43,  44,  and  45  of  the  Bulgarian  trade- 
mark Lnv  of  January  14-27,  1904,-  prohibit  the  infringement  of 
trade-marks. 

Akt.  43.  He  is  guilty  of  infringing  the  present  law  and  shall  therefore  be 
liable  to  the  fines  provided  by  this  law — except  where  it  is  proved  that  he  has 
acted  without  bad  faith — any  person  who — 

(a)  Imitates  a  mark  of  another; 

(6)  Uses  a  mark  registered  by  another; 

(c)  Employs  an  imitation  of  a  mark  previously  registered; 

(d)  Prepares  stamps,  cliches,  machines,  and  other  special  instruments  in- 
tended for  the  imitation  or  counterfeiting  of  another  mark ; 

(e)  Places  on  his  goods  false  commercial  inscriptions; 

(/)  Employs  the  annotation  "marque  euregistrge "  or  "M.  E."  as  a  murk 
or  as  its  supplement ; 

(f/)  Has  at  disposal  stamps,  cliches,  machines,  and  other  instruments  in- 
tended for  counterfeiting  or  imitating  another  mark ; 

(7i)  Employs  as  a  mark  or  puts  on  the  papers  of  his  establishment,  without 
having  the  right,  the  arms  of  the  Principality,  those  of  the  Princely  House, 
in  any  imitation  whatever  of  those  arms  or  the  decorations  of  the  State,  the 
portraits  of  the  Sovereign  or  members  of  his  family ; 

(i)  Employs  without  any  authority  the  emblem  of  the  "Red  Cross,"  its 
imitation,  or  the  denomination  "  Red  Cross,"  or  the  portraits  of  statesmen  or 
public  men ; 

(Ic)  Allows  to  figure  upon  his  goods,  upon  the  wrappers  or  upon  the  ves- 
sels, medals,  diplomas,  copies  of  testimonials,  or  their  imitation,  which  he  does 
not  possess,  or  else  represents  them  in  colors  which  do  not  correspond  with 
their  appearance ; 

(I)  Employs  in  general  any  kind  of  inscription  or  designation  which  may 
give  rise  to  the  belief  that  the  goods  are  of  local  origin. 

Aet.  44.  He  is  considered  equally  "guilty  of  infraction  of  the  present  law  who 
shall  sell,  exhibit,  or  possess,  with  intent  to  sell  for  some  commercial  or  industrial 
purpose,  gooils  or  objects  bearing  one  of  the  signs  or  inscriptions  enumerated  in 
paragraphs  h,  c,  c,  f,  li,  i,  I',  I  of  the  preceding  article,  unless  he  can  prove — 

(a)  That,  notwithstanding  all  the  steps  which  he  has  taken  in  order  to  avoid 
any  infringoniont  of  the  law,  it  has  been  impossible  for  him  to  doubt  at  the  time 
when  the  infringement  occurred  the  authenticity  of  the  mark  which  has  been 
used  or  of  the  commercial  inscription  which  he  has  appropriated  for  himself ; 

(f>)  That,  upon  the  request  made  by  the  party  damaged  or  in  his  name,  he 
(the  infractor)  has  furnished  all  the  information  that  it  has  been  possible  for 
him  to  furnish  concerning  the  person  who  fui*nished  him  the  goods  or  the  objects 
in  question ;  

iDas  Biils.arische  Strafsesetz  vom  2.  Fob.  1806.     Borlin,  1898. 
-  Patent  and  Trade-Mark  Review,  Vol.  Ill,  p.  1017. 


686  EEPORT   OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

(c)  That  he  has  acted  without  bad  faith. 

Akt.  45.  Auy  person  wlio  sliall  be  deemed  guilty  of  tlie  offenses  enumerated  in 
articles  43  and  44  shall  be  punished  by  a  tine  of  from  500  to  4,000  francs  or  by 
impx'isonment  for  a  term  of  from  thnee  months  to  one  year,  to  which  a  fine  of 
3,000  francs  may  also  be  added.  Besides  the  penalties  provided  in  the  preceding 
clause,*  the  party  to  whom  the  damage  has  been  caused  shall  also  have  the  right 
to  demand  from  the  offender  indemnity  for  the  sustained  damages  and  losses. 
Upon  the  request  of  the  party  who  has  suffered  the  damage  the  court  may  decide 
that  the  sentence  be  published  in  the  "  Official  Journal  "  for  his  account  and,  at 
least,  in  one  of  those  papers  having  the  largest  circulation  in  the  country. 

Section  20.  Turkey. 

Turkey  has  no  special  law  against  unfair  competition.  However, 
the  courts  allow  a  claim  for  damages  against  a  person  who  in  an  im- 
proper manner  draws  to  himself  the  clientele  of  a  competitor.^ 

Penal  Code. — Articles  2J:0  and  241  of  the  Penal  Code  provide 
against  deceiving  purchasers  as  to  the  quality  or  quantity  of  goods 
and  against  the  unauthorized  reproduction  of  books  or  other  articles.^ 

Aet.  240.  Whoever  cheats  a  purchaser  as  to  the  fineness  of  gold  or  silver  or 
the  quality  of  a  false  jewel  sold  as  a  genuine  gem  or  of  any  other  kind  of  mer- 
chandise, or  commits  fraud  as  to  the  quantity  of  things  sold  by  using  defective 
weights  or  measures,  is  imprisoned  for  from  three  months  to  one  year  and,  in 
addition  to  being  caused  to  make  good  the  loss,  a  fine  not  exceeding  the  one- 
fourth  of  the  amount  of  the  compensation  and  in  any  case  not  less  than  3 
mejidiehs^  is  taken  and  his  defective  weight  or  measure  is  broken  and  de- 
stroyed. 

Art.  241.  As  the  person  who  prints  or  causes  to  be  printed  a  book  contrary  to 
the  privileges  of  authors  or  makes  or  causes  to  be  made  a  thing  the  manufactur- 
ing or  doing  of  which  has  been  restricted  to  an  individual  or  a  company  as  a 
privilege  will  have  committed  a  sort  of  forgery,  the  books,  etc.,  caused  by  him 
to  be  printed  or  the  things  caused  liy  him  to  be  made  are  seized  and  given  to  the 
holder  of  the  privilege,  and  a  fine  of  from  5  mejidieh  gold  pieces  °  to  100  meji- 
dieh  gold  pieces  is  taken ;  and  from  those  who  import  into  the  Ottoman  Empire 
such  as  have  been  printed  or  manufactured  in  this  manner  abroad  a  fine  of  like- 
wise from  5  mejidieh  gold  pieces  to  100  mejidieh  gold  pieces  is  taken;  and  those 
who  knowingly  sell  such  printings  or  manufactures  are  punished  by  the  taking 
of  a  fine  of  from  1  mejidieh  gold  piece  to  25  mejidieh  gold  pieces. 

Trade-mark  law. — Articles  21  and  23  of  the  trade-mark  law  of 
May  11,  1888,  provide  against  false  designations  of  provenance.*' 

Akt.  21.  There  shall  be  punished  in  accordance  with  the  degree  of  the  gravity 
of  the  offense,  by  a  penalty  of  from  2  Turkish  pounds  to  50  Turkish  pounds  or 
by  imprisonment  of  from  one  month  to  six  months  or  even  by  these  two  penalties 
at  the  same  time — those  who  have  indicated  in  characters  of  one  sort  or  another 

1  An  obvious  error  in  the  English  transhition  of  this  phrase  was  corrected  by  com- 
parison with  the  law  in  Bulgarian. 

2  Lobe,  op.  cit.,  Bd.  I,  p.  114. 

s  Bucknill  and  Utidjian,  The  Imperial  Ottoman  Penal  Code,  London,  101.> ;  also  see 
Nord,  Das  tiirkische  Strafgesetzbuch,  Berlin,  1912. 

■>  Mejidieh — a  silver  coin  of  20  piasters,  worth  :!s.  4d.,  or  83  cents. 

6  Mejidieh  gold  piece=100  gold  piasters,  or  $4."S. 

8  Marques  de  fabrique,  rfeglement,  11  mai,  1888.  See  G.  Young,  "Corps  de  droit  Otto- 
man," Vol.  IV,  p.  37,  fol.     Oxford,  1906. 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  687 

upon  products  ti  locality  of  the  Ottomuu  Empire  other  than  that  of  the  real 
provenance  of  such  products,  as  well  as  those  who  have  knowingly  sold  or 
offered  for  sale  products  of  this  kind. 

Art.  23.  In  those  cases  where  products  with  a  counterfeited  mark  and  bear- 
ing the  name  of  any  country  whatsoever  are  unloaded  at  the  customhouse,  they 
shall  not  be  prohibited  from  entry,  without  prejudice,  however,  to  the  right  of 
the  manufacturers  of  the  products  whose  marks  are  counterfeited  to  bring  suit, 
if  they  have  been  counterfeited  abroad ;  if  Ottoman  products  counterfeited 
abroad  and  also  bearing  a  counterfeited  mark  are  imported  into  the  Ottoman 
Empire  they  shall  be  prohibited  from  entry  and  returned  to  tlieir  prj- 
prietor.    *    *    * 

Section  21.  Brazil. 

The  laws  of  Brazil  relating  to  unfair  competition  are  found  in  the 
Penal  Code,  in  the  trade-mark  laAvs  of  1807,  190i,  and  1905,  and  in 
the  customs  law  of  1899. 

Penal  Code.^ — Articles  353  and  351  of  the  Penal  Code  relate  to 
the  fraudulent  use  of  a  trade-mark. 

Akt.  353.  To  reproduce,  without  authorization  of  the  proprietor  or  of  his 
legitimate  representative,  by  any  means  whatever,  in  whole  or  in  part,  a  mark 
of  manufacture  or  trade  duly  registered  and  published : 

§  1.  To  use  the  trade-mark  of  another,  or  a  counterfeited  trade-mark  under 
the  conditions  indicated  above; 

§  2.  To  sell  or  expose  for  sale  goods  bearing  the  trade-mark  of  another,  or  a 
trade-mark  counterfeited  in  whole  or  in  part ; 

§  3.  To  imitate  a  mark  of  manufacture  or  trade  in  such  a  \\ay  as  to  deceive 
the  buyer ; 

§  4.  To  use  a  trade-mark  thus  imitated ; 

§  5.  To  sell  or  offer  for  sale  objects  bearing  an  imitated  trade-mark ; 

§  6.  To  use  a  name  or  firm  name  that  one  does  not  own,  whether  this  name  or 
firm  name  forms  or  not  part  of  a  registered  trade-mark ; 

I'exxVlties. — A  tine  of  500  to  2,000  milreis  in  favor  of  the  nation,  and  of  10  to 
50  per  cent  of  the  value  of  the  objects  on  which  the  delict  bears,  in  favor  of  the 
proprietor  of  the  ti'ade-mark. 

Art.  354.  In  order  that,  in  the  cases  indicated  above,  imitation  exist,  it  is 
not  necessary  that  the  imitation  of  the  trade-mark  be  complete;  it  is  sufficient, 
whatever  be  the  existing  differences,  that  there  be  iwssibility  of  error  or  con- 
fusion when  the  differences  between  the  two  marks  can  not  be  recognized  with- 
out careful  examination  or  comparison. 

Paragraph  unique.— The  usurpation  of  a  name  or  of  a  iirm  name  is  consid- 
ered as  existing,  whether  the  reproduction  be  complete  or  with  additions,  omis- 
sions, or  changes,  if  tliere  exist  tlie  same  possibility  of  error  or  of  confusion  of 
the  buyer. 

Article  355  relates  to  the  unlawf id  use  or  sale  of  marks  of  distinc- 
tion, trade-marks  repugnant  to  good  morals,  and  false  designations 
of  provenance. 

Art.  355.  To  use  in  a  mark  of  manufacture  or  trade  without  competent  au- 
thorization, arms,  coats  of  arms,  public  or  ollicial  (Icslirnations.  national  or 
foreign ; 


1  Codigo  Penal  de  11  Outubro  de  1S90. 


688  REPORT    OF    THE    COMMISSIONER    OF    CORPORATIONS. 

§  1.  To  use  a  trade-mark  which  offends  public  decorum ; 

§  2.  To  use  a  trade-marlc  which  contains  indication  of  a  place  or  of  an  estab- 
lishment other  than  that  of  the  provenance  of  the  merchandise  or  the  product, 
whether  or  not  that  indication  be  accompanied  by  a  fictitious  name; 

§  3.  To  sell  or  expose  for  sale  merchandise  or  a  product  in  the  conditions 
indicated  in  the  present  article ; 

Penalty. — A  fine  of  100  to  500  milreis  in  favor  of  the  state. 

Decree  or  November  3,  1897. — ^Tlie  decree  of  November  3,  1897/ 
together  with  the  regiihition  of  December  17,  1897,  forbids  the  im- 
portation and  manufacture  of  hibels  for  liquors,  pharmaceutical 
preparations,  or  other  national  products  calculated  to  deceive  as  to 
the  provenance  of  the  goods;  also  the  sale  of  domestic  products 
labeled  in  a  foreign  language. 

Art.  1.  It  is  prohibited: 

(«)  To  import  and  to  manufacture  labels  which  are  applied  in  the  manufac- 
ture of  liquors  and  all  other  national  products,  for  the  purpose  of  selling  them 
as  if  they  were  foreign. 

(&)  To  put  on  sale  pharmaceutical  preparations  without  the  declaration  of 
the  name  of  the  manufacturer,  of  the  product,  and  of  the  place  of  origin. 

(c)  To  put  on  sale  domestic  merchandise  or  manufactured  products  under  a 
label  in  a  foreign  tongue. 

§  1.  Olfeuders  of  the  provision  in  letter  (a)  shall  be  liable  in  addition  to  the 
penalties  of  the  Penal  Code,  to  a  fine  of  1,000  to  5,000  milreis ;  and  those  who 
contravene  the  prohibitions  in  letters  (b)  and  (c)  shall  be  punished  by  the 
seizure  of  the  labeled  products,  and  also  by  a  fine  of  20  to  500  milreis. 

§  2.  In  the  prohibition  against  putting  on  sale  domestic  products  furnished 
with  labels  in  a  foreign  tongue,  letter  (c),  there  are  not  included  labels  which, 
without  involving  a  fraudulent  imitation  of  foreign  trade-marks,  contain  the 
mimes  of  the  manufacturers,  of  the  factory,  and  of  the  locality  where  this  is 
.situated,  or  the  declaration,  "  National  industry,"  in  very  plain  letters,  this 
simple  indication  not  being  admissible  Avhen  the  labels  are  intended  for  food 
products. 

§  3.  In  the  prohibition  against  importing  labels,  capsules,  or  envelopes,  in- 
cluded under  letter  ((/)  of  article  1,  there  are  not  included  those  imported  by 
factories  or  commercial  houses,  which  are  branches  or  the  headquarters  of  other 
estal)lishments  in  Europe. 

§  4.  Importers  of  said  merchandise  shall  be  obliged  to  prove  by  commercial 
contracts,  duly  registered  with  the  commercial  boards,  that  they  are  in  the 
meaning  of  the  preceding  paragraph. 

Trade-mark  law  of  September  24,  1904. — The  trade-mark  law  of 
September  24,  1904,-  which  is  a  modification  of  the  trade-mark  law 
of  October  14,  1887,  contains  several  provisions  applicable  to  unfair 
competition. 

Article  13,  which  is  similar  to  article  353  of  the  Penal  Code  given 

1  Decroto  N.  452  de  3  de  Novembro  de  1S97 ;  Collccgao  das  Icis  da  Ropublica  dos  Estados 
Uuidos  do  Brazil  de  1807. 

2Uecreto  N.  1230,  de  24  de  sotembro  de  1904,  modiflca  o  decreto  N.  3346  de  14  de  outubro 
de  1887,  sobre  marcas  de  fabrica  e  de  conimercio.  See  Bento  de  Faria,  Das  Marcas  de 
Fabrica  e  de  Commercio  e  do  Nome  Commercial.     Rio  de  Janeiro,  1906,  p.  413. 


TEUST   LAWS   AND  UNFAIR   COMPETITION.  689 

above,  prohibits  the  imhiwfiil  use  or  imitation  of  another's  trade- 
mark or  the  sale  of  goods  bearing  false  trade-marks : 

Abt.  13.  He  shall  be  punished  with  imprisonment  for  six  months  to  one  year 
and  with  a  fine  of  from  500  to  5,000  milreis  in  favor  of  the  State,  who — 

1.  Uses  the  authentic  trade-marli  of  another  on  a  product  of  false  prove- 
nance. 

2.  Uses  the  trade-mark  of  another,  counterfeited  in  whole  or  in  part. 

3.  Sells  or  exposes  for  sale  objects  bearing  the  trade-mark  of  another  when 
those  objects  are  not  furnished  by  the  proprietor  of  the  trade-mark. 

4.  Sells  or  exposes  for  sale  objects  bearing  the  trade-mark  of  another, 
counterfeited  In  whole  or  in  part. 

5.  Reproduces  by  any  means  whatever,  in  whole  or  in  part,  a  mark  of  uumu- 
facture  or  of  trade  duly  registered  and  published  without  the  authorization 
of  the  proprietor  or  of  his  legitimate  representative. 

6.  Imitates  a  mark  of  manufacture  or  of  trade  in  a  way  to  confuse  the  con- 
sumer. 

7.  Uses  a  trade-mark  thus  imitated. 

8.  Sells  or  exposes  for  sale  objects  bearing  an  imitated  trade-mark. 

9.  Uses  a  name  or  firm  name  not  belonging  to  him  whether  it  forms  or  does 
not  form  part  of  a  registered  trade-mark, 

§  1.  In  order  that  imitation  intended  by  Nos.  6  to  9  of  the  present  article 
take  place  it  is  not  necessary  that  the  resemblance  to  the  trade-mark  be  com- 
plete; it  is  sufficient,  whatever  may  be  the  actual  differences,  that  there  may 
be  possibility  of  error  or  confusion  in  the  sense  of  article  8,  No.  6,  last  part. 

§  2.  Usurpation  of  name  or  of  firm  name  referred  to  in  Nos.  5  and  6  is 
regarded  as  existing  whether  the  reproduction  be  complete  or  with  additions, 
omissions,  or  changes  if  there  is  present  the  possibility  of  error  or  confusion 
of  the  consumer. 

Article  11  relates  to  the  unlawful  use  or  sale  of  marks  of  distinc- 
tion, provenance,  or  such  as  are  repugnant  to  good  morals. 

Akt.  14.  He  shall  be  punished  with  a  fine  of  100  to  500  milreis  in  favor  of 
the  State  who — 

1.  Without  competent  authorization  uses  as  a  mark  of  manufacture  or  trade, 
arms,  coats  of  arius,  or  pulilic  or  official  designations,  national  or  foreign. 

2.  Uses  a  mark  which  offends  public  decorum. 

3.  Uses  a  mark  of  manufacture  or  trade  which  contains  the  indication  of 
locality  or  establishment  which  is  not  that  of  the  provenance  of  the  mer- 
chandise or  the  product  whether  or  not  such  indication  be  accompanied  by  a 
name  that  is  fictitious  or  another's. 

4.  Sells  or  exposes  for  sale  merchandise  or  products  bearing  marks  that  come 
under  the  conditions  of  Nos.  1  and  2  of  this  article. 

5.  Sells  or  exposes  for  sale  merchandise  or  products  that  come  under  the 
conditions  indicated  under  No.  3. 

Decree  or  January  10,  1905. — The  decree  of  January  10,  1905,^ 
Avhich  contains  regulations  for  the  execution  of  law  No.  123G,  of  Sep- 
tember 24,  1901,  provides  against  various  unfair  practices: 

1  Approva  o  regolamcLto  para  execugao  da  lei  N.  1236  de  24,  de  Setembro  de  1904,  sobre 
marcas  de  fabrica  e  de  cv'>mmercio. 

30035°— 10 44 


690  EEPOET    OF    THE   COMMISSIONER  OF   CORPOEATIONS, 

Articles  11  to  14  relate  to  designations  of  provenance. 

Art.  11.  By  indication  of  provenance  of  products  is  understood  the  designa- 
tion of  the  geographic  name  which  corresix»nds  to  the  place  of  manufacture, 
of  elaboration,  or  of  extraction  of  the  same  products.  The  name  of  the  place 
of  production  belongs  cumulatively  to  all  the  producers  established  therein. 

Art.  12.  No  one  has  the  right  to  make  use  of  the  name  of  a  place  of  manufac- 
ture to  designate  a  natural  or  artificial  product  manufactured  at  or  coming 
from  another  place. 

Art.  13.  It  will  not  be  a  false  indication  of  provenance  when  it  is  a  question 
of  the  designation  of  a  product  by  means  of  a  geographical  name  which,  hav- 
ing taken  on  a  generic  character,  designates,  in  trade  language,  the  nature  or 
the  kind  of  product.    This  exception  is  not  applicable  to  products  of  the  vine. 

Art.  14.  Products  bearing  a  false  indication  of  provenance  can  be  seized  by 
order  of  the  Public  Prosecutor  or  at  the  request  of  the  interested  party. 

Article  40  provides  the  penalties  for  the  unlawful  use  or  imitation 
of  another's  trade-mark  or  the  sale  of  goods  bearing  false  trade- 
marks. 

Art.  40.  He  shall  be  punished  with  imprisonment  for  six  months  or  one  year 
and  with  a  fine  in  favor  of  the  State  of  500  to  5,000  milreis,  who  : 

1.  Uses  the  authentic  trade-mark  of  another  upon  a  product  of  false  pro- 
venance. 

2.  Uses  the  trade-mark  of  another  counterfeited  in  whole  or  in  part. 

3.  Sells  or  put  on  sale  objects  bearing  the  trade-mark  of  another  when  those 
objects  are  not  supplied  by  the  proprietor  of  the  trade-mark. 

4.  Sells  "or  puts  on  sale  objects  bearing  the  trade-mark  of  another  counter- 
feited in  whole  or  in  part. 

5.  Reproduces  without  authorization  of  the  proprietor  or  of  his  legitimate 
representative,  by  whatever  means,  in  whole  or  in  part,  a  trade-mark  of  manu- 
facture or  trade  duly  registered  and  published. 

6.  Imitates  a  mark  of  manufacture  or  of  trade  in  a  way  that  may  deceive  the 
consumer. 

7.  Uses  a  mark  thus  imitated. 

8.  Sells  or  puts  on  sale  objects  bearing  an  imitated  trade-mark. 

9.  Uses  a  name  or  firm  name  which  does  not  belong  to  him,  whether  or  not  it 
forms  a  part  of  a  registered  trade-mark. 

§1.  In  order  that  there  be  imitation  in  the  sense  of  Nos.  6  to  9  of  this  article 
it  is  not  necessary  that  there  be  complete  resemblance  in  the  trade-mark,  it 
suffices  that,  despite  the  differences,  there  be  the  possibility  of  error  or  of 
confusion  according  to  the  terms  of  article  8,  No.  6,  last  part. 

§2.  Usurpation  of  name  or  of  firm  name  is  considered  to  exist,  according  to 
the  terms  of  Nos.  5  and  6,  whether  the  reproduction  is  complete,  or  with  ad- 
ditions, omissions,  or  alterations  if  there  be  the  same  possibility  of  error  or  of 
confusion  of  the  consumer.     (Arts.  13  and  37  of  the  law.) 

Article  41  provides  against  unauthorized  use  of  another's  mark  of 
distinction  or  the  use  of  indecorous  trade-marks,  or  those  which  con- 
tain false  indications  of  provenance: 

Art.  41.  He  shall  be  punished  with  a  fine  of  from  100  to  500  milreis  in  favor 
of  the  State,  who — 

1.  Without  competent  authorization  uses  as  a  trade-mark  of  industry  or  of 
commerce  arms,  coats  of  arms,  or  public  or  official  designations,  national  or 
foreign. 


TKUST   LAWS  AND  UNFAIR   COMPETITION.  691 

2.  Uses  a  trade-mark  which  offends  public  decorum. 

3.  Uses  a  marli  of  manufacture  or  of  trade  which  contains  the  indication  of 
locality  or  of  establishment  which  is  not  that  of  the  provenance  of  the  mer- 
chandise or  the  product,  wliether  or  not  such  indication  be  accompanied  by  a 
fictitious  or  a  borrowed  name. 

4.  Sells  or  puts  on  sale  merchandise  or  products  bearing  a  trade-mark  under 
the  conditions  indicated  in  Nos.  1  and  2  of  this  article. 

5.  Sells  or  puts  on  sale  merchandise  or  products  under  the  conditions  indi- 
cated in  No.  3.     (Arts.  14  and  37  of  the  law.) 

Customs  law  or  November  14,  1899. — Article  15  of  the  customs 
law  No.  611  of  November  11,  1899,^  relates  to  the  miportation  of  mer- 
chandise furnished  with  labels  in  the  Portuguese  language. 

Akt.  45.  National  factories  are  not  permitted,  under  the  terms  of  the  law 
No.  452  of  November  3,  1897,  the  use  of  labels  written  in  whole  or  in  part  in 
a  foreign  language.  The  importation  of  merchandise  manufactured  abroad 
which  bear  labels  written  in  whole  or  in  part  in  Portuguese  is  not  permitted 
except  when  imported  from  Portugal  or  when  intended  for  use  by  factories. 

Section  22.  Argentina. 

The  law  relating  to  industrial,  commercial,  and  agricultural  trade- 
marks^ contains  several  provisions  applicable  to  imfair  methods  of 
competition. 
Article  13  provides  against  infringing  another's  trade  name. 

Art.  43.  Whoever  desires  to  carry  on  an  industry,  trade,  or  branch  of  agri- 
culture already  carried  on  by  another  person,  under  the  same  name  or  con- 
ventional designation,  shall  adopt  a  modification  which  shall  make  this  name 
or  designation  clearly  distinguishable  from  that  employed  by  the  older  house 
or  establishment. 

Article  18  relates  to  counterfeited  trade-marks. 

Art.  48.  Thei*e  shall  be  punished  by  a  fine  of  from  20  to  500  pesos  in  national 
money  and  imprisonment  of  from  one  month  to  one  year,  the  corporal  penalty 
not  being  redeemable  in  money : 

(1)  Those  who  counterfeit  an  industrial,  trade,  or  agricultural  traile-mark. 

(2)  Those  who  use  counterfeited  trade-marks. 

(3)  Those  who  fraudulently  imitate  a  trade-mark. 

(4)  Those  who  knowingly  place  on  their  products  or  articles  of  commerce 
the  trade-mark  of  another  or  a  trade-mark  fraudulently  imitated. 

(5)  Those  who  knowingly  sell,  place  on  sale,  or  facilitate  the  sale  of  coun- 
terfeited trade-marks,  or  who  sell  authentic  trade-marks  without  the  knowledge 
of  their  owners. 

(G)  Those  who  knowingly  sell,  offer  for  sale,  or  facilitate  the  sale  or  circu- 
lation of  articles  with  counterfeited  or  fraudulently  imitated  trade-marks. 

(7)  All  those  who  with  fraudulent  intention  place  or  cause  to  be  placed  on 
an  article  of  merchandise  or  product  a  declaration  or  any  other  description 
which  is  false  -with  respect  to  its  nature,  quality,  quantity,  number,  weight,  or 

iLei  N.  641  de  14  de  Novemln-o  de  1899,  cstabelece  o  processo  do  arrccadacao  dos 
impostos  de  consumo ;  Collecf-ao  das  Lels  da  Republica  dos  Estados  Unidos  do  Brazil 
do  IS'.IO,  Vol.  1,  p.  ~>0  fol.;  Rio  do  Janeiro,  1902. 

2  Ley  nfim.  S975  do  las  marcas  de  fabrica,  comercio  y  airricultura,  A  14  de  noviembre  de 
1900 ;  Leycs  Nacionales  sancionadas  en  el  Periodo  Legislatlv  o  de  1900,  p.  79. 


692  EEPORT   OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

measure,  or  to  the  place  or  the  country  of  manufacture  or  shipment,  or  with 
respect  to  medals,  diplomas,  mentions,  recompenses,  or  honorific  distinctions 
gained  in  exhibitions  or  competitions. 

(8)  Those  who  knowingly  sell,  place  on  sale,  or  facilitate  the  sale  of  mer- 
chandise or  products  bearing  any  of  the  false  declarations  mentioned  in  the 
foregoing  paragraph. 

In  case  of  repetition  these  punishments  shall  be  doubled. 

Article  53  relates  to  confiscation  of  goods  falsely  marked,  and  ar- 
ticle 58  provides  that  persons  circulating  goods  falsely  marked  must 
furnish  information  with  respect  to  their  source  of  supply. 

Section  23.  Chile. 

The  laws  of  Chile  relating  to  unfair  competition  are  contained  in 
the  Penal  Code  and  in  the  trade-mark  laws  of  1874  and  1898. 

Penal  Code. — Articles  185  and  190  of  the  Penal  Code^  prohibit 
certain  unfair  practices.  Article  185  relates  to  counterfeit  trade- 
marks, seals,  stamps,  etc. 

Art.  1S5.  Whoever  counterfeits  tickets  for  the  transportation  of  persons  or 
goods  or  for  public  gatherings  or  exhibitions,  with  the  intention  of  making  use 
of  them  or  fraudulently  putting  them  in  circulation,  as  also  the  one  who  uses 
them  or  puts  them  in  circulation,  although  he  knows  that  they  are  counterfeit; 
further,  whoever  counterfeits  seals,  stamps,  or  trade-marks  of  any  authority, 
of  a  in-ivate  banking  establishment,  trade  or  industrial  undertaking,  or  of  an  in- 
dividual, or  whoever  knowingly  makes  use  of  such  false  seals,  stamps,  or  trade- 
marks, shall  be  punislied  with  minor  imprisonment  in  one  degree  or  another 
and  with  a  fine  of  100  to  1,000  pesos. 

Article  190  relates  to  the  fraudulent  use  of  a  manufacturer's  name 
or  trade  name. 

Art.  190.  Whoever  puts  upon  manufactured  products  the  name  of  a  manu- 
facturer who  is  not  the  maker  of  such  articles,  or  the  firm  name  of  a  factory 
which  is  not  that  of  the  actual  manufacture,  shall  be  punished  with  minor 
imprisonment  from  the  lowest  to  the  middle  degree  and  with  a  fine  of  100  to 
GOO  pesos. 

The  same  punishments  shall  be  applicable  to  every  merchant,  commission 
agent,  or  seller  who  knowingly  has  placed  on  sale  or  put  in  circulation  goods 
wiiich  are  marked  with  fictitious  or  altered  names. 

Trade-mark  law  of  November  12,  1874. — The  trade-mark  law  of 
November  12,  1874,-  contains  certain  provisions  applicable  to  unfair 
competition : 

Article  11  of  this  law  relates  to  counterfeiting  of  trade-marks. 

Art.  11.  Whoever  shall  counterfeit,  alter,  or  use  in  a  fraxululent  way  marks 
or  labels  such  as  those  with  which  the  present  law  is  concerned  shall  be  pun- 
ished with  the  penalties  established  by  the  Penal  Code.  (Arts.  185,  190,  and 
191.) 

1  Codlgo  Penal,  Santiago,  Noviembre  12  de  1874. 

"  Loy  de  Marcas  de  fal>ricas  y  de  comercio  (Novioml)ro  12  de  1874).  Recueil  general  de 
la  legislation  et  des  traites  concernant  la  pi'opriete  industrielle,  Berne,  1890,  tome  III., 
p.  228. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  693 

Article  12  provides  for  confiscation  of  goods  bearing  counter- 
feit trade-marks. 

Abt.  12.  Objects  bearing  counterfeit  trade-marks  sliall  be  confiscated  for 
the  benefit  of  the  injured  party,  and  the  instruments  that  have  served  for  the 
counterfeiting  shall  be  destroyed. 

Trade-mark  law  or  October  24,  1898. — The  trade-mark  law  of 
October  24,  1898,^  declares  that  the  courts  in  deciding  cases  under 
article  11  of  the  law  of  November  12,  1874,  shall  be  governed  by 
good  conscience,  and  reads  as  follows: 

In  suits  whicli  occur  to  prosecute  the  responsibility  establislied  by  article  11 
of  the  law  of  November  12,  1874,  the  tribunals  shall  decide  according  to  con- 
science, notwithstanding  the  differences  which  may  exist  between  the  registered 
trade-mark  and  that  which  is  the  object  of  the  penal  action,  whether  or  not 
there  was  counterfeiting,  alteration,  or  fraudulent  use,  referred  to  in  the  said 
article. 

Section  24.  Peru. 

The  Peruvian  trade-mark  law  of  December  19,  1892,^  contains  cer- 
tain provisions  applicable  to  unfair  competition. 

Articles  23,  24,  and  25  relate  to  counterfeiting  trade-marks : 

Art.  23.  The  usurpation  of  the  property  right  in  a  new  trade-mark  shall  be 
punished  with  a  fine  of  from  25  to  500  soles  or  with  imprisonment  of  from  40 
days  to  6  months  at  the  most;  they  shall  be  liable  to  this  penalty:  First,  who 
counterfeit  or  change  in  any  manner  whatever  a  trade-mark  of  commerce  or 
manufacture;  second,  who  put  on  their  own  products  or  articles  of  couunerce  a 
mark  belonging  to  another  person ;  third,  who  knowingly  sell,  offer  for  sale,  or 
consent  to  sell  or  to  put  in  circulation  articles  which  bear  trade-marks  that  are 
counterfeited  or  fraudulently  affixed ;  fourth,  who  knowingly  sell,  offer  for  sale, 
or  accept  what  is  sold  to  them  with  counterfeited  trade-marks,  and  even  with 
authentic  trade-marks  without  the  knowledge  of  the  legitimate  proprietors ; 
fifth,  who  with  intention  to  defraud,  mark  articles  or  have  them  marked  with 
trade-marks  or  false  designations  concerning  tlieir  kind,  quality,  quantity, 
number,  weight  or  measure,  or  the  country  of  provenance  or  of  manufacture ; 
sixtli,  who  knowingly  sell,  offer  for  sale,  or  accept  articles  sold  to  them  with 
the  false  designations  to  which  the  preceding  number  relates. 

Art.  24.  In  case  of  repetition  the  penalty  shall  be  doubled. 

Art.  25.  In  order  that  there  be  infringement  or  nsur]tatiou  it  shall  suffice 
that  the  counterfeited  trade-mark  has  been  aftixed  to  a  single  object. 

Article  26  provides  that  persons  circulating  goods  bearing  counter- 
feited marks  shall  reveal  the  source  of  their  supplies. 

Art.  2G.  Those  who  may  have  sold  or  put  on  .sale  articles  bearing  a  counter- 
feited trade-mark,  thus  violating  or  usurping  legitimate  rights,  must  communi- 
cate in  writing  to  the  i)roprietor  of  the  trade-mark  the  name  and  address  of 
the  persons  from  whom  they  h.ive  made  the  pui'chase  or  from  whom  they  h.ave 

1  Loi  Num.  1004,  de  Marcas  rejistrados,  24  de  Octubre  de  1898;  Boletin  de  las  Leyes  i 
Decrofos  del  Gobierno.  Lib.  LXVH,  1S9S,  p.  742. 

-  Loi  du  19  dec.  1892  sur  los  marciuos  de  fabiique ;  Recueil  general  de  la  legislation  et  des 
traites  conceinant  la  propri(5t6  industinelle,  Berne,  1899,  tome  III,  p.  488. 


694  REPORT   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

received  the  offer  of  sale  and  the  date  at  which  negotiations  liegan.  The  one 
who  should  refuse  to  furnish  this  information  can  be  compelled  to  do  so  by  the 
courts  under  penalty  of  being  regarded  as  an  accomplice  or  receiver  of  stolen 
goods. 

Articles  27  and  28  relate  to  the  confiscation  and  destruction  of 
goods  bearing  counterfeited  marks: 

Art.  27.  The  articles  bearing  the  counterfeited  trade-mark  which  shall  be 
found  in  the  possession  of  the  counterfeiter  or  his  agent  shall  be  seized  and  sold, 
and  the  proceeds  of  the  sale  shall  be  used  for  the  payment  of  the  legal  expenses 
and  for  the  indemnity  established  by  law ;  the  rest  shall  go  to  the  schools  of 
the  provinces  in  which  the  seizure  shall  have  taken  place. 

Art.  28.  The  counterfeited  trade-marks  which  shall  be  found  in  the  posses- 
sion of  the  offender,  as  well  as  the  instruments  and  tools  used  for  the  counter- 
feiting, shall  be  destroyed. 

Art.  29.  The  right  to  criminally  accuse  the  counterfeitei's  belongs  exclusively 
to  the  person  injured,  but  as  soon  as  prosecution  shall  have  begun  the  public 
prosecutor  shall  intervene.  The  plaintiff  shall  be  able,  however,  at  any  time 
before  the  pronouncement  of  sentence,  to  withdraw  the  accusation  and  to  with- 
hold prosecution. 

Art.  30.  Injured  persons  may  bring  suit  for  damages  before  the  civil  tribunal 
against  the  autbors  of  the  fraud  and  their  accomplices.  The  judgment  shall 
be  pul)lished  at  the  expense  of  the  condemned.  Suit  is  outlawed  three  years 
after  the  infraction  is  committed  and  one  year  after  the  proprietor  has  become 
cognizant  of  this  offense. 

Article  31  relates  to  the  usurpation  of  another's  name : 

Art.  31.  In  the  case  of  usurpation  of  name  the  same  regiilations  which  have 
governed  trade-marks  shall  be  applicabla 

Section  25.  Japan. 

Japan  has  no  special  law  against  unfair  competition,  but  several 
articles  of  the  Civil,  Penal,  and  Commercial  Codes,  as  well  as  of  the 
laws  relating  to  trade-marks,  patents,  and  designs  would  seem  to  be 
applicable  to  cases  of  unfair  competition. 

Civil  Code. — Articles  709  and  710  of  the  Civil  Code  of  Japan  are 
similar  to  articles  1382  and  1383  of  the  French  Civil  Code.^ 

Art.  709.  A  person  wh<j  has  intentionally  or  negligently  violated  the  right  of 
another  is  bound  to  compensate  any  damages  resulting  in  consequence.     *     *     * 

Art.  710.  Irrespective  of  whether  the  person,  liberty,  or  honor  (reputation) 
of  another  is  injured  or  his  property  rights  are  violated,  the  person  who  is 
bound  to  make  compensation  for  damage  in  accordance  with  the  provisions  of 
the  preceding  article  must  make  also  compensation  even  for  damage  other  than 
that  to  his  property. 

Penal  Code. — Article  233  of  the  Penal  Code'  provides  against 
disparaging  another. 

Art.  233.  Whoever  by  spreading  a  false  rumor  or  by  means  of  deceit  injures 
the  credit  of  another,  or  hinders  him  in  the  exercise  of  his  calling,  is  punished 
by  imprisonment  up  to  three  years  or  by  a  fine  up  to  1,000  yen. 

1  Annotated  Civil  Code  of  Japan,  by  J.  E.  do  Beclier,  London,  1909. 

2  Strafgesetzbuch  fttr  das  kaiserlich  japanische  Reich  vom  23,  April  1907.  Berlin,  1908, 
p.  43. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  695 

Commercial  Code. — The  Commercial  Code  of  Japan  ^  contains 
several  articles  which  relate  to  the  confusion  of  trade  names,  some 
of  which  specifically  prohibit  certain  practices  in  the  use  of  trade 
names  as  unfair  competition.  The  language  of  articles  19,  20,  22, 
and  23,  which  are  the  most  pertinent  in  this  connection,  is  as  follows : 

Art.  19.  A  trade  name  already  registered  by  another  per.son  can  not  be  reg- 
istered witliin  tlie  same  Shiclioson "  for  tlie  same  business. 

Art.  20.  He  whose  trade  name  lias  been  registered  can  ask  for  an  injunction 
to  restrain  other  persons  from  using  the  same  or  a  similar  trade  name  for  the 
purpose  of  unfair  competition.     In  such  case  damages  can  be  claimed. 

He  who  uses  the  trade  name  already  registered  by  another  person  within  the 
same  Shichoson  for  the  same  business  is  presumed  to  use  it  for  the  purpose 
of  unfair  competition. 

Art.  22.  In  case  both  the  trade  name  and  the  business  are  transferred,  xuiless 
the  parties  expressly  provide  otherwise,  the  transferor  can  not  carry  on  the 
same  business  within  the  same  Shichoson  for  a  period  of  20  years. 

If  the  transferor  has  promised  not  to  carry  on  the  same  business,  such 
promise  has  its  validity  only  in  the  same  Fu "  or  Ken  *  for  a  period  of  not  more 
than  30  years. 

The  transferor,  irrespective  of  the  provisions  of  the  preceding  paragraphs, 
can  not  carry  on  the  same  business  for  the  purpose  of  iinfair  competition. 

Art.  23.  The  provisions  or  article  22  are  ajtplicable  where  the  business  is 
transferred  exclusive  of  the  trade  name. 

Article  17  of  this  code  requires  that  a  business  association  shall 
indicate  the  specific  form  of  association  in  its  trade  name,  and 
article  18  prohibits,  under  penalty  of  a  fine,  the  use  of  a  word  indi- 
cating a  business  association  in  the  trade  name  if  no  such  associa- 
tion exists. 

Trade-mark  law. — The  Trade-Mark  Law  (No.  25)  of  April  2, 
1909,'^  contains  the  following  provisions  relating  to  fraudulent  and 
deceptive  trade-marks. 

Art.  23.  Persons  who  come  iinder  any  one  of  the  following  subheadings  shall 
be  punished  with  penal  servitude  for  a  period  not  exceeding  live  years,  or 
with  a  fine  not  exceeding  1,000  yen. 

(1)  A  person  who  uses  for  identical  goods  the  registered  trade-mark  of 
another  person,  or  who  uses  for  identical  goods  a  vessel  or  wrapper,  etc.,  which 
bears  the  registered  trade-mark  of  another  person,  or  who  transmits  or  sells 
such  goods,  or  who  keeps  them  for  the  purpose  of  transmitting  or  selling  them. 

(2)  A  person  who  transmits  or  sells  the  registered  trade-mark  of  another, 
or  vessels,  or  wrappers,  etc.,  bearing  such  mark,  with  the  intention  that  they 
shall  be  used  for  identical  goods,  or  who  keeps  them  for  the  purpose  of  trans- 
mission or  sale. 

(3)  A  person  who  counterfeits  or  imitates  the  registered  trade-mark  of 
another  person,  with  the  intention  of  using  it,  or  causing  it  to  be  used  on 
identical  gootls. 

1  Commercial  Code  of  .Japan,  by  Yang  Yin  Hang,  Boston,  1911. 

2  The  terms  Shichoson,  Fu,  and  Ken  are  Japanese  words  designating  administrative 
divisions  of  the  Japanese  Emi)ire.  Tliero  are  three  Pii  (Tokyo,  ICyoto,  and  Osaka)  and 
42  Ivon,  and  they  have  simihir  administrative  organizations.  The  Shichoson  is  a  subordi- 
nate administrative  division. 

Tatent  uud  Trude-Mark  Review,  Vol.  Vll,  p.  12841,  fol. 


696  EEPOET   OF   THE   COMMISSIONER   OF   CORPOEATIONS. 

(4)  A  perison  who  transmits  or  sells  counterfeits  of  or  imitations  of  trade- 
marks with  the  intention  that  they  shall  be  used  on  identical  goods,  or  who 
uses  them  on  identical  goods. 

(5)  A  person  who  transmits  or  sells  identical  goods  on  which  counterfeits 
of  or  imitations  of  trade-marks  have  been  used,  or  who  keeps  them  for  the  pur- 
pose of  transmitting  or  selling. 

(6)  A  person  who  imports,  for  the  purpose  of  transmitting  or  selling,  goods 
on  which  a  mark  has  been  used  which  is  identical  with  or  similar  to  the  regis- 
tered mark  of  another  person,  or  who  transmits  or  sells  such  goods,  or  who 
keeps  them  for  the  purposes  of  transmitting  or  selling  them. 

(7)  A  person  who  manufactures,  transmits,  sells,  or  keeps  the  necessary 
implements  for  the  purpose  of  counterfeiting  or  imitating  the  registered  trade- 
mark of  another  pei'son. 

(8)  A  person  who,  in  connection  with  identical  goods,  uses  a  mark  identical 
with  or  simihir  to  the  registered  trade-mark  of  another  person  on  commei-cial 
advertisements,  notice  boards,  handbills,  price  lists,  or  other  mercantile  docu- 
ments. 

The  institution  of  criminal  proceedings  sh^H  be  awaited  before  cognizance  is 
taken  of  any  offense  mentioned  in  the  preceding  clause. 

Akt.  24.  Persons  who  come  under  any  one  of  the  following  subheadings  shall 
be  punished  with  penal  servitude  for  a  period  not  exceeding  three  years,  or  with 
a  fine  not  exceeding  300  yen: 

(1)  A  person  who  obtains  registration  of  a  trade-mark  by  a  fraudulent  act. 

(2)  A  person  who  marks  as  registered  an  unregistered  trade-mark,  or  who 
puts  a  deceptive  mark  upon  it.  A  person  who  uses  such  a  mark  upon  goods,  or 
who  transmits  or  sells  such  goods,  or  who  keeps  them  for  the  purpose  of  trans- 
mitting or  selling, 

(3)  A  person  who,  withoiit  obtaining  registration,  uses  in  an  advertisement, 
signboard,  or  handbill,  etc.,  a  trade-mark  which  is  marked  as  registered,  or  to 
which  a  deceptive  mark  which  suggests  that  it  has  been  registered  is  applied. 

Patent  law. — Article  93,  section  2,  of  the  Patent  Law  No.  23  of 
April  2,  1909,^  relates  to  the  use  of  fraudulent  or  deceptive  marks  in 
connection  with  patents. 

Art.  93.  Persons  who  come  under  any  one  of  the  following  subheadings  shall 
be  punished  with  penal  servitude  for  a  period  not  exceeding  three  years,  or  with 
a  fine  not  exceeding  500  yen: 

(1)  A  person  who  obtains  a  patent  by  a  fraudulent  act. 

(2)  A  person  who  marks  a  tiling  which  is  not  patented  or  the  vessel  or 
wrapper  that  contains  it  as  though  it  were  patented,  or  who  puts  a  deceptive 
mark  upon  it,  or  who  sells  or  circulates  such  falsely  marked  things. 

(3)  A  person  who,  for  the  purpose  of  sale  or  circulation  of  a  thing  or  process 
which  is  not  patented,  or  for  the  purpose  of  causing  the  use  of  a  process  which 
is  not  patented,  makes  it  appear  in  an  advertisement,  signboard,  or  handbill 
that  the  thing  or  process  is  patented,  or  puts  a  deceptive  mark  on  it  which  would 
lead  one  to  think  that  it  was  patented. 

Law  of  designs. — Article  2.5  of  the  Law  of  Designs  No.  24  of 
April  2,  1909,-  relates  to  fraudulent  or  deceptive  designs. 

Art.  25.  Persons  who  come  under  any  one  of  the  following  subheadings  shall 
be  punished  with  penal  servitude  for  a  period  not  exceeding  one  year,  or  with  a 
fine  not  exceeding  300  yen: 

1  Patent  and  Trade-Mark  Review,  Vol.  VII,  pp.  2801,  2813. 

2  Patent  and  Trade-Mark  Review,  Vol.  VII,  pp.  2837,  2840. 


TEUST   LAWS  AND   UNFAIR  COMPETITION.  697 

(1)  A  person  who  obtains  registration  of  a  design  by  a  fraudulent  act. 

(2)  A  person  wlio  marlvs  a  thing  to  which  a  registered  design  has  not  been 
applied,  or  its  receptacle  or  wrapper  as  though  the  design  were  registered,  or 
wlio  puts  a  deceptive  mark  on  it,  or  who  sells  or  circulates  such  falsely  marked 
things. 

(3)  A  person  who,  for  the  purpose  of  sale  or  distribution  of  a  thing  to  which 
a  registered  design  has  not  been  ajjplied,  makes  it  appear  in  an  advertisement, 
signboard,  or  handbill  that  a  registered  design  has  been  applied  to  it,  or  puts 
any  deceptive  mark  upon  it  which  would  lead  one  to  think  so. 

Section  26.  International  agreements  regarding  unfair  competition. 

Introductory. — The  special  laws  regarding-  unfair  competition  of 
some  countries,  such  as  Germany,  contain  provisions  regarding  the 
rights  of  foreigners  to  the  protection  afforded.  As  a  rule,  how- 
ever, this  matter  is  settled  by  international  agreement.  The  United 
States,  for  instance,  has  entered  into  conventions  for  the  protec- 
tion of  industrial  property  with  some  19  foreign  countries.  There 
are  also  various  international  agreements  in  existence,  some  official 
and  some  private,  which  provide  uniform  regulations  for  the  protec- 
tion of  certain  forms  of  industrial  property.  Most  important  of 
the  public  agreements  is  that  of  the  "  International  Union  for  the 
Protection  of  Industrial  Property." 

International  Union  for  the  Protection  or  Industrial  Prop- 
erty.— As  early  as  1873  the  International  Patent  Congress  in  Vienna 
proposed  an  international  agreement  for  the  uniform  legal  protec- 
tion of  patents.^  The  International  (^ongress  for  the  Protection  of 
Industrial  Property  at  Paris,  in  1878,  concurred  in  this  plan,  and  the 
movement  finallv  culminated  in  1883  in  the  ors^anization  of  the  "  In- 
tei-national  Union  for  the  Protection  of  Industrial  Propertj^ "  at 
Paris. 

The  Paris  agreement  of  this  union  of  INIarch  20,  1883,  together 
with  the  Madrid  protocol  of  April  l."),  ISOl,  were  revised  and  modified 
at  Brussels  on  December  4,  1900,  and  signed  at  AVashington  on  June 
2,  1911,  by  the  following  members  of  the  Union:  Germany,  Austria, 
Hungary,  Belgium,  United  States  of  Brazil,  Cuba,  Denmark,  Domin- 
ican Republic,  Spain,  United  States  of  America,  France,  Great  Brit- 
ain, Italy,  Japan,  United  States  of  Mexico,  Norway,  Netherlands, 
Republic  of  Portugal,  Servia,  Sweden,  Switzerland,  and  Tunis. 

Articles  2  and  10""  of  this  agreement,^  which  provide  for  the  sup- 
pression of  unfair  competition,  are  as  follows: 

Art.  2.  The  subjects  or  citizens  of  each  of  the  contracting  countries  shall  en- 
joy, in  all  other  countries  of  the  Union,  with  regard  to  patents  of  invention, 
models  of  utility,  industrial  designs  or  models,  trade-marks,  trade  names,  the 
.statements  of  place  of  origin,  suppression  of  imfair  competition,  the  nilvniitagos 

1  OstprriPth  nnrl  Axstpr  "  Dio  Tarispr  Konvontion."  Berlin,  100".  p.  IX. 
=  Convention  lietween  the  I'nited  State.s  and  other  Powers  for  the  protection  of  indnstrhil 
property  ;  Treaty  Series  No.  579,  Washington,  1913. 


698  EEPOET   OF   THE   COMMISSIONER  OF   CORPORATIONS. 

■\vhicli  the  respective  laws  now  grant  or  may  hereafter  grant  to  the  citizens  of 
that  country.  Consequently,  they  shall  have  the  same  protection  as  the  latter 
and  the  same  legal  remedies  against  any  infringements  of  their  rights,  pro- 
vided they  comply  with  the  formalities  and  requirements  imposed  by  the  Na- 
tional laws  of  each  State  upon  its  own  citizens.  Any  obligation  of  domicile  or 
of  establishment  in  the  country  where  the  protection  is  claimed  shall  not  be 
imposed  on  the  members  of  the  Union. 

Art.  10"'*.  All  the  contracting  countries  agree  to  assure  to  the  members  of 
the  union  an  effective  protection  against  unfair  competition. 

Article  6  of  this  agreement  provides  that  trade-marks  which  are 
admitted  to  registry  in  the  country  of  origin  shall  be  admitted  to 
registration  and  protected  by  all  of  the  members  of  the  Union  unless 
(1)  they  infringe  the  rights  of  third  parties  in  the  coimtry  where 
protection  is  sought,  (2)  are  not  distinctive  in  the  language  or 
custom  of  the  country  where  protection  is  sought,  or  (3)  are  con- 
trary to  morals  or  public  order. 

According  to  article  8  trade  names  are  protected  in  all  the  countries 
of  the  union  without  the  obligation  of  filing. 

Article  9  provides  that  any  product  bearing  illegally  a  trade-mark 
or  trade  name  is  prohibited  from  importation  and  shall  be  seized  or 
otherwise  disposed  of  by  the  country  of  importation. 

Article  10  relating  to  false  indications  of  origin  is  as  follows : 

Art.  10.  The  provisions  of  the  preceding  article  shall  be  applicable  to  any 
product  bearing  falsely,  as  indication  of  place  of  production,  the  name  of  a 
definite  locality,  when  this  indication  shall  be  joined  to  a  fictitious  or  borrowed 
trade  name  with  an  intention  to  defraud. 

As  interested  party  is  considered  any  producer,  manufacturer,  or  merchant, 
engaged  in  the  production,  manufacture  or  commerce  of  such  product,  and 
established  either  in  the  locality  falsely  indicated  as  place  of  production  or  in 
the  region  where  this  locality  is  situated. 

In  the  final  protocol  it  was  agreed  that  "  the  words  '  propriete 
industrielle '  (industrial  property)  should  be  taken  in  their  broadest 
acceptation  " ;  they  extend  to  all  production  in  the  domain  of  agricul- 
tural industries  (wines,  grains,  fruits,  animals,  etc.),  and  extractives 
(minerals,  mineral  water,  etc.)." 

At  the  Washington  congress  the  Belgian  delegate  made  the  explicit 
reservation  with  regard  to  article  10'^'^  that  those  countries  which 
do  not  have  a  special  law  for  the  suppression  of  unfair  competition 
shall  not  be  obliged  to  enact  any. 

Great  Britain  desired  that  the  Union  should  add  the  following 

clause  to  article  10''^^: 

The  term  "  unfair  competition  "  shall  extend  especially  to  the  affixing  to  mer- 
chandise or  products,  conjointly  or  not  with  a  trade-mark,  of  figures,  words,  or 
other  indications  calculated  to  make  one  believe  or  suppose  that  they  come  from 
a  person  other  than  he  who  has  actually  produced  or  sold  them. 

This  amendment  was  not  adopted,  however,  by  the  union  on  ac- 
count of  the  objection  of  the  Austrian  delegate,  whose  instructions 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  699 

did  not  allow  the  acceptance  of  any  special  agreement  which  would 
anticipate  the  legislation  in  course  of  enactment  by  his  Government.^ 
Eegarding  the  rights  of  foreigners,  section  28-  of  the  German 
unfair  competition  law  of  1909  provides : 

Whoever  does  not  possess  a  principal  place  of  business  within  the  country 
has  a  claim  to  the  protection  of  this  law  only  in  so  far  as  in  tlie  State  in  wliich 
his  principal  place  of  business  is  found.  German  manufacturers  enjoy  a  corre- 
spondinj?  protection,  according  to  an  announcement  contained  in  the  Imperial 
Gazette. 

However,  this  section  no  longer  applies  to  the  members  of  the  Paris 
Union,  since  the  adoption  of  article  10'''^ 

The  German  courts  have  repeatedly  upheld  article  10'^'''  of  the 
Paris  CouA'ention  as  amended  at  Brussels. 

In  the  case  of  the  Eagle  Oil  Co.  of  New  York  v.  Vacuum  Oil  Co.,  the 
Imperial  Court  ^  considered  the  question :  Whether  a  stock  company, 
which  is  located  and  has  its  main  office  in  the  United  States,  may  in- 
voke the  protection  of  the  German  unfair  competition  law  of  May  27, 
1896,  even  if  it  maintains  no  branch  establishment  in  the  German 
Empire.  The  court  held  as  follows :  According  to  article  10""  of  the 
Paris  Convention,  together  with  the  Brussels  amendment  of  Decem- 
ber 14,  1900,  all  contracting  parties  enjoy  the  protection  against  un- 
fair competition  which  exists  in  each  of  the  individual  States.  As 
regards  Germany  it  must  be  taken  into  account  also  that  section  16 
of  the  unfair  competition  law  of  1896  (sec.  28  of  the  law  of  1909),  re- 
quiring a  main  establishment,  was  drafted  mainly  from  the  Adewpoint 
of  reciprocity,  and  that  therefore  its  maintenance  is  irreconcilable 
with  the  purpose  of  article  lO'^'*'.  Henceforth,  a  German  whose  main 
establishment  is  not  located  in  the  German  Empire,  but  in  one  of  the 
other  States  belonging  to  the  Paris  Union,  may  also  invoke  the  pro- 
tection of  the  unfair  competition  law  in  Germany,  which  he  was  un- 
able to  do  before.  The  appellate  court  has  rightfully  held  that, 
according  to  article  10"'^  of  the  Paris  Convention,  the  plaintiff,  a  stock 
company  whose  establishment  is  located  in  the  United  States  of 
America,  enjoys  in  Germany  the  protection  of  the  unfair  competition 
law,  even  if  it  has  no  branch  establishment  in  the  German  Empire. 

In  a  case  where  a  British  concern  brought  suit  against  a  German 
company  for  infringing  upon  the  trade  name  "  Liebig,"  to  which  the 
former  claimed  the  exclusive  right  of  use,  the  Imperial  Court  held 
that,  since  the  British  concern  had  been  denied  the  exclusive  use  by 
the  courts  of  its  own  country  on  the  grounds  that  the  name  in  disjnite 
had  become  a  matter  of  public  ownership,  no  grounds  for  an  action 
existed  in  a  German  court.* 

*"Actea  de  la  Conference  r^iinie  h  Washington,"  Berne,  1911,  p.  305. 
=  Section  16  of  the  hiw  of  ISIMJ. 

3  Urt.  V.  3.  Miirz  1905  ;  Entsch.  d.  Reichsgerichts  in  Zivilsaclien,  1905,  Ud.  GO.  S.  :217  fol. 
*  I'rt.  V.  13.  Nov.  1897  :  Kntsih.  d.  Reichsgeiichts  in  Clvilsachen,  Bd.  40,  1898,  S.  61. 
See  also  ibid.,  Bd.  46,  S.  125. 


700  KEPOET   OP   THE   COMMISSIONER   OF   COEPOEATIONS. 

In  the  case  of  an  Austrian  merchant,  whose  place  of  business  was 
located  in  Austria,  and  who  brought  suit  against  a  German  competi- 
tor for  unfair  acts  of  competition  committed  in  Berlin,  the  Imperial 
Court  decided  that  since  Austria  had  become  a  member  of  the  Paris 
Union  the  German  unfair  competition  law  of  1909,  as  well  as  the  Ger- 
man Civil  Code,  were  applicable  to  the  case  at  issue,  and  that  to 
Austrian  citizens  the  same  rights  were  accorded  as  to  citizens  of  the 
German  Empire.^ 

International  agreement  for  the  prevention  of  false  indica- 
tion or  origin  on  goods, — On  April  14,  1891,  an  international  agree- 
ment for  the  prevention  of  false  indications  of  origin  on  goods  was 
entered  into  at  Madrid  and  revised  at  Washington  June  2,  1911,  by 
the  following  countries:  Brazil,  Cuba,  Spain,  France,  Great  Britain, 
Portugal,  Switzerland,  and  Tunis.-  This  agreement  contains  the 
following  provisions : 

Akt.  1.  All  goods  bearing  a  false  indication  of  origin  in  which  one  of  the  Con- 
tracting Countries,  or  a  place  situated  therein,  shall  be  directly  or  indirectly 
indicated  as  being  the  country  or  place  of  origin,  shall  be  seized  on  importation 
into  any  of  the  said  countries. 

The  seizure  shall  also  take  place  either  in  the  country  where  the  false  indica- 
tion of  origin  has  been  applied,  or  in  that  into  which  the  goods  bearing  the  false 
indication  may  have  been  imported. 

If  the  law  of  any  country  does  not  permit  seizure  on  impoi'tation,  such  seizure 
shall  be  replaced  by  prohibition  of  importation. 

If  the  law  of  any  country  does  not  permit  seizure  in  the  interior,  such 
seizure  shall  be  replaced  by  the  remedies  assured  in  such  case  to  natives  by  the 
law  of  such  country. 

Art.  2.  The  seizure  shall  take  place  at  the  request  either  of  the  proper  Gov- 
ernment Department  or  of  any  competent  authority,  such,  for  example,  as  the 
Customs  Administration  or  of  an  interested  party,  whether  individual  or  society, 
in  conformity  with  the  domestic  law  of  each  country. 

The  authorities  are  not  bound  to  effect  the  seizure  of  goods  in  transit. 

Art.  3.  The  present  stipulations  are  not  intended  to  prevent  the  vendor  from 
indicating  his  name  or  address  upon  goods  coming  from  a  countiy  other  than 
where  the  sale  takes  place;  but  in  such  case  the  address  or  the  name  must  be 
accompanied  by  a  clear  indication  in  legible  characters  of  the  country  or  place 
of  manufacture  or  production. 

Art.  4.  The  Tribunals  of  each  country  will  decide  what  appellations,  on  ac- 
count of  their  generic  character,  do  not  fall  within  the  provisions  of  the  present 
Arrangement,  regional  appellations  concerning  the  origin  of  products  of  the  vine 
being,  howe\er,  not  comprised  in  the  reserve  specified  by  the  present  article. 

International  agreement  regarding  the  registration  of  trade- 
marks.— An  international  agreement  for  the  registration  of  trade- 

1  Reichsgerlcht,  Urt.  v.  16.  Mai,  1911 ;  Zeitschrift  fiir  Intemat.  Recht.,  Bd.  2?!,  lOl.*?. 
S.  :}.50. 

-Papers  and  Correspondence  relative  to  the  Recent  Conference  at  Washington  for  the 
revision  of  the  International  Convention  for  the  Protection  of  Industrial  Property  and  the 
Arrangement  for  the  Prevention  of  False  Indications  of  Origin  on  Goods,  London,  1912, 
p.  114. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  701 

marks  was  established  at  Madrid,  April  14,  1891.^     It  was  revised  at 
Brussels  December  14,  1900,  and  at  Washington  June  2,  1911. 

The  following  countries  are  parties  to  this  agreement:  Austria, 
Hungaiy,  Belgium,  Brazil,  Cuba,  Spain,  France,  Italy,  Mexico,  Hol- 
land, Portugal,  Switzerland,  and  Tunis.  Articles  1  and  4  are  of 
special  interest. 

Art.  1.  The  subjects  or  citizens  of  each  of  the  contracting  countries  may 
secure  protection  for  their  trade-marlis  of  industry  or  commerce,  providing  they 
have  been  admitted  for  registry  in  the  country  of  origin,  in  all  the  other  coun- 
tries by  registering  said  marks  with  the  international  bureau  at  Berne  througli 
the  agency  of  the  country  of  origin. 

Art.  4.  Upon  tlie  registration  of  tlie  marl<:  at  the  international  bureau  being 
made,  the  protection  of  the  mark  in  each  of  the  contracting  countries  will  be  the 
same  as  if  said  marks  had  been  directly  registered  there.     *     *     * 

Association  for  CreatinCx  a  World  Trade-Mark. — On  October  8, 
1911,  the  Association  for  Creating  a  World  Trade-Mark  (Gesell- 
schaft  fiir  Weltmarkenrecht)  Avas  organized  at  Berlin,  with  cooper- 
ating branches  in  19  countries.  The  purpose  of  this  association  is  to 
create  a  uniform  trade-mark  law  which  will  be  recognized  and  afford 
protection  in  all  parts  of  the  world.^ 

Berne  agreement  for  the  protection  of  works  of  literature 
AND  ART. — An  international  agreement  for  the  protection  of  works 
of  literature  and  art  was  established  at  Berne  on  September  9,  1886, 
and  amended  at  Paris,  May  4,  1896,  and  on  November  13,  1908.  The 
following  countries  were  parties  to  this  agreement:  Belgium;  Den- 
mark, with  its  colonies;  Germany;  France,  with  its  colonies;  Great 
Britain,  with  its  colonies  and  possessions;  Italy;  Japan;  Liberia; 
Luxemburg;  Monaco;  Norway;  Sweden;  Switzerland;  Spain,  with 
its  colonies;  Tunis;  and  Portugal,  with  its  colonies.^ 

According  to  articles  1  and  2,  the  contracting  countries  constitute 
a  leag-ue  for  protecting  the  copyright  of  works  of  literature,  art, 
and  science,  including  books,  brochures,  and  other  literary  works, 
dramatic,  musical,  choreographic,  and  pantomime  productions.  To 
authors  who  are  citizens  of  one  of  those  countries  such  protection  is 
guaranteed  in  all  the  other  countries  except  the  country  of  origin 
of  the  works,  as  the  respective  laws  grant  to  domestic  authors  or  shall 
grant  in  the  future,  as  well  as  the  rights  especially  stipulated  in  this 
agreement  (art.  4).  Protection  is  granted  not  only  for  nonpublished 
works,  but  also  for  works  published  for  the  first  time  in  one  of  the 
countries  belonging  to  the  league. 

Middle-European  Economic  Association. — The  Middle-European 
Economic  Association,  formed  b)^  the  delegates  from  Germany,  Aus- 
tria, Hungary,  and  Belgium,  at  its  seventh  conference  in  Brussels, 

1  Arraneroment  do  Madrid  pour  I'cnregiRti-cinoi.t  international  dcs  marqnos. 

=  Marlienscluitz  und  Wi'tlbevvorb,  I?d.  XI.,  pp.  28,  120. 

=' Katz  ;  Textausj^abo  dor  yesamten  deutsclion  Gosetzfiobuiii;  und  dor  internal ionalon  und 
Sondorvertrtige  des  doutsclion  Roicbos  auf  dom  Gebiete  des  Ratent,  Mustor  und  Zcichcn- 
wesens  und  des  Urheberrechts.    Berlin,  1912,  S.  198. 


702  EEPOET   OP   THE   COMMISSIONER   OF    COEPOEATIONS. 

April,  1912,^  and  its  eighth  conference  at  Budapest  January,  1914, 
discussed  and  formuhited  phms  for  simplifying  and  making  more 
uniform  the  laws  relating  to  unfair  competition  in  the  countries  com- 
prising this  association.  At  the  Budapest  meeting  it  was  recom- 
mended by  several  delegates  that  the  Governments  of  the  different 
States  represented  enact  uniform  legislation  for  the  suppression  of 
such  unfair  j^ractices  of  competition,  as  fsilse  advertisements  regard- 
ing quantity  and  quality,  misappropriation  and  misuse  of  distinguish- 
ing marks  for  the  purpose  of  enticing  customers,  disparaging  com- 
petitors, betrayal  or  other  violation  of  trust  or  spying  out  of  business 
and  trade  secrets  and  fraudulent  clearance  sales. 

In  addition  to  this  casuistic  enumeration  of  certain  practices  of 
unfair  competition,  the  adoption  of  a  supplementary  general  clause 
was  also  recommended  which  would  enable  the  courts  to  reach  other 
practices  of  unfair  competition  that  are  grossly  repugnant  to  good 
morals.^ 

Sixth  International  Congress  of  Chambers  of  Commerce  and 
CoiMMERciAL  AND  INDUSTRIAL  ASSOCIATIONS. — At  the  Sixtli  Inter- 
national Congress  of  Chambers  of  Commerce  and  of  Commercial  and 
Industrial  Associations  at  Paris,  June,  1914,  one  of  the  leading  sub- 
jects on  the  program  was  "  The  advisability  of  international  action 
against  unfair  competition  in  the  sense  of  the  existing  laws."  Several 
special  reports  on  this  subject  Avere  embodied  in  the  proceedings  of 
the  special  committee  on  unfair  competition. 

The  "Association  des  Anciens  Eleves  de  I'Ecole  des  Hautes  Etudes 
Commerciales,"  in  a  special  report  submitted  by  it,  proposed  that  the 
congress  should  inaugurate  an  international  action  for  the  suppres- 
sion of  unfair  competition  on  the  basis  of  the  following  program : 

1.  Legislation: 

(«)   The  general  adoption  internationally  of  the  French  system 

of  article  1382  of  the  Civil  Code." 
{b)   Recognition  of  unfair  competition  in  all  countries  as  a  penal 

offense,  in  order  to  permit  the  public  ministry  to  initiate 

action. 

2.  Procedure: 

Installation  at  Berne  of  a  service  for  the  suppression  of  unfair 
competition,  whose  duty  it  shall  be  {a)  to  furnish  information 
to  merchants  regarding  everything  that  relates  to  bringing 
suit  in  any  tribunal  of  a  country  signatory  to  the  conventions 
of  Paris,  Brussels,  and  Washington;  (5)  to  notify  the  public 
ministry,  that  has  jurisdiction,  of  cases  of  unfair  competition.^ 

1  Verhandlungen  der  Mitteleuropaischen  Wirtschafts-Konferenz  in  Briissel,  1912,  p.  289  ; 
Budapest,  1914,  pp.  39,  301. 

=  Pfstoi-  Lloyd,  Jan.  4,  1914. 

"  Rapport  prescnte  au  nom  de  T.Vssociation  dos  Anciens  filfeves  de  I'Ecole  des  Hautes 
Etudes  Commerciales,  par  M.  Depuicbault,  Liege,  1914. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  703 

The  subcommittee  on  unfair  competition  in  its  report  recom- 
mended ^  that  every  nation  should  make  an  effort  to  render  efficacious 
the  resohitions  of  the  Washington  convention  and  proposed  that  the 
congress  should  restrict  itself  to  one  special  phase  of  unfair  competi- 
tion, viz,  corruption  and  corruptive  practices,  which  affect  not  only 
the  countries  where  they  are  carried  on,  but  international  commerce 
equally,  and  therefore  require  international  intervention  for  their 
suppression. 

The  subcommittee  submitted  resolutions  to  the  effect  that  (1)  the 
congress  should  name  a  special  committee  to  study  the  different 
phases  of  unfair  competition  which  require  legislative  intervention ; 
(2)  the  congress  should  insist  upon  the  necessity  of  special  legisla- 
tion, as  uniform  as  possible,  in  all  countries  for  the  suppression  of 
corruption.  It  recommended  further  that  prohibited  acts  should  be 
made  punishable  as  a  crime  by  the  penal  code  of  each  country,  but 
that  civil  prosecution  should  be  allowed,  which  would  enable  the 
victims  of  bribery  to  procure  compensation  for  injuries  sustained. 
The  congress  held  that  such  special  legislation  should  facilitate  the 
prosecution  of  corrupt  practices  and  should  confer  the  right  of  in- 
itiative not  only  upon  the  public  ministry,  but  also  upon  associations 
and  individuals.- 

FouKTH  International  American  Conference  at  Buenos 
Aires. — At  the  Fourth  International  American  Conference  at  Buenos 
Aires,  June  9  to  August  30,  1910,  the  following  three  conventions  re- 
lating to  industrial  property  were  entered  into,  subject  to  ratification 
by  the  proper  authorities  of  the  countries  represented,  viz,  United 
States  of  America,  Argentina,  Brazil,  Chile,  Colombia,  Costa  Rica, 
Cuba,  Dominican  Republic,  Ecuador,  Guatemala,  Haiti,  Honduras, 
Mexico,  Nicaragua,  Panama,  Paraguay,  Peru,  Salvador,  Uruguay, 

and  Venezuela:^ 

(1)  The  convention  relating  to  inventions,  patents,  designs,  and 
industrial  models.  This  convention  was  signed  by  the  President  of 
the  United  States  on  July  29,  1914.^  Article  IX  relates  to  liability 
incurred  for  injuring  the  rights  of  inventors. 

Art.  IX.  Persons  who  incur  civil  or  criminal  liabilities,  bocanse  of  injuries  or 
tianiuge  to  the  rights  of  inventors,  shall  be  prosecuted  and  punished  in  accord- 
ance with  the  laws  of  the  countries  wherein  the  offense  has  been  committed  or 
the  damage  occasioned. 

(2)  The  convention  relating  to  protection  of  trade-marks  of 
August  20,  1910.     Article  VIII  of  this  convention  relates  to  falsifica- 

1  Sous-ComitS  de  la  concurrence  deloyalo,  Rapport. 
-  Rajjport.  pp.  7-S. 

spatcnf  and  Tradc-lNIark  Ri'viow.  Vol.  IX.  p.   3442.  fol. 
*ratent  and  Trade-Mark  Review,  Vol.  XII,  p.  367. 


704  REPOET    OP    THE   COMMISSIONER  OP   CORPORATIONS. 

tion  or  unauthorized  use  of  a  trade-mark,  and  Article  X  to  the  pro- 
tection of  commercial  names.     These  articles  are  as  follows : 

Art.  VIII.  The  fulsification,  imitation,  or  unauthorized  use  of  a  trade-mark, 
as  also  the  false  representation  as  to  the  origin  of  a  product,  sliall  be  prosecuted 
by  the  interested  party  in  accordance  witli  the  laws  of  the  State  wherein  the 
offense  is  committed. 

For  the  effects  of  this  article,  interested  parties  shall  be  understood  to  be  any 
producer,  manufacturer,  or  merchant  engaged  in  the  production,  manufacture, 
or  traffic  of  said  product,  or  in  the  case  of  false  representation  of  origin,  one 
doing  business  in  the  locality  falsely  indicated  as  that  of  origin,  or  in  the  ter- 
ritory in  which  said  locality  is  situated. 

AiiT.  X.  Commercal  names  shall  be  protected  in  all  the  States  of  the  Union, 
without  deposit  or  registration,  whether  the  same  form  part  of  a  trade-murk  or 
not. 

Articles  XI  to  XVI  provide  for  the  establishment  of  two  inter- 
national bureaus,  one  at  Habana,  Cuba,  to  have  charge  of  the  regis- 
tration of  trade-marks  coming  from  the  countries  of  North  and  Cen- 
tral America,  and  the  other  at  Rio  de  Janeiro  to  have  charge  of  the 
registration  of  trade-marks  from  the  South  American  countries. 

According  to  Article  XVI,  the  Republic  of  Cuba  and  of  the  United 
States  of  Brazil  shall  proceed  with  the  organization  of  these  bureaus 
upon  the  ratification  of  the  convention  by  at  least  two-thirds  of  each 
group.  The  Patent  and  Trade-Mark  Review  for  May,  1913,^  states 
that  six  States  had  at  that  time  ratified  the  convention,  all  belonging 
to  the  northern  group.  As  soon  as  two  more  States  ratified  the  con- 
vention the  Government  of  Cuba  could  proceed  to  the  organization 
of  the  bureau. 

(3)  The  convention  relating  to  literary  and  artistic  copyright  of 
August  11,  1910.  This  convention  was  signed  by  the  President  of 
the  United  States  on  July  13,  1911.- 

1  Patent  and  Trado-Mark  Review,  Vol.  XI,  p.  228. 
2 Patent  and  Trade-Mark  Review,  Vol.  XII,  p.  329. 


CHAPTER  XI. 

ACTIVITIES  OF  TRADE  ASSOCIATIONS  AND  THEIR  RELATION  TO 
LAWS  CONCERNING  COMPETITION. 

Section  1.  Introductory. 

The  remarkable  growth  of  trade  associations  makes  this  form  of 
cooperation  of  especial  importance  in  the  consideration  of  legislation 
against  restraint  of  trade  and  unfair  competition.  A  trade  association 
is  an  efficient  means  by  which  those  engaged  independently  in  a  par- 
ticular line  of  trade  may  redress  wrongs  and  improve  conditions 
through  collective  action.  It  is  capable  of  symbolizing  the  highest 
ideals  in  trade,  or  of  expressing  that  which  invites  the  odium  of  public 
censure  and  legal  penalt}'.  Directed  within  legal  limits  and  along 
proper  lines,  it  may  accomplish  much  good,  but,  if  ostensibl}^  formed 
for  a  legitimate  purpose,  when  in  reality  designed  to  accomplish  ille- 
gal or  questionable  ends,  it  will  result  in  much  harm.  To  cover  all  of 
the  conditions  under  which  trade  associations  would  be  beneficial,  or 
to  point  out  the  line  of  demarcation  between  combinations  6f  circum- 
stances under  which  they  would  or  would  not  be  legal,  is  beyond  the 
scope  and  intent  of  this  chapter,  which,  in  its  fij-st  part,  is  limited  to 
brief  descriptions  of  the  purposes  and  activities  of  trade  associations 
as  indicated  by  their  constitutions,  by-laws,  and  similar  published 
public  material,  and  in  its  second  part,  to  a  brief  treatment  of  selected 
cases  wherein  the  activities  of  trade  associations  have  been  judicially 
questioned.  These  cases  are  arranged  so  as  to  show  chiefly  the  classes 
of  association  activities  which  have  formed  the  basis  of  legal  action. 

GENERAL   CHARACTER  AND   PURPOSE   OF   TRADE   ASSOCIATIONS. 

Section  2.  Classification  of  trade  associations. 

As  employed  in  this  chapter  the  term  "trade  associations"  com- 
prises associations  of  manufacturers,  dealers  (wholesale  or  retail), 
and  producers  of  raw  materials,  such  as  mining  companies  and  agi'i- 
cultural  enterprises,  in  so  far  as  their  activities  relate  to  the  promo- 
tion of  the  commercial   aspects  of  the  business.^     Occasionally   a 

1  Boards  of  trade,  cham))ers  of  commerce,  aud  similar  general  promotive  organizations 
have  been  omitted,  as  uot  bearing  sufficiently  upon  particular  industries  :  also,  most  of  the 
general  nmnufacturers'  associations,  except  tlie  National  Association  of  Manufacturers 
and  tlie  National  Federation  of  Retail  Merchants.  I>al)or  unions  have  been  omitted; 
also  associations  of  professional  men  anil  purely  technical  societies,  unless  their  work 
is  part  of  the  activity  of  an  association  clearly  industrial  in  character. 

30035°— 10 45  705 


706  KEPOET   OF    THE   COMMISSIONER   OF   COEPOEATIONS. 

mixed  association  includes  both  manufacturers  and  dealers  in  the 
same  industry  or  in  related  industries. 

Associations  may  be  further  classed  into  local,  State,  and  inter- 
state or  national.  The  few  associations  Avhich  are  international  in 
their  scope  are  classed  here  with  interstate  and  national  associations. 

The  members  of  some  of  these  associations  are  individual  business 
concerns;  others,  particularly  those  of  national  scope,  have  as  mem- 
bers other  associations.  The  National  Federation  of  Implement  and 
Vehicle  Dealers'  Associations,  for  instance,  is  composed  of  delegates 
from  State  and  interstate  associations  of  implement  and  vehicle 
dealers. 

Section  3.  Association  activities  looking  toward  general  promotion  of  the 
industry. 

The  first  and  most  general  object  of  most  trade  associations,  as 
stated  in  their  by-laws  or  constitutions,  is  to  advance  the  general 
prosperity  of  the  industry.  "  This  association,"  says  one,  "  is  formed 
for  the  purpose  of  promoting  the  welfare  of  the  flour  millers  of  the 
United  States."  Another  aims,  among  other  things,  "  to  promote 
fellowship  among  members  and  advance  the  welfare  of  trade  and 
commerce."  The  objects  of  an  association  of  retail  jewelers  are  "to 
unite  the  retail  jewelers  of  the  State  in  a  sentiment  promotive  of  the 
highest  welfare  of  the  trade ;  to  cause  the  elimination  of  unmercantile 
methods  and  practices;  to  encourage  the  supremacy  of  standards  of 
truth  and  honesty  in  all  jewelry  and  related  products;  and  in  gen- 
eral to  promote  measures  calculated  to  redound  to  the  material  and 
moral  advantage  of  retail  jewelers." 

In  actual  practice,  the  advancement  of  the  general  welfare  of  the 
industry  has  been  interpreted  to  cover  a  wide  field  of  activities,  from 
promoting  the  widest  use  of  the  product  to  "  safeguarding  legitimate 
profit "  in  various  ways. 

Section  4.  Publicity  of  product — Cooperative  advertising. 

A  variety  of  methods  have  been  adopted  by  associations  with  a 
view  to  increasing  the  demand  for  and  consumption  of  the  goods 
produced  or  handled  by  their  members.  The  principal  method  has 
been  the  use  of  extensive  general  advertising.  Many  associations 
have  made  heavy  appropriations  and  engaged  in  campaigns  intended 
to  acquaint  the  public  with  the  quality  and  usefulness  of  their 
members'  goods.  Others  have  given  their  attention  to  educating 
their  members  in  the  most  successful  methods  of  local  advertising. 
Advertising  experts  and  agencies  are  employed  to  make  the  best 
possible  presentation  of  the  subject.  Some  associations  publish 
books  and  pamphlets  or  issue  regular  publications  extolling  the 
merits  of  their  product.     Cooperative  advertising  for  securing  pub- 


TEUST   LAWS   AND    UNFAIR   COMPETITION.  707 

licity  of  product  has  not  been  confined  to  commodities  of  a  special 
and  unusual  nature,  but  has  also  been  applied  to  staple  articles. 
This  has  been  due  partly  to  the  competition  of  substitutes  for  these 
staple  articles.  Some  associations  provide  for  public  exhibitions  and 
demonstrations  of  their  products,  and  others  adopt  labels,  seals,  and 
designs,  for  the  purpose  of  identifying  and  popularizing  their  goods. 
There  is  a  movement  among  some  associations  to  adopt  a  trade-mark 
as  the  basis  of  still  more  extensive  advertising. 

Section  5.  Price  control. 

The  primary  purpose  of  the  more  elaborate  associations  of  manu- 
facturers is,  of  course,  to  increase  profits.  In  former  days  the  pur- 
pose to  maintain  prices  was  expressly  avowed  in  their  constitutions, 
and  carried  out  through  formal  agreements,  Avith  penalties  for  viola- 
tion. Often  the  agreements  limited  production  instead  of  directly 
fixing  prices;  the  purpose  and  the  general  effect  were  the  same. 
Agreements  on  prices  or  output  are  not  now  reduced  to  such  formal 
character,  because  of  the  increasingl}'  stringent  condemnation  of 
them  by  the  law,  and,  if  they  exist,  are  of  a  surreptitious  character. 
For  the  same  reason  the  avowal  of  the  purpose  to  sustain  prices  or 
limit  output  has  been  eliminated  from  the  association  constitutions. 
In  many  constitutions  a  formal  disavowal  of  any  such  purpose  has 
been  inserted  instead. 

Section  6.  Fixing  the  channels  of  trade;  opposition  to  "direct  selling"; 
the  '*  irregular  "  dealer. 

There  is  a  group  of  practices  complained  of  by  merchants,  chiefly 
by  retailers,  and  consisting  of  methods  of  distribution  which  the  mer- 
chants adversely  affected  regard  as  "  irregular  "  and  therefore  illegiti- 
mate. They  include  selling  by  manufacturers  and  jobbers  directly  to 
consumers;  selling  by  mail-order  houses;  selling  by  cooperative 
stores ;  selling  of  any  sort  of  goods  by  persons  not  regularl}^  engaged 
in  selling  them  or  not  maintaining  a  fixed  and  permanent  business 
place;  and  sales  by  an  established  retailer  outside  of  territory  which 
is  conceived  as  his.  The  restriction  of  any  of  these  forms  of  compe- 
tition may  be  described  as  fixing  the  channels  of  trade.  Even  the 
opposition  to  price  cutting  may  be  so  described  when  it  takes  the 
form  of  efforts  to  cut  off  the  supply  of  goods  from  price  cutters.  In 
various  lines,  including  groceries,  lumber,  and  coal,  the  retailers  have 
made  strenuous  efforts  through  association  activity  to  confine  trade 
to  "  legitimate  "  channels.  The  usual  method  is  to  shut  off  supplies — 
sometimes  by  bojxotting  manufacturers  and  wholesalers  who  sell  to 
persons  not  recognized  as  "  regular  "  dealers. 


708  EEPOET    OF    THE    COMMISSIONER   OE    COIlPOKATiONS. 

Section  7.  Uniform  terms. 

One  of  the  purposes  of  tenest  announced  in  the  preambles  of  associa- 
tion constitutions  is  "  to  produce  uniformity  and  certainty  in  the  cus- 
toms and  usages  of  the  trade."  Among  the  trade  terms  for  which  the 
need  of  definition  is  earliest  felt  are  the  designations  of  kinds  and 
grades  of  the  commodities  dealt  in.  In  respect  to  terms  of  sale,  the 
associations  whose  members  sell  in  wholesale  quantities  try  to  estab- 
lish uniformity  and  certainty  by  defining  trade  terms,  by  prescribing 
or  suggesting  the  ways  in  which  sales  shall  be  made  and  confirmed, 
by  restricting  cancellation  of  orders,  by  limiting  the  permissible  post- 
ponement of  shipment,  by  prescribing  the  manner  and  terms  of 
j)ayment,  etc.  Sometimes  the  uniformity  and  certainty  that  are 
sought  concern  not  so  much  normal  terms  of  sale  as  adherence  to 
such  terms. 

A  point  in  which  nominal  uniformity,  at  least,  establishes  itself 
almost  automatically  in  each  trade  is  the  customary  length  of  credit 
and  the  discount  for  cash.  Here,  therefore,  the  efforts  of  the  asso- 
ciations are  directed  to  the  enforcement  of  the  usual  terms,  and  to 
shortening  the  credit  and  diminishing  the  discount. 

Section  8.  Marketing  and  other  cooperative  associations. 

Somewhat  different  from  other  trade  associations  have  been  the 
marketing  and  other  cooperative  organizations  which  have  been 
formed  from  time  to  time.  Such  success  as  the  cooperative  associa- 
tions have  had  in  the  United  States  has  been  largely  among  farmers. 
Several  ambitious  plans  of  national  scope  have  been  formed,  and 
have  to  some  extent  succeeded.  Successes  quite  as  great  have  grown 
out  of  local  movements,  started  without  thought  of  extension. 

To  the  former  class  belong  the  Patrons  of  Husbandry,  the  Ancient 
Order  of  Gleaners,  and  the  American  Society  of  Equity.  To  the 
latter  belong  the  farmers'  elevator  companies.  These  elevator  com- 
panies, which  exist  to  the  number  of  1,500  or  more,  and  are  scattered 
all  through  the  grain-growing  States,  were  brought  into  existence  by 
the  methods  of  the  grain  business  as  handled  through  the  large  com- 
mission companies  in  Chicago.  These  commission  companies  estab- 
lished strings  of  local  elevators  throughout  the  grain  States  and 
"  froze  "  out  the  independent  elevator  man  by  overbidding  him  for  a 
time,  after  which  they  paid  the  farmer  whatever  they  pleased  for  his 
grain. 

There  are  several  very  important  cooperative-marketing  organiza- 
tions among  fruit  growers,  especially  in  California. 

Many  of  the  cooperative-selling  societies  buy  supplies  also  for  their 
members.  There  are  also  associations  exclusively  for  joint  buying; 
for  instance,  among  bakers. 


TRUST    LAWS   AND   UNFAIR    COMPETITION.  709 

Section  9.  Standardizing  materials,  processes,  or  products. 

This  is  a  matter  in  Avliich  many  associations  liave  greatly  inter- 
ested themselves.  Sometimes  such  standardization  is  subsidiary  to 
efforts  for  uniformity  of  prices,  but  this  is  by  no  means  always  so. 
Drug  associations,  for  instance,  have  interested  themselves  in  stand- 
ardization of  drugs;  millers  in  grading  of  grain  and  flour;  printers 
in  standard  sizes  and  weights  of  paper;  and  textile  manufacturers 
in  standardization  of  colors. 

Section  10.  Standard  cost  accounting. 

Associations  have  been  active  in  educating  their  members  as  to 
their  cost  of  doing  business,  sometimes  with  a  view  to  inducing 
them  to  charge  higher  or  more  uniform  prices.  "  Wlien  our  associa- 
tion was  organized  four  years  ago,"  said  the  president  of  an  associa- 
tion in  a  convention  address,  "  one  of  the  first  problems  we  had  to 
contend  with  was  the  low  prices  at  which  goods  were  being  sold.  It 
has  often  been  said  that  the  only  way  to  remedy  this  evil  was  to  let 
the  price  cutter  really  know  the  cost  of  his  goods.  Our  association 
found  the  surest  and  best  plan  to  accomplish  this  w^as  to  secure  a 
cost  expert  to  get  us  all  to  figure  our  costs  on  the  same  basis  and  by 
the  same  method." 

Section  11.  Improving  processes  or  product;  technical  activities. 

Many  associations  have  attempted  to  improve  their  product,  and 
also  to  simplify  their  processes  of  manufacture,  frequently  for  the 
purpose  of  improving  the  product,  sometimes  in  order  to  lessen  the 
cost  of  production.  Technical  improvements  of  processes  and  prod- 
ucts have  therefore  been  the  subject  of  active  discussion.  Indeed, 
there  are  associations  whose  meetings  are  devoted  more  to  technical 
than  to  business  questions.  Several  associations  in  the  metal  indus- 
tries have  largely  a  technical  character.  Several  connected  with  food 
production  have  given  much  attention  to  improvement  of  quality. 

Section  12.  Credit  bureaus. 

One  of  the  main  activities  of  a  number  of  trade  associations  is  the 
supplying  of  credit  ratings.  In  a  number  of  instances  it  is  set  forth 
as  one  of  the  purposes  of  the  organization. 

Information  on  credit  conditions  is  usually  collected  through  a 
credit  bureau  or  credit  department  connected  with  the  secretary's 
office.  In  some  instances  national  associations  maintain  credit  bu- 
reaus merely  for  the  purpose  of  establishing  credit  departments  in 
the  local  associations  and  standardizing  sets  of  credit-system  blanks 
to  facilitate  the  exchange  of  credit  information,  but  the  most  im- 
portant and  effecti\e  ones  are  maintained  primarily  by  the  national 
associations. 


710  KEPOET    OF    THE    COMMISSIONER    OF    CORPOEATIONS. 

The  information  collected  by  these  credit  bureaus  is  in  most  cases 
the  result  of  an  exchange  of  actual  "  ledger  experiences."  The  mem- 
bers of  the  association  make  reports  to  the  secretary,  showing  how 
bills  are  paid,  amounts  overdue,  etc.  In  some  cases  the  constitution 
or  by-laws  make  it  the  duty  of  members  to  report  such  information. 
In  most  cases  there  is  no  penalty  for  failing  to  supply  such  informa- 
tion, but  only  the  members  w'ho  supply  the  information  are  entitled 
to  receive  it. 

In  many  instances  the  secretary  prepares  a  list  of  "  delinquent " 
or  "  questionable  "  concerns  at  regular  intervals,  and  mails  it  to  the 
members,  sometimes  giving  the  names  of  members  furnishing  the 
information,  but  oftener  merely  requesting  members  to  correspond 
with  the  secretary's  office  before  dealing  with  such  concerns.  Several 
important  associations  publish  regidar  credit-rating  books. 

Section  13.  Collection  agencies. 

A  few  trade  associations  undertake  to  collect  debts  for  their  mem- 
bers. In  one  instance  collections  seem  to  be  the  main  activity  of  the 
organization,  while  in  others  it  is  stated  to  be  one  of  the  purposes  for 
which  the  association  w^as  organized.  Collections  are  made  by  both 
local  and  national  associations.  In  some  cases  the  collection  depart- 
ment is  maintained  in  connection  with  the  credit  information  depart- 
ment. The  volume  of  business  done  by  some  of  the  collection  bureaus 
is  large. 

A  few  associations  maintain  bureaus  of  bankruptcy  in  addition 
to  the  collection  bureaus,  whose  duty  is  to  handle  bankruptcy  cases 
in  which  members  are  interested. 

Section  14.  Traffic  matters. 

One  of  the  main  activities  of  trade  associations  is  taking  care  of 
their  members  in  matters  growing  out  of  their  relations  with  the 
transportation  companies.  This  is  usually  done  through  an  orga- 
nized department  of  the  association,  variously  called  "  committee  on 
freight  rates,''  "  transportation  committee,"  "  traffic  committee," 
"railroad  department,"  or  some  similar  name.  An  incidental  work 
in  this  connection  is  keeping  members  informed  as  to  traffic  regu- 
lations; but  the  important  Avork  of  associations  in  regard  to  traffic 
matters  is  representing  the  interest  of  their  members  in  such  matters 
as  traffic  regulations;  freight  rates,  including  classifications;  bills 
of  lading;  adjustment  and  collection  of  claims;  and,  in  few  instances, 
express  rates  and  telephone  and  telegraph  matters. 

A  most  important  part  of  the  work  of  the  traffic  department  of  the 
trade  association  is  obtaining  favorable  freight  rates  for  its  members. 
Occasional  action  is  taken  to  secure  lower  rates,  but  they  are  con- 


TRUST   LAWS   AND   UNFAIR  COMPETITION.  Vll 

tinually  on  the  defensive  trying  to  prevent  an  increase  of  existing 
rates.  The  famous  "  5  per  cent  increase  "  recently  granted  the  east- 
ern raihoads  by  the  Interstate  Commerce  Connnission  was  vigorously 
opposed  by  the  trade  associations  throughout  the  country.  A  pro- 
posed increase  in  the  minimum  carload  of  certain  commodities  is 
opposed  by  associations  whose  members  are  affected  by  such  changes, 
for  the  reason  that  it  would  tend  to  increase  the  number  of  less-than- 
carload  shipments  of  such  commodities  at  higher  rates.  Some  articles 
packed  in  uniform  packages  have  an  accepted  weight  per  unit,  and 
trade  associations  oppose  any  attempt  of  the  railroads  to  increase 
this  weight.  A  common  way  of  increasing  rates  is  by  transferring 
articles  from  a  lower  to  a  higher  class.  When  such  change  is  pro- 
posed the  shippers  of  the  article  in  question  may  file  protests  and 
attend  the  hearings,  first  before  the  classification  committee  through 
which  the  change  is  proposed  and  then  before  the  Interstate  Com- 
merce Commission. 

Some  activity  is  shown  among  associations  in  the  matter  of  secur- 
ing favorable  express  rates  and  telephone  and  telegraph  regulations. 
Some  associations  have  worked  to  induce  railroads  to  construct  suit- 
able cars  and  to  keep  shippers  better  supplied  with  cars. 

Bills  of  lading  are  receiving  considerable  attention  from  trade 
associations.  They  are  seeking  to  secure  the  passage  of  a  national 
law  under  which  a  uniform  bill  of  lading  may  be  framed. 

A  great  many  trade  associations  undertake  to  collect  claims  against 
carriers  for  their  members,  for  overcharge,  loss,  damage,  demurrage, 
shortage,  etc.    With  many  this  is  one  of  the  main  activities. 

Section  15.  Labor  matters. 

There  are  associations  formed  to  fight  labor  unions,  which  will  not 
even  admit  an  employer  who  has  any  individual  agreement  with  a 
labor  union;  associations  that  spend  or  have  spent  most  of  their 
energy  on  labor  matters,  but  some  in  other  directions;  associations 
that  are  concerned  with  labor  questions  incidentally;  and  associa- 
tions that  are  not  concerned  with  such  questions  at  all.  Labor  mat- 
ters are  of  comparatively  little  direct  importance  to  merchants  and 
are  therefore  unlikely  to  be  taken  up  by  mercantile  associations. 
They  are  of  primary  importance  to  manufacturers  and  mine  oper- 
ators, and  are  apt  to  get  much  attention  from  associations  in  such 
lines. 

The  closest  relations  between  employers'  associations  and  labor 
unions  are  represented  by  the  formal  agreements  between  them,  fix- 
ing wages  and  hours  and  other  conditions,  and  usually  running  for  a 
fixed  time.  Such  agreements  have  been  maintained  for  many  years 
by  several  associations  of  bituminous  coal-mine  operators.     They 


712  EEPOET   OP   THE   COMMISSIONER  OF   COEPOEATIOlSrS. 

exist  locall}^  in  several  branches  of  the  clothing  trade.  Somewhat 
similar  conditions  exist  in  the  building  trades  of  many  of  the  larger 
cities. 

Section  16.  Employment  bureaus  and  clearance  cards. 

Partly  for  convenience  in  securing  help  in  the  ordinary  course  of 
business  and  partly  as  an  aid  in  breaking  strikes,  many  employers' 
associations  maintain  employment  offices.  A  system  of  clearance 
cards,  involving  refusal  of  employment  to  anyone  who  has  not  a 
card  from  his  last  employer,  may  be  used  with  or  without  an  em- 
ployment bureau.  It  is  obvious  that  such  a  system  may  perform  the 
function  of  a  very  effective  black  list. 

Section  17.  Apprenticeship  and  trade  education. 

Employers  in  the  more  skilled  trades  are  troubled  by  the  lack  of 
skilled  workmen,  a  lack  which  seems  to  result  from  the  difficulty  of 
training  apprentices — perhaps  rather  from  the  fact  that  it  does  not 
pay  to  train  them — under  modern  conditions.  Under  these  circum- 
stances some  associations  have  taken  steps  to  substitute  school  for 
shop  teaching. 

Section  18.  Legislative  activities. 

The  range  of  legislative  questions  in  which  one  association  or 
another  is  interested  is  very  wide.  Among  the  topics  on  which  trade 
associations  have  promoted  or  opposed  legislation  in  recent  years  are 
the  following:  The  tariff;  resale  price  maintenance;  cotton  ex- 
changes; purity  of  textile  materials  or  statement  by  label  of  ma- 
terials of  textiles;  Federal  horsepower  tax  on  automobiles;  Federal 
tax  on  gasoline;  mixed  flour;  Federal  tax  on  grain  sales  on  ex- 
changes; Federal  tax  on  mail-order  houses;  various  amendments  of 
the  trust  laws,  including  exemption  of  labor  and  agricultural  asso- 
ciations therefrom;  Federal  tax  on  patent  or  proprietary  medicines; 
antinarcotic  legislation;  special  precautionary  methods  of  packing 
poisons ;  parcel  post ;  pure-food  and  drug  laws ;  Federal  registration 
of  motor  vehicles;  Federal  grading  of  cotton  and  of  grain;  cold 
storage;  patents;  trade-marks;  copyrights;  bankruptcy;  forest 
conservation;  liquor  traffic;  labor  laws,  including  workmen's  com- 
pensation, convict  labor,  and  eight-hour  day. 

Various  associations  have  indorsed  proposals  for  legalizing  by 
statute  the  maintenance  of  resale  prices;  that  is,  the  authoritative 
fixing  by  a  seller  of  the  price  at  which  his  customer  shall  sell  again. 
The  National  Drue:  Trade  Conference  and  the  National  Association 


'to 


of  Retail  Druggists  have  giA^en  considerable  attention  to  this  sub- 
ject.   As  long  ago  as  the  late  eighties  and  early  nineties,  the  dealers 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  713 

in  grain  binders  were  seeking  the  support  of  manufacturers  and 
wholesalers  in  the  establishment  and  maintenance  of  resale  prices. 
In  1915  the  Western  Association  of  Implement  and  Vehicle  Dealers 
indorsed  the  Stevens  bilP  giving  manufacturers  the  right  to  fix 
resale  prices. 

The  nature  of  many  articles  handled  by  the  stationery  trade  and 
the  fact  that  the  manufacturers  are  members  of  the  National  Associa- 
tion of  Stationers  and  Manufacturers  has  made  for  a  more  or  less 
general  adoption  of  a  policy  calculated  to  fix  resale  prices.  This 
policy  has  been  greatly  strengthened  by  the  cooperation  and  support 
of  the  association's  price  committees  covering  the  various  classes  of 
goods,  and  by  agitation  and  discussion  at  the  annual  conventions.  It 
seems  fairly  clear  that  in  a  number  of  cases  at  least,  the  initiative 
in  forming  such  a  policy  rested  with  the  retailers. 

Section  19.  Supplying  insurance  to  members. 

Many  of  the  trade  associations  interest  themselves  in  the  question 
of  insurance.  Heretofore  this  has  been  confined  almost  entirely  to 
fire  insurance,  but  the  passing  of  employers'  liability  laws  in  many 
of  the  States  has  caused  some  associations  to  turn  their  attention  to 
industrial  indemnity  insurance. 

The  reasons  which  have  caused  associations  to  take  up  the  matter 
of  insurance  are  twofold— the  seeking  of  lower  insurance  costs,  and 
the  increasing  of  their  membership  by  increasing  their  usefulness. 

In  their  activities  in  this  field  the  associations  may  be  grouped 
under  two  heads,  viz : 

1.  Those  which  seek  mainly  to  lower  the  rates  of  the  regular  in- 
surance companies. 

2.  Those  which  have  established  special  methods  of  insurance  for 
their  members. 

Most  of  the  associations  fall  under  the  first  group.  Their  work  is 
generally  carried  on  through  committees  or  insurance  departments 
and  consists  largely  of  education  among  the  members  in  methods  of 
reducing  the  fire  risks  by  the  use  of  safety  appliances  and  the  elimi- 
nation of  possible  causes  of  fire.  On  account  of  such  improvements 
the  insurance  companies  are  asked  to  reduce  their  rates  in  the  par- 
ticular mdustry.  Some  of  the  associations  also  seek  to  reduce  the 
rates  bv  acting  as  agents  for  particular  companies  in  securing  the 
insurance  of  their  members,  thus  eliminating  for  the  insurance  com- 
panies the  usual  cost  of  securing  business. 

The  more  important  work  in  the  insurance  field  is  performed  by 
those  associations  which  fall  under  the  second  group.  This  includes 
not  only  those  associations  which  have  established  their  own  insur- 
ance com.panies,  but  those  which  subscribe  to  the  insurance  companies 

iH.  R.   13305,  63d  Cong. 


714  REPORT   OF    TKE   COMMISSIONER   OF    CORPORATIONS. 

of  other  associations.  There  are  a  considerable  number  of  such  com- 
panies. They  have  saved  their  members  hirge  amounts  which  would 
otherwise  have  gone  for  the  expenses  and  profits  of  regular  com- 
panies, and  some  of  them  have  also  greatly  reduced  the  fire  loss  and 
the  fire  hazard  of  their  members  by  investigation  and  education. 

Section  20.  Foreign  trade. 

Some  associations  have  given  considerable  attention  to  the  matter 
of  foreign  trade.  Many  have  made  it  the  subject  of  discussion  at 
their  conventions,  and  some  have  appointed  permanent  connnittees 
to  deal  with  the  questions  arising  in  connection  therewith.  A  num- 
ber of  associations  have  recognized  the  importance  of  obtaining  the 
assistance  of  the  Government  in  extending  the  foreign  trade  of  their 
members.  Information  based  on  the  Government's  consular  reports 
is  distributed  by  some  associations. 

Section  21.  Publications. 

The  associations  publish  a  variety  of  material.  Some  of  the  smaller 
associations  limit  their  publications  to  letters  sent  to  members,  weekly 
or  monthly  or  without  regular  time  of  issue.  Many  publish  occa- 
sional bulletins,  reports,  or  circulars  on  topics  of  interest  to  their 
members.  A  number  of  the  associations  publish  books,  such  as  year- 
books, rating  books,  records  of  proceedings,  and  the  like.  Many, 
especially  of  the  larger,  publish  weekly,  monthly,  or  quarterly  maga- 
zines or  bulletins  as  their  official  organs.  Others  merely  adopt  some 
current  publication  as  their  official  organ. 

JUDICIAL    ATTITUDE    TOWARD    ACTIVITIES    OF    TRADE    ASSOCIA- 
TIONS AFFECTING  COMPETITION. 

Trade  associations,  from  the  legal  point  of  view,  are  subject  to  the 
same  restrictions  and  limitations  imposed  on  individuals,  with  the 
additional  limitation  that  "  an  act  harmless  when  done  by  one  person 
may  become  a  public  wrong  when  done  by  many  acting  in  concert 
in  pursuance  of  a  conspiracy."  ^ 

Trade  associations,  being  nothing  more  than  combinations  of  indi- 
viduals, firms,  or  corporations,  engaged  in  a  particular  line  of  trade 
and  acting  usually  under  some  kind  of  formal  organization,  are  not 
of  themselves  obnoxious  to  the  law.  There  are,  in  fact,  many  worthy 
and  legitimate  purposes  for  which  such  associations  may  be  formed ; 
for  example,  protection  against  insolvent  debtors,  prevention  of 
dishonest  practices,  publication  of  statistical  data,  social  intercourse, 
etc.;  but  no  matter  how  innocent  the  purpose,  or  how  plausible  the 
i:)rofession  of  good  faith,  if  its  actions  result  in  restraining  the  legal 

1  Grenada  Lumber  Co.  v.  Mississippi,  217  IT.  S.,  433  (1910)  ;  Eastern  States  Lumber 
Dealers'  Association  v.  United  States,  224  U.  S.,  600  (1914). 


TRUST   LAWS   AND   UNFAIR   COMPETTTION.  715 

rights  of  either  comembers  or  others,  such  actions  will  be  condemned 
by  the  courts.^ 

An  interesting  example  of  an  association  whose  purpose  was  held 
to  be  legal,  while  certain  of  its  acts  were  condemned,  is  found 
in  United  States  v.  Southern  Wliolesale  Grocers'  Association.-  The 
purpose  of  this  association,  as  stated  in  its  constitution  and  by- 
laws, was  the  promotion  of  harmony  betw^een  the  members  of  the 
association   and   the   manufacturers  of  food   products,  to   the   end 

^A  very  interesting  exposition  of  the  law  relating  to  cooperative  effort  is  found  in  the 
following  letter  by  an  eminent  member  of  the  American  bar  : 

[Letterhead  of  Lehmann  &  Lehmann,  attorneys,  St.  Louis,  Mo.,  Apr.  8,  1909.] 

Mr.  George  K.  Smith, 

St.  Louis,  Missouri. 

Dear  Sir  :  I  have  given  due  consideration  to  the  matters  we  talked  about  on  Tuesday 
and  have  found  no  occasion  to  change  the  opinion  then  expressed. 

You  have  the  undoubted  right  to  collect  and  distribute  the  fullest  information  you  can 
get  of  what  is  being  done  in  the  lumber  field,  with  all  details  as  to  the  amount  of 
production  from  day  to  day,  the  stock  on  hand,  prices  asked  and  received,  etc.,  and 
every  man  who  receives  this  information  has  the  right  to  act  upon  it  as  he  thinks 
proper.  If  he  thinks  more  is  being  produced  than  can  be  sold,  he  can  reduce  the  amount 
of  his  cutting  or  cease  cutting  altogether  if  he  chooses,  until  conditions  improve. 

Beyond  this,  however,  you  can  not  go.  There  can  be  no  agreement  or  understanding 
between  two  or  more  lumbermen  to  limit  their  production  and  therefore  no  course  of 
conduct  from  which  such  an  agreement  or  understanding  could  be  inferred  by  a  court 
or  a  jury. 

If  some  man  should  go  from  one  lumberman  to  another  getting  from  each  a  statement 
or  a  promise  that  he  would  limit  his  output  in  the  future  and  what  each  man  thus  said 
or  promised  was  communicated  to  the  others  and  if  this  were  followed  by  a  limitation 
of  the  output,  a  court  or  jury  would  be  very  likely  to  infer,  despite  all  protestations 
to  the  contrary,  that  the  limitation  of  output  was  the  result  of  an  agreement  or  under- 
standing. 

So,  too,  if  one  lumberman  after  another  declares  that  he  will  hereafter  curtail  his 
production  and  they  inform  each  other  of  this  purpose  and  then  they  act  in  accordance 
with  their  declarations,  a  court  or  jury  would  be  very  likely  to  infer  that  this  was  all 
in  pursuance  of  an  agreement  or  understanding. 

What  is  in  fact  being  done,  each  and  all  have  a  right  to  know.  This  is  no  more 
than  is  done  every  day  by  the  market  reports  in  our  daily  newspapers.  They  show,  for 
example,  the  daily  receipts  of  grain  and  live  stock,  the  prices  received,  information  as 
to  visible  supply,  etc.,  and  farmers  individually  govern  themselves  accordingly.  The  man 
not  pressed  for  money  does  not  ship  his  grain  or  live  stock  to  a  glutted  market.  The 
lumberman  may  undoubtedly  get  like  information  as  to  his  business  and  may  determine 
his  conduct  by  it. 

But  the  action  based  upon  this  information  must  be  individual  and  independent.  If 
he  concludes  for  himself  that  the  market  is  overloaded  and  that  he  can  not  produce  at 
a  profit,  he  may  curtail  or  cease  producing  altogether  and  for  as  long  a  time  as  he 
pleases,  but  if  he  concludes  that  he  will  continue  as  he  is  doing,  unless  his  competitors 
will  also  curtail  or  cease  production,  and  there  is  a  curtailment  or  cessation  as  the 
result  of  any  sort  of  pi-econcert,  agreement  or  understanding,  the  law  is  violated. 

The  conditions  of  the  trade,  however  bad;  the  price  of  lumber  however  low;  the 
persistence  of  lumbermen  in  cutting  an  amount  above  the  market  demands;  will  not 
legalize  an  agreement  among  any  number  of  them  to  limit  the  output  of  their  com- 
modity or  to  fix  the  price  of  it.  The  policy  of  the  law  is  free  competition  and  it  plainly 
requires  that  each  producer  shall  conduct  his  business  independently  of  any  compact 
with  his  competitors.  This  does  not  prohibit  any  producer  from  taking  into  account 
all  the  conditions  of  business  in  determining  his  own  conduct,  and  it  does  not  forbid 
cooperation  for  the  purpose  of  obtaining  information  that  is  useful  to  each  and  to  all. 

1  repeat,  however,  that  beyond  the  collection  and  distribution  of  information  as  to 
what  is  being  done,  you  can  not  go,  and  can  not  state  too  strongly  that  any  agreement 
or  understanding,  no  matter  how  indirect  the  means  by  which  it  is  brought  about,  falls 
under  the  ban  of  the  law. 

Respectfully,  yours,  F.  W.  Lehua.N'N. 

2  207  Fed.,  434  (1913). 


716  EEPOET   OF   THE   COMMISSIONER   OF   CORPOEATIOISrS, 

that  the  wholesale  grocers  might  be  recognized  as  the  economical 
channel  of  distribution  of  the  products  of  the  manufacturers.  In  a 
suit  against  the  association  to  restniin  alleged  violations  of  the 
Sherman  Antitrust  Act,  the  decree,  after  enjoining  certain  acts, 
expressly  provided  that  the  association  was  not  restrained  from  main- 
taining the  organization  for  social  or  other  purposes  than  those 
therein  prohibited.  It  was  further  held  that  the  addressing  of  legiti- 
mate argument  to  manufacturers  to  procure  the  abandonment  by 
them  of  a  certain  policy  and  the  continuance  of  another  did  not 
violate  the  Sherman  Antitrust  Act,  nor  a  decree  enjoining  violations 
of  that  act. 

In  contrast  to  this  case  may  be  cited  United  States  v.  Jellico 
Mountain  Coal  Co.,^  wherein  the  purposes  of  the  association,  in  the 
opinion  of  the  Federal  Court,  "  could  hardly  have  been  more  suc- 
cessfully framed  to  fall  within  the  provisions  of  the  Act  of  July  2, 
1890  [Sherman  Antitrust  Act],  had  the  objects  been  to  organize  a 
combination,  the  business  of  which  should  subject  it  to  the  penalties 
of  that  statute." 

Consent  decrees  in  suits  brought  under  the  Sherman  Antitrust 
Act,  namely,  decrees  in  suits  wherein  defendants  have  submitted 
without  contest  to  injunctions  prayed  for  by  the  prosecution,  have, 
in  some  instances,  exceeded  in  scope  injunctions  granted  in  contested 
causes.  Thus,  the  "Association  of  Coaster  Brake  Licensees,"  com- 
posed of  owners  of  certain  patent  rights,  some  of  whom  also  dealt  in 
unpatented  articles  and  all  of  whom  acted  under  a  number  of  uni- 
form patent-license  contracts  fixing  prices,  was  declared  a  combina- 
tion in  restraint  of  trade  and  an  attempt  to  monopolize,  etc.  The 
decree,  after  enjoining  certain  acts  (see  p.  729),  enjoined  each  of  the 
defendants  who  had  been  members  of,  or  who  had  a  share  in  the 
business  operations  of  said  association  from  further  maintaining  the 
association,  or  thereafter  creating,  or  participating  in  an}?^  manner 
whatsoever  in,  any  other  association  or  organization  of  similar 
character.^ 

An  abuse  of  the  proper  functions  of  trade  associations  is  found 
where  they  are  formed  ostensibly  for  legitimate  purposes  but  used 
as  a  means  for  carrying  out  unlawful  ends.  Thus,  for  the  purpose  of 
supplying  honest  information,  it  is  legal,  at  least  under  the  Missouri 
antitrust  statute,  for  trade  associations  to  publish  statistics  giving 
actual  bona  fide  sales  of  products  and  the  prices  thereof;  but  the 
Supreme  Court  of  Missouri  ^  has  declared  that  such  statistics  ought 

MS  Fed.,  898,  and  46  Fed.,  432   (1891). 

"  Consent  decree,  United  States  v.  New  Departure  Mfg.  Co. 

Consent  decrees  affecting  trade  associations  arc  treated  herein  rather  as  showing  the 
attitude  of  tlie  Government  witli  respect  to  prosecutions  under  the  Sherman  Anti-trust 
Act  than  as  binding  legal  precedent. 

3  State  ex  inf.  Attorney  General  v.  Arljansas  Lumber  Co.  et  al.,  169  S.  W.,  145,  177  ;  262 
Mo.,  212   (1914). 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  7 17 

to  represent  current  prices  based  on  actual  sales  or  offers  to  sell  or  to 
buy,  and  "  not  to  misrepresent  such  prices  with  a  view  of  boosting 
any  prices  of  any  item  or  items." 

Another  instance  of  abuse  is  found  in  a  Missouri  case  which  con- 
demned an  association  maintained  ostensibly  for  social  purposes  but 
in  reality  used  for  the  purpose  of  fixing  fire  insurance  rates.^ 

A  description  of  the  variety  of  purposes  for  which  trade  associa- 
tions might  legally  be  formed,  or  the  countless  differences  in  the 
methods  of  attaining  their  ends,  is  not  attempted,  but  some  of  the 
more  important  judicial  decisions  relating  to  associations  having 
some  degree  of  formal  organization  are  summarized  below,  for  the 
purpose  of  showing  the  judicial  attitude  toward  trade  association 
activities,  the  legality  of  which  has  been  questioned.  Probably  the 
greatest  number  of  these  decisions  treat  of  activities  which  have  for 
their  purpose  (1)  the  controlling  of  prices  by  direct  agreement  or  by 
the  publication  of  price  lists,  or,  in  lines  of  business  where  conditions 
change  with  each  transaction,  such  as  contracting,  by  either  refrain- 
ing absolutely  from  submitting  bids  or  by  submitting  them  in  such 
a  manner  that  the  contract  will  be  awarded  according  to  a  prear- 
ranged plan;  (2)  the  prevention  of  sales  by  manufacturers  to  con- 
sumers and  to  so-called  "irregular  dealers";  (3)  the  limitation  of 
output;  (4)  the  allotment  of  customers  and  the  division  of  territory; 
and  (5)  the  refusal  to  extend  credit  to  delinquent  debtors.  The 
most  usual  means  by  which  associations  have  sought  to  prevent 
direct  and  irregular  sales  is  by  boycotting,  ordinarily  effected 
through  blacklisting  or  whitelisting,  although  other  forms  of  coer- 
cion have  been  employed. 

The  decisions  are  treated  chiefly  according  to  the  five  purposes 
mentioned,  because  this  arrangement  lends  itself  more  readily  than 
a  more  formal  legal  arrangement  of  cases  to  the  purposes  of  this 
part  of  the  chapter,  which  is  intended  to  describe  (a)  what  pur- 
pose the  association  attempted  to  accomplish  by  the  acts  complained 
of;  (h)  what  means  it  took  to  accomplish  that  purpose;  and  (c) 
what  class  of  law,  namely,  common  law,  Federal  statutes,  or  State 
statutes,  was  violated  thereby. 

Section  22.  Price  control. 

As  shown  in  the  first  part  of  this  chapter,  a  primary  purpose 
common  to  various  classes  of  trade  associations  is  to  increase  re- 
turns, usually  through  increased  prices.  Association  activities  hav- 
ing for  their  purpose  the  fixing  of  ]>rices,  wliother  the  result  is 
to  increase  or  decrease  them,  have  generally  been  judicially  con- 
demned under  the  common  law  and  under  State  and  Federal  stat- 

1  state  ex  rel.  Crow,  Attorney  General,  v.  Firemen's  Fund  Insurance  Co.,  52  S.  W.,  595 ; 
152  Mo.,  1   (1S90>. 


718  EEPOET   OF   THE   COMMISSIONER   OF   COKPOEATIONS. 

iites.  Thus  the  purposes  of  an  association,  composed  of  approxi- 
mately 95  per  cent  of  the  manufacturers  of  candles  located  in  a 
certain  large  section  of  the  United  States,  organized  to  increase 
prices  and  decrease  production,  were  held  in  Ohio  to  be  contrary 
to  public  policy,  and  an  action  at  law  which  would  give  effect  to 
the  articles  of  association  could  not  be  maintained.^  A  similar  re- 
sult was  reached  in  Illinois,  where  it  appeared  that  one,  if  not 
the  leading,  object  of  the  Chicago  Law  Stenographers'  Association 
was  to  control  prices  to  be  charged  by  its  members,  notwithstand- 
ing only  a  small  portion  of  the  total  number  of  stenographers  oper- 
ating in  Chicago  were  members  of  the  association.^  The  following 
agreements  were  likewise  condemned :  An  agreement  among  members 
of  a  brewers'  association,  prohibiting,  among  other  things,  the  sale 
of  beer  to  any  new  trade  or  to  customers  of  any  other  member  of  the 
association  at  less  than  a  stipulated  price  was  held  by  the  Supreme 
Court  of  Pennsylvania  to  be  in  restraint  of  trade,  to  tend  to  destroy 
competition  and  to  create  a  monopoly  in  articles  of  daily  consump- 
tion, and  therefore  void  as  against  public  policy ;  ^  an  agreement  be- 
tween a  retail  druggists'  association  and  certain  corporations  engaged 
in  selling  drugs  and  druggists'  supplies,  to  maintain  a  maximum  scale 
of  prices  and  to  prevent  all  vendors  who  are  unwilling  to  maintain 
such  prices  from  securing  supplies  was  held  unlawful  in  Maryland;* 
and  an  agreement  between  a  jobbers'  association,  a  retail  grocers' 
association,  and  a  retail  merchants'  association  to  prohibit,  in  sub- 
stance, wholesalers  from  selling  to  any  retail  dealer  in  the  State  who 
refused  to  agree  to  sell  to  consumers  at  prices  fixed  by  these  associa- 
tions, was  declared  unlawful  by  the  Colorado  Court  of  Appeals,^ 

Similar  trade-association  activities  have  violated  various  State 
antitrust  laws  as  follows:  The  purpose  of  an  association  organized 
to  fix  the  price  and  control  and  limit  the  quantity  of  milk  shipped 
to  Chicago  was  held  to  violate  the  Illinois  statute ;  ^  the  action  of 
an  association  in  fixing  the  price  of  coal  and  in  distributing  circulars 
showing  the  price  so  fixed  ^  resulted  in  the  successful  prosecution  of 
its  members  under  the  Illinois  Criminal  Code  *  and  under  the  Illinois 
antitrust  act ;  ^  a  by-law  fixing  the  minimum  commission  to  be 
charged  by  members  of  an  association  of  persons  engaged  in  and 
practically  controlling  the  business  of  buying  and  selling  live  stock 

1  Emery  et  al.  v.  The  Ohio  Candle  Co.,  47  Ohio  St.,  320   (1890). 

2  More  et  al.  v.  Bennett  et  al.,  140  111.,  69,  80  (1892). 

sNester  et  al  v.  Continental  Brewing  Co.  et  al.,  161  Pa.  St.,  473   (1S04). 

«  Klingel's  Pharmacy  v.  Sharp  &  Dohme  et  al.,  104  Md.,  218  (1906). 

6  Denver  Jobbers'  Association  et  al.  v.  People  ex  rel.  Diclcson,  Atty.  Gen.,  122  Pac,  405 
(1912). 

«  Ford  V.  The  Chicago  Milk  Shippers'  Association,  155  111.,  166  (189.".).  Ct.  People  r. 
Milk  Exchange,  145  N.  Y.,  267   (1895). 

'Chicago,  AVilmington  &  Vermilion  Coal  Co.  et  al.  v.  People,  214  III..  421    (1905). 

8  Illinois  Grim.  Code,  sec.  46,  prohibiting  conspiracies  "  to  do  any  illegal  act  injurious 
to  the  public  trade." 

» Illinois  Laws,  1891,  p.  206. 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  719 

for  others  was  held  to  violate  the  Kansas  antitrust  law :  ^  airree- 
ments  between  members  of  an  association  w^hich  included  the  ma- 
jority of  the  master  plumbers  and  all  the  wholesale  dealers  in 
i^lumbers'  supplies  in  Detroit  to  fix  both  buying  and  selling  prices, 
accompanied  by  discrimination  against  nonmembers,  was  held  pro- 
hibited by  the  antitrust  act  of  Michigan,^  and  testimony  tending 
to  prove  that  defendants  had  lowered  prices  was  immaterial;^  an 
agreement  entered  into  for  the  purpose  of  limiting  competition  and 
raising  and  controlling  the  price  of  plumbers'  supplies  in  St.  Louis 
between  a  plumbers'  association  and  certain  manufacturers  and  deal- 
ers whereby  the  latter  agreed  not  to  sell  to  nonmembers  and  the 
former  not  to  purchase  from  dealers  found  selling  to  nonmembers,* 
the  activities  of  members  of  an  underwriters'  social  club  in  main- 
taining fire  insurance  rates,^'and  attempts  by  members  of  a  lumber 
manufacturers'  association  to  influence  the  price  of  lumber  were 
declared  unlawful  under  the  Missouri  antitrust  laws.  In  the  last- 
mentioned  case  it  appeared  that  the  association  (Yellow  Pine  Manu- 
facturers' Association)  had  adopted  a  resolution  stating  it  should 
not  make  any  recommendations  respecting  prices  to  be  charged  for 
lumber.  Price  lists  or  market  reports  which  showed  great  increases, 
however,  had  thereafter  been  issued  by  the  secretary  to  members, 
who  for  various  reasons  did  not  faithfully  abide  thereby.  The  court 
observed  that  the  price  was  constantly  advancing,  and  that  "  while 
a  rigid  adherence  to  the  price  fixed  was  in  the  nature  of  things  well- 
nigh  impossible,  yet  the  prices  charged  revolved  about  the  prices  fixed 
like  planets  in  their  orbits  revolve  about  the  sun."  A  writ  of  ouster 
was  suspended  on  the  condition,  among  others,  that  the  respondents 
would  in  the  future  sell  lumber  in  Missouri  in  open  and  honest  com- 
petition with  all  other  wholesale  dealers;  that  they  would  not  dis- 
criminate between  buyers  of  lumber  or  retailers;  that  they  Avould 
not  be  party  to  the  publication  or  circulation  of  any  price  current, 
except  such  as  gave  honest  information  Avith  respect  to  actual  and 
bona  fide  sales  of  such  products  and  the  prices  paid  therefor,  nor 
engage  in  any  practices  which  would  violate  the  letter  or  spirit  of 
the  antitrust  laAvs  of  the  State."  The  attitude  of  the  court  toward 
the  honest  publication  of  bona  fide  price  statistics  is  made  plain  in 
the  decision  of  this  case,  which  in  part  is  as  follows : 

We  are  not  to  be  understood  as  declaring  as  a  matter  of  law,  under  our  Mis- 
souri anti-trust  statutes,  tliat  dealers  or  manufacturers  of  any  vendible  com- 

1  State  V.  Wilson,  Tn  Kans..  343   n906). 

=  Michigan  Public  Acts,  1899,  act  No.  255. 

3  Hunt.  Pros.  Atty.  of  Wayne  County,  v.  Riverside  Cooperative  Club  et  :il..  140  Midi., 
538  (1905). 

«  Walsh  V.  Association  of  Master  Plumbers  et  al.,  97  Mo.  App..  2S0  (1902).  See  also 
Bailey  r.  Master  Plumbers,  lo:'.  Tenii.,  99  (1,S99),  and  Knisht  &  .lillson  Co.  r.  Miller,  172 
Ind.,  27   (1909). 

testate  r.  Firemen's  Fund  Ins.  Co.  et  al.,  r»2  S.  W.,  595   (Mo.  Sup,  Ct.,  1899). 

0  Missouri  Rev.  Stats.,  1909,  sec.  10299  et  scq. 


720  KEPOET    OF    THE   COMMISSIONEK   OF   COEPOKATIONS. 

uiodity  of  sale  or  manufacture  may  not  issue  a  price  current.  But  such  a  list 
or  compilation  of  prices  ought  either  to  be  compiled  and  promulgated  by  an 
indifferent  or  wholly  disinterested  person,  or,  if  compiled  and  promulgated 
by  an  interested  person,  it  ought  to  be  honestly  and  fairly  compiled ;  it  ought 
fairly  to  represent  current  prices  as  based  upon  actual  sales,  or  vipon  actual 
offers  to  buy  and  actual  offers  to  sell,  and  not  misrepresent  such  prices  with  a 
view  of  boosting  any  prices  of  any  item  or  items.  If  in  tlie  instant  case  there 
had  been  touching  this  price  current  matter  no  antecedent  unlawful  acts  of  the 
Yellow  Pine  Association,  if  this  association  had  not  for  years  promulgated  as 
current  prices  lists  whicli  falsely  represented  and  arbitrarily  fixed  the  price  of 
yellow  pine  lumber  pursuant  to  the  adopted  report  of  a  committee  on  values, 
and  if  Smith,  the  secretary  of  the  association,  pursuing  the  lawful  methods 
originated  by  him  of  obtaining  reports  from  correspondents  of  actual  sales,  had 
fairly  compiled  and  averaged  such  reports  into  a  list  of  current  prices  of  yellow 
pine  lumber,  we  would  not  say  that  Smith's  acts  or  the  acts  of  the  association 
in  this  behalf  were  unlawful.  In  truth  the  name  "  prices  current "  explains 
itself  in  law  as  in  diction.  To  pursue  the  matter  further  would  be  merely  to 
define  common  honesty,  the  rules  of  which  in  the  last  analysis  are  all  the 
respondents  in  this  matter  are  by  law  required  to  follow.^ 

In  New  York,  where  it  has  been  made  a  misdemeanor  to  conspire 
to  commit  any  act  injurious  to  trade  or  commerce,^  the  Court  of 
Appeals  affirmed  the  conviction  of  the  members  of  the  Locl^port  Coal 
Exchange,  which,  it  appeared,  was  by  the  articles  of  agreement 
adopted  by  the  members,  authorized  to,  and  did,  fix  and  advance  the 
prices  to  be  charged  by  members  for  coal,  although  it  was  not  shown 
that  such  prices  were  excessive  or  oppressive,  or  were  more  than 
sufficient  to  afford  a  fair  remuneration  to  the  dealers.^  This  act  has 
also  been  successfully  invoked  against  the  members  of  a  combination 
formed  for  the  purpose  of  destroying  competition  and  fixing  and 
maintaining  the  prices  at  which  poultry  should  be  bought  and  sold. 
It  appeared  that  a  poultry  dealers'  association  and  a  jobbers'  associa- 
tion agreed  that  commissions  should  be  pooled,  and  that  the  jobbers 
should  purchase  all  the  poultry  required  at  prices  fixed  by  the  two 
associations.  A  number  of  the  members  of  both  organizations  were 
convicted  of  the  crime  of  conspiracy  and  the  judgment  was  affirmed 
on  appeal.* 

In  the  cases  above  noted  the  fixing  of  prices  affected  members  and 
nonmembers  alike.  In  the  following  cases  the  fixing  of  prices  dis- 
criminated against  nonmembers  in  favor  of  members.  The  purpose 
and  effect  of  rules  or  by-laws  which  provide  for  such  discrimination 

1  state  ex  inf.  Atty.  Gen.  v.  Arkansas  Lumber  Co.  et  al.,  1G9  S.  W.,  145,  17G,  177,  179, 
180  (Mo.  Sup.  Ct.,  1914).    And  see  State  v.  Adams  Lumber  Co.,  81  Nebr.,  392  (1908). 

2  New  York  Cons.  Laws,  Penal  Law,  sec.  580  (G). 

3  People  V.  Sheldon  et  al.,  139  N.  Y.,  251   (189.3). 

•1  People  V.  Dwyer  ct  al.,  145  N.  Y.  Supp.,  748  (Sup.  Ct.,  App.  Div.,  1914).  In  this  ease 
it  was  held  that  as  the  indictment  also  charged  a  violation  of  the  Business  Law  (Cousol. 
Laws,  ch.  20,  sees.  340,  341),  and  also  a  conspiracy  to  commit  a  crime  under  Penal 
Law,  art.  54,  sec.  580  (1),  it  was  not  material  whether  subdivision  6  of  the  latter 
section  was  repealed  by  the  subsequent  enactment  of  the  Business  Law. 


TRUST   LAWS   AND   UNFAIR   COMPETITION.  721 

was  clearly  shown  in  a  decision  by  the  Supreme  Court  of  Michigan.^ 
There  it  appeared  that  the  membership  of  a  club  was  composed  of 
members  of  a  Master  Plumbers'  Exchange,  of  all  manufacturers  of, 
and  of  all  dealers  in,  plumbers'  supplies  in  Detroit.  The  rules  of  the 
club  provided,  among  other  things,  that  the  price  of  supplies  should 
be  fixed  by  a  committee,  and  that  they  should  be  sold  without  dis- 
crimination to  members,  but  that  nonmembers  should  be  charged  15 
to  30  per  cent  more  than  members.  Eeferring  to  this  discrimination, 
the  court  observed: 

The  advantage  that  this  arrangement  gives  the  plumber  members  over  the 
plumber  nonmembers  is  obvious.  The  latter  must  buy  their  supplies  either  in 
the  local  markets  at  excessive  prices,  or  abroad  at  a  great  disadvantage.  It  is 
scarcely  necessary  to  say  that  this  arrangement  was  designed  to  create,  and 
tends  to  create,  a  practical,  though  possibly  incomplete,  monopoly  in  favor  of 
the  plumber  members. 

Although,  acting  on  the  advice  of  counsel,  the  defendants  abro- 
gated the  provision  requiring  discrimination  against  nonmembers, 
the  court  found  that  their  purpose  remained  unchanged,  and  that  the 
only  eifect  of  eliminating  the  provision  was  to  make  discrimination 
an  implied,  instead  of  an  expressed,  part  of  the  contract;  and  con- 
cluded that  the  parties  had  attempted  to  create  a  monopoly  and  had 
restricted  competition  in  violation  of  the  antitrust  act.- 

Likewise  in  Indiana,  where  the  evidence  disclosed  a  conspiracy  to 
prevent  competition  in  the  plumbing  business,  pursuant  to  which  two 
corporations  dealing  at  wholesale  in  plumbing  supplies  had  made 
sales  to  members  of  a  plumbers'  association  at  from  30  to  75  per  cent 
less  than  list  prices,  and  had  also  refused  to  sell  for  cash  to  the 
plaintiff,  a  licensed  plumber,  solely  because  he  was  not  a  member 
of  the  association,  the  court,  under  a  statute^  Avhich  was  held  to 
be  declaratory  of  the  common  law,  enjoined  all  the  parties  from 
refusing  to  sell,  or  inducing  others  not  to  sell,  to  the  plaintiff  for 
cash,  at  the  usual  and  customary  prices.*  In  Missouri,  members  of 
a  manufacturers'  association  under  suspended  legal  action  agreed  to 
make  no  distinction  between  members  and  nonmembers  of  a  retail 
dealers'  association  and  to  treat  all  retail  dealers  alike  in  the  matter 
of  making  sales.^  In  another  case  it  appeared  that  a  farmers'  co- 
operative society  had  adopted  a  by-law  which  in  effect  compelled  all 
members  to  sell  their  hogs  to  the  society  at  such  price  as  it  might 
offer,  or,  in  the  event  of  sale  to  another,  to  forfeit  and  pay  to  the 

1  Hunt,  Pros.  Atty.  of  Wayne  County,  v.  Riverside  Cooperative  Club  ct  al.,  140  Mich., 
538  (1905). 

=  Michigan  Public  Acts,  1899,  act  No.  255. 
»  Burns'  Ann.  Stats.  (1908),  sees.  3884,  3887. 
*  Knight  &  Jillson  Co.  et  al.  v.  Miller,  172  Ind.,  27,  M   (1909). 

^  State  ex  inf.  Attorney  General  v.  Arkansas  Lumber  Co.  et  al.,  109  S.  W.,  145,  179 
(Mo.  Sup.  Ct.,  1914). 

30035"— 16 46 


722  EEPOET   OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

society  5  cents  per  hiinclredAYeight.^  In  purchasing  hogs  belonging 
to  members,  a  competing  dealer  was  obliged  to  offer  5  cents  per 
hundredweight  more  than  the  defendant,  and  it  appeared  that  in 
actual  usage  in  the  market  he  was  compelled  to  pay  10  cents  per 
hundredweight  more  than  was  oifered  by  the  society.  The  court, 
being  of  opinion  that  the  arrangement  was  unlawful  both  at  the 
common  law  and  under  the  State  antitrust  law ,2  enjoined  the  society 
and  its  officers  from  enforcing  the  objectionable  by-law. 

Violations  of  the  Sherman  Antitrust  Act  whereby  the  prices  fixed 
aifected  members  and  nonmembers  alike,  in  one  case  consisted  of  an 
agreement  between  a  fuel  company  and  an  association  composed  of 
a  number  of  persons  independently  engaged  in  producing  coal  and 
coke  in  a  certain  district,  providing  that  the  fuel  company  should 
act  as  selling  agent  for  that  portion  of  the  entire  output  of  the 
association  intended  for  western  shipment  over  a  leading  route  of 
transportation,  and  for  the  fixing  by  a  committee  of  a  minimum  price* 
at  which  such  product  was  to  be  sold ;  ^  in  another  case  the  illegal 
agreement  complained  of  prohibited  the  sale  of  coal,  except  at  prices 
established  by  an  exchange ;  *  and  in  still  another  case  the  association 
established  prices  below  which  members  were  not  allowed  to  sell 
shingles.^ 

The  charging  of  fixed  prices  to  all  and  higher  prices  to  nonmem- 
bers than  to  members  was  also  condemned  in  a  case  arising  under 
the  Sherman  Antitrust  Act  wherein  price  control  was  sought  to  be 
accomplished  by  an  agreement  incorporated  as  a  section  of  the  asso- 
ciation's by-laws.  This  agreement  prohibited  wholesale  dealers  in 
coal  brought  in  from  other  States  and  foreign  countries  from  selling 
such  commodity  at  trade  rates  to  any  one  not  having  an  established 
yard,  and  prohibited  both  wholesale  and  retail  dealers  from  selling 
to  consumers  (except  certain  specified  classes)  at  less  than  rates  estab- 
lished by  the  association.  It  also  prohibited  wholesale  dealers  from 
selling  coal  to  nonmembers  at  less  than  $1  per  ton  over  "  present 
trade  rates."  Offending  retail  members  were  penalized  by  being 
required  to  buy  at  consumers'  prices,  and  nonmembers  by  "  such 

1  Reeves  v.  The  Decorah  Farmers'  Cooperative  Society  et  al.,  160  Iowa,  194  (1913). 

sjowa,  33  G.  A.  (1909),  ch.  225.  And  see  Judd  i;.  Harrington,  1.39  N.  Y.,  105  (1893), 
where  an  agreement  between  an  association  of  brokers  and  dealers  in  sheep  and  lambs  and 
an  association  of  butchers,  whereby  the  brokers  were  to  sell  only  to  the  butchers  and  the 
latter  to  buy  only  of  the  brokers  belonging  to  their  respective  associations,  was  held  to  be 
an  agreement  contrary  to  public  policy  and  void,  since  its  real  nature  was  to  suppress 
competition  in  an  article  of  food  and  to  tend  to  enhance  the  price. 

'  Held,  that  such  contract  was  illegal  under  the  antitrust  law  as  in  restraint  of  inter- 
state commerce  and  as  tending  to  create  a  monopoly.  Chesapeake  &  Ohio  Fuel  Co.  v. 
United  States,  10.5  Fed.,  93   (1900),  and  115  Fed.,  610  (1902). 

*  United  States  v.  Jellico  Mountain  Coal  Co.,  46  Fed.,  432  (1891). 

^Gibbs  V.  McNeeley,  102  P^ed.,  594  (1900)  ;  107  Fed.,  210  (1901)  ;  and  118  Fed.,  120 
(1902). 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  723 

reasonable  penalties  as  may  be  imposed  upon  him  by  the  association." 
This  agreement  was  held  to  be  in  violation  of  the  Sherman  x\nti- 
trust  Act.^ 

"Where,  however,  the  activities  of  an  association  were  confined  to 
a  restricted  locality,  although  partly  in  one  State  and  partly  in 
another,  and  where  the  services  rendered  by  members  of  the  asso- 
ciation as  commission  merchants,  acting  between  prospective  pur- 
chasers and  owners  of  live  stock,  were  local  to  the  particular  stock- 
yard, such  transactions  were  held  by  the  United  States  Supreme 
Court  not  to  be  interstate  commerce.  The  agreement  in  this  case 
regulated  the  terms  on  which  members  would  render  such  local 
services,  and  therefore  was  not  an  agreement  in  restraint  of  interstate 
commerce.- 

Consent  decrees  under  the  Sherman  Antitrust  Act  have  also  pro- 
hibited price-fixing  activities  of  associations.  Thus,  the  Southern 
Wholesale  Grocers'  Association  was  enjoined  from  fixing  prices,  or 
from  coercing  manufacturers  into  price-fixing  agreements,  or  from 
accepting  rebates  or  bonuses  from  manufacturers  for  maintaining 
prices,  or  from  conspiring  to  increase  prices  of  commodities  sold  by 
the  wholesalers  and  jobbers,  and  from  any  agreement  which  interferes 
with  the  free  flow  of  commerce.^  So,  also,  the  "Association  of  Coaster 
Brake  Licensees  "  was  enjoined  from  fixing  sale  and  resale  prices,  or  es- 
tablishing trade  discounts,  trade  rebates,  terms  of  credit,  or  any  other 
terms  and  conditions  relating  to  the  sale,  shipment,  and  trade  by  any 

1  The  Coal  Dealers'  Association  of  California,  unincorporated,  adopted  as  a  section  of 
its  by-laws  the  agreement  above  noted,  -which  agreement  stated  its  purpose  as,  first,  the 
protection  of  consumers  in  receiving  full  amount  and  kind  of  coal  purchased,  and, 
second,  protection  to  dealers  in  obtaining  sufficient  margin  to  carry  on  a  safe  business 
with  justice  to  consumers.  Held,  "  that  commerce  among  the  several  States  and  with 
foreign  nations  must  be  absolutely  free  and  untrammeled,  except  as  it  may  be  regulated 
by  Congress ;  that  no  State  law,  with  certain  exceptions  not  necessary  here  to  state, 
would  be  allowed  to  interfere  with  it,  and  no  contract  or  agreement  on  the  part  of 
individuals,  associations,  or  corporations,  would  be  permitted,  directly  or  indirectly, 
to  hinder  or  restrain  its  natural  current  or  volume  *  *  *  that  the  constitution  and 
by-laws  of  the  Coal  Dealers'  Association  and  the  agreement  of  the  wholesale  dealers 
with  that  association  came  within  the  prohibition  of  the  act  of  July  2,  1890"  [Sherman 
Antitrust  Act].  United  States  v.  Coal  Dealers'  Association  of  California,  85  Fed.,  232 
(1898). 

•  The  Kansas  City  Live  Stock  Exchange,  a  voluntary  unincorporated  association  com- 
posed of  commission  merchants,  who  bought,  sold,  and  handled  substantially  all  of  the 
live  stock  shipped  to  Kansas  City  from  several  States,  operated  under  an  agn>ement  pro- 
viding that  each  member  should  faithfully  observe  and  be  bound  by  articles  of  association 
and  rules  and  by-laws.  Among  the  rules  were  fixed  rates  of  commission  for  buying  and 
handling  in  a  certain  city,  live  stock,  a  large  proportion  of  which  was  from  other  States, 
and  limitations  and  prohibitions  upon  its  members  in  dealing  with  nonmenibers  and 
with  persons  violating  the  rules  and  regulations  of  the  exchange.  These  rules  and  regu- 
lations were  enforceable  by  fines,  penalties,  and  assessments.  Held,  as  above  stated, 
United  States  v.  Hopkins,  171  U.  S.,  579  (1898). 

A  somewhat  similar  case  is  found  in  United  States  r,  Anderson,  except  that  the  de- 
fendants were  themselves  pin-chasers  of  cattle  in  the  Kansas  City  stockyard,  while 
defendants  in  the  Hopkins  case  sold  cattle  on  commission  as  compensation  for  services. 
United  States  r.  Anderson.  171  U.  S.,  604   (lS98i. 

8 United  States  v.  Southern  Wholesale  Grocers"  Assn.,  207  Fed.,  445,  446  (1911). 


724  REPOET   OF   THE   COMMISSIONER   OP   CORPORATIONS. 

of  its  members.^  The  National  Association  of  Ketail  Drii<jgists  was 
also  enjoined  from  issuing  or  aiding  in  any  way  in  the  publication 
of  lists  or  other  documents  purporting  to  contain  the  names  of  per- 
sons adhering  or  not  adhering  to  their  contracts,  or  maintaining  or 
refusing  to  maintain  prices,  from  securing  or  aiding  in  securing  the 
adoption  of  any  schedule  for  the  sale  of  drugs,  etc.,  by  the  retail 
dealers  of  any  market  to  the  consumers  of  said  market,  and  from 
enforcing  the  maintenance  of  any  such  schedule;  and  all  such  lists, 
documents,  schedules,  contracts,  agreements,  and  understandings  were 
declared  unlawful  and  ordered  recalled.- 

Section  23.  Prevention  of  sales. 

The  prevention  of  sales  to  consumers  and  others  is  one  of  the 
methods  of  fixing  the  channels  of  trade,  above  referred  to,  which,  in 
the  more  recent  cases,  has  been  repeatedly  condemned  by  the  courts. 
Trade  associations  early  sought  to  accomplish  this  purpose  by  adopt- 
ing by-laws  or  constitutions  designed  to  prohibit  members  from 
dealing  with  manufacturers  or  wholesalers  who  sold  to  consumers,  or 
who  sold  to  such  brokers  or  dealers  as  were  regarded  by  the  associa- 
tion as  not  entitled  to  purchase  commodities  at  wholesale  prices. 
Transactions  of  this  nature  were  penalized  by  requiring  offending 
manufacturers  and  wholesalers  to  pay  a  commission  to  the  dealers  in 
whose  territory  such  sales  were  made.  Refusals  to  comply  with  such 
demands  were  to  be  met  with  concerted  withdrawals  of  patronage. 
While  one  or  two  early  decisions  ^  seemed  to  have  upheld  the  legality 
of  by-laws  or  agreements  of  this  character,  the  weight  of  authority 
is  decidedly  against  them. 

Decisions  condemning  the  performance  of  association  agreements 
of  this  character  hold  that  damages  resulting  therefrom  are  recov- 
erable, or,  in  a  proper  case,  their  future  performance  may  be  re- 
strained by  injunction.  Thus,  where  a  manufacturer  was  compelled 
by  a  retail  lumber  dealers'  association  to  pay  a  penalty  for  selling 
lumber  to  a  consumer  through  a  broker  in  territory  supplied  by  a 
member  of  a  retail  dealers'  association,  and,  as  a  consequence  of  such 
fine,  thereafter  refused  to  sell  to  the  broker;  held,  that  the  latter  could 
recover  damages  from  the  association  member  who  had  compelled 
the  payment  of  the  penalty,  and  that  an  injunction  should  issue  re- 
straining the  defendants  from  demanding  a  penalty  under  the  by- 
laws from  anyone  who  sold  to  the  broker,  or  through  the  broker  to  the 
consumer,  and  from  interfering  with  the  broker's  business  in  any 
way  other  than  by  fair,  open  competition.*    So,  also,  where  a  firm  of 

1  United  States  v.  New  Departure  Mfg.  Co.  (1913). 

2  United  States  v.  National  Assn.  of  Retail  Druggists  (1907). 

3Bolin  Manufacturing  Co.  v.  Ilollis,  54  Minn.,  223  (1S93)  ;  also  Montgomery  Ward  & 
Co.  V.  South  Dakota  Merchants  &  Hardware  Dealers'  Association,  1.50  Fed.,  413  (C.  C, 
1907). 

''Jackson  v.  Stanfleld  ct  al.,  137  Ind.,  592  (1894). 


TKUST   LAWS   AND  UNFAIE   COMPETITION.  725 

manufacturers  suffered  a  loss  of  business  as  a  result  of  a  letter  circu- 
lated by  a  retail  dealers'  association  notifying  members  of  sales 
made  to  consumers  by,  and  requesting  them  not  to  deal  with,  the 
firm  of  manufacturers,  such  letter  having  been  sent  presumably  as  a 
consequence  of  by-laws  which  made  it  the  duty  of  members  to  dis- 
continue purchasing  from  manufacturers  or  wholesalers  who  sold  to 
consumers,  the  Texas  Court  of  Civil  Appeals  held  that  said  manu- 
facturers could  recover  damages  from  members  of  the  association, 
that  members  had  no  right  to  prevent  the  manufacturer  from  selling 
to  consumers,  and,  further,  that  such  interference  with  his  business 
served  no  legitimate  purpose  connected  with  their  own.^  Likewise  tlie 
Iowa  Supreme  Court  denounced  as  unlawful  an  agreement  among  re- 
tail dealers  to  prevent  farmers'  cooperative  companies  from  securing 
supplies  by  coercing  wholesalers  and  jobbers  in  the  matter  of  refusing 
to  sell.^  So,  also,  an  Iowa  district  court  in  the  same  year  granted  an 
injimction  restraining  the  members  of  the  Iowa  Implement  Dealers' 
Association  from  "in  any  manner  whatever  interfering  with  the 
business  of  the  plaintiff,  from  preventing  or  attempting  to  prevent 
any  jobber,  wholesaler,  or  vender  of  farm  implements  *  *  *  from 
selling    *     *     *     to  the  plaintiff "  company.^ 

Agreements  among  the  members  of  associations  of  retail  dealers 
not  to  deal  with  manufacturers  or  wholesalers  who  sold  to  consumers 
in  territory  supplied  by  any  of  the  parties  to  the  agreement  have, 
in  a  number  of  cases,  been  held  to  violate  State  statutes  prohibiting 
combinations  to  restrain  trade  or  to  hinder  or  lessen  competition. 
Thus,  where  the  constitution  of  an  association  of  retail  lumbermen 
provided  that  the  members,  upon  notice  by  the  secretary,  should  dis- 
continue purchasing  from  any  manufacturer  or  wholesaler  who  had 
sold  to  a  consumer,  the  Supreme  Court  of  Mississippi  held  the  asso- 
ciation to  be  a  combination  in  violation  of  the  State  statute.*  This 
statute  prohibits  combinations  "  intended  to  hinder  competition  in 
*     *     *     the  sale  or  purchase  of  a  commodity."^     Where  it  clearly 

1  Olive  &  Sternenburg  v.  Van  Patten  et  al.,  7  Tex.  Civ,  App.,  630  (1894). 

sFunck  V.  Farmers'  Elevator  Co.,  of  Gowrie,  et  al.,  142  Iowa,  G21   (1909). 

3  Farmers'  Elevator  Co.  v.  Iowa  Implement  Dealers'  Association  et  al.  Unreported 
decision  of  Wrij,'ht,  .!.,  in  tlio  district  court  of  Webster  County,  Iowa,  September  term,  1909. 

*  Mississippi  Code,  1906,  sec.  5002. 

t^  Retail  Lumber  Dealers'  Assn.  v.  Mississippi.  9.5  Miss.,  337  (1909).  This  case  was 
appealed  to  the  Supreme  Court  of  the  United  States,  where  it  was  held  that  the  State 
statute  did  not  violate  the  Federal  Constitution.  In  discussing  the  nature  of  the  agree- 
ments prohiliited  liy  tbo  act.  the  Supreme  Court  said  : 

"  *  *  *  they  *  *  *  have  agreed  not  to  deal  with  anyone  who  makes  sales  to 
consumers,  which  sales  might  have  been  made  by  any  one  of  the  77  independent  members 
of  the  association.  Thus  they  have  stripped  themselves  of  all  freedom  of  contract  in 
order  to  compel  those  against  whom  they  'have  combined  to  elect  between  their  combined 
trade  and  that  of  consumers.  That  such  an  agreement  is  one  in  restraint  of  trade  is 
undenial)le,  whatever  the  motive  or  nec(>ssity  which  has  induced  the  compact.  Whether 
it  would  be  an  illegal  restraint  at  common  law  is  not  now  for  our  determination." 
(Grenada  Lumber  Co.  r.  Mississippi,  217  U.  S.,  4.33   (1910). 


726  EEPORT   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

appeared  that  one  of  the  objects  of  a  similar  association  was  to  pre- 
vent manufacturers  and  wholesalers  from  selling  to  consumers,  and 
the  constitution  and  by-laws  provided  for  a  penalty  to  be  collected 
from  manufacturers  or  wholesalers  who  made  such  sales,  the  Supreme 
Court  of  Nebraska  held  that  such  purpose  was  clearly  in  contraven- 
tion of  a  State  statute,^  which  prohibited  any  combination  of  dealers 
intended  "to  prevent  others  from  conducting  or  carrying  on  the 
same  business,"  or  which  tended  "  to  prevent  or  preclude  a  free 
and  unrestrained  competition  among  themselves  or  others  or  the 
people  generally."  -  The  action  of  an  association  of  retail  lumber 
dealers  in  preventing  manufacturers  and  wholesalers  from  making 
sales  to  consumers  was  also  held,  in  a  subsequent  Nebraska  decision,  to 
be  in  violation  of  the  State  antitrust  laws.^  In  this  case  the  secretary 
took  up  complaints  of  members  in  a  manner  which  left  no  doubt  in 
the  minds  of  offending  wholesalers  or  dealers  that  such  sales  were 
displeasing.  This,  apparently,  in  the  opinion  of  the  court,  carried 
the  implied  threat  of  the  withdrawal  of  patronage.* 

The  cases  just  treated  involve  the  prevention  of  sales  tO'  consumers, 
while  the  following  cases  involve  efforts  to  prevent  sales  to  objection- 
able dealers.  The  common-law  decisions  in  these,  as  in  the  above- 
cited  cases,  are  not  in  accord.  Thus,  a  leading  decision  in  Rhode 
Island  denied  an  injunction  to  restrain  members  of  an  association  of 
master  plumbers  from  nc^ifying  dealers  in  plumbers'  supplies  that 
the  association  members  were  withdrawing  their  patronage  and  would 
continue  to  do  so  unless  said  dealers  refrained  from  selling  the  com- 
modities in  which  they  dealt  to  certain  master  plumbers  who  were 
not  members  of  said  association ;  ^  and  where  an  association  of  deal- 
ers engaged  in  buying  and  selling  cattle  adopted  a  by-law  prohibiting 
its  members  from  dealing  with  any  trader  not  a  member  of  the 
association,  or  with  anyone  who  dealt  with  nonmembers,  it  was  held 
that  those  outside  the  association,  being  only  incidentally  affected, 
had  no  standing  in  a  court  of  equity  to  restrain  the  enforcement  of 
such  by-laws." 

Taking  a  decidedly  opposite  view,  the  Supreme  Court  of  Tennessee 
declared  obnoxious  to  the  common  law  a  by-law  which  prohibited 
members  of  an  association  of  master  plumbers  from  purchasing  from 
any  manufacturer  or  dealer  who  did  not  comply  with  the  rules  of 
the  association,  or  from  any  jobber  who  purchased  from  a  manu- 
facturer who  sold  to  master  plumbers  who  were  not  members  of  the 
association.'^    In  another  case  the  Supreme  Court  of  Wisconsin  held 

1  Cobbey's  Annotated  Stats.,  sec.  11510 ;  Comp.  St.   1001,  ch.  Ola,  sec.   11. 

2Cleland  r.  Ander-son,  66  Nebr.,  2.52  (1902). 

3  Nebraska  Laws,  1905,  ch.  162;  Comp.  St.,  1901,  ch.  Ola. 

estate  V.  Adams  Lumlx-r  Co.,  81  Nebr.,  392  (1908). 

^Macauley  Bros.  v.  Tierney  et  al.,  19  R.  I.,  255  (1895). 

6  Downs  V.  Bennett  et  al.,  63  Kans.,  653  (1901). 

'Bailey  v.  Master  Plumbers,  103  Tenn.,  99  (1899). 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  727 

on  demurrer  that  an  action  for  damages  would  lie  against  the  parties 
to  an  agreement,  in  favor  of  a  retailer  whose  business  had  been  de- 
stroyed as  the  result  of  the  performance  of  the  agreement,  between 
wholesale  coal  dealers  and  certain  retail  dealers,  binding  the  former 
to  sell  coal  to  the  latter  only.  This  agreement  was  made  for  the  pur- 
pose, among  others,  of  forcing  out  of  business  all  retail  dealers  not 
parties  thereto.^ 

The  action  of  associations  in  similarly  preventing  sales  to  non- 
members  has  also  been  held  in  violation  of  State  antitrust  laws.^ 

The  stifling  or  elimination  of  competition  by  prohibiting  or  unduly 
influencing  mine  ow^ners,  manufacturers,  wholesale  dealers,  or  others, 
to  refuse  or  to  desist  from  selling  to  nonmembers,  to  consumers,  to 
so-called  "  objectionable  "  dealers,  or  to  others  has  been  at  issue  in  a 
number  of  cases  involving  interpretation  of  the  Sherman  Antitrust 
Act.  Briefly  stated,  the  judicial  decisions  in  the  cases  herein  selected 
under  the  Sherman  Act  covering  this  class  of  association  activities 
condemned  the  following:  A  written  agreement  among  members, 
binding  them  under  penalty  not  to  sell  in  a  certain  city,  coal  imported 
from  another  State,  except  to  members ;  ^  an  agreement  binding 
members  not  to  purchase  materials  from  manufacturers  located  in 
other  States,  who  were  not  members,  and  not  to  sell  unset  tiles  to 
nonmembers,  except  at  50  per  cent  more  than  the  price  charged 
members ;  *  an  agreement  prohibiting  members  from  selling  books 
to  anyone  who  cut  prices  or  to  anyone  who  should  be  known  to  have 

1  Hawarden  r.  The  Youghiogheny  &  Lehigh  Coal  Co.,  Ill  Wis.,  545   (1901). 

2  Nebraska  Comp.  St.,  1901,  chap.  91a.  See  Cleland  v.  Anderson,  66  Nebr.,  252  (1902), 
and  State  v.  Adams  Lumber  Co.,  81  Nebr.,  392  (1908). 

For  viohitions  of  Missouri  statutes  see  State  v.  Arkansas  Lumber  Co.,  109  S.  W.,  145, 
179   (191P.)  ;  Walsh  v.  Association  of  Master  Plumbers,  97  Mo.  App.,  280    (1902). 

For  violation  of  Michigan  laws  (Mich.  Public  Acts,  1899;  act  No.  255,  sec.  1)  see 
Hunt  V,  Riverside  Cooperative  Club,  104  N.  W.,  40,  Supreme  Court  of  Michigan   (1905). 

''  The  "  Nashville  Coal  Exchange,"  composed  of  a  number  of  companies  mining  coal 
in  Kentucky  and  Tennessee  and  a  number  of  coal  dealers  in  Nashville,  Tenn.,  was  formed 
for  the  purpose  of  regulating  the  price  of  coal  at  Nashville.  Its  members  agreed  not 
to  ship  coal  to  Nashville  or  to  sell  coal  therein  except  to  members,  and,  under  penalty  of 
fine,  also  agreed  not  to  sell  except  at  prices  established  by  the  exchange  or  association. 
This  was  held  to  be  in  violation  of  the  act  of  July  2,  1890,  and  the  members  were 
enjoined  from  further  violations  of  that  act.  United  States  v.  Jellico  Mountain  Coal  Co., 
46  Fed.,  432   (1891). 

A  substantially  identical  case  is  found  in  United  States  r.  Coal  Dealers"  Assn.,  85 
Fed.,  252    (1898). 

■•  In  an  action  for  treble  damages  against  an  unincorporated  association  of  wholesale 
dealers  residing  in  California,  having  as  nonresident  members  manufacturers  in  other 
States,  held  that  although  the  sales  of  unset  tiles  were  within  the  Stale  of  California, 
and  although  such  sales  constituted  a  very  small  portion  of  the  trade  involved,  agree- 
ment of  manufacturers  without  the  State  not  to  sell  to  anyone  but  members  was  part  of 
a  scheme  which  included  the  enhancement  of  the  price  of  unset  tiles  by  the  dealers 
within  the  State,  and  that  the  whole  thing  was  so  bound  together  that  the  transactions 
within  the  State  were  inseparable  and  became  a  part  of  a  purpose  which,  wlien  carried 
out,  amounted  to  and  was  a  combination  in  restraint  of  interstate  trade  and  commerce. 
Montague  &  Co.  r.  Lowry,  193  U.  S.,  38   (1904). 


728  KEPOKT    OF    THE   COMMISSIONER   OF   CORPOEATIONS. 

sold  to  others  who  cut  prices  on  copyrighted  books ;  ^  the  sending  of 
lists  to  manufacturers,  and,  on  request,  the  furnishing  to  manufac- 
turers of  information  as  to  the  standing  of  applicants  for  the  privi- 
lege of  buying  direct  from  manufacturers ;  ^  and  the  distribution  of 
an  "official  list"  among  the  members  of  retail  dealers'  association 
containing  the  names  of  wholesalers  who  had  solicited,  quoted,  or 
sold  directly  to  consumers  of  lumber.^ 

Association  activities  enjoined  under  consent  decree  in  suits 
brought  for  violations  of  the  Sherman  Antitrust  Act  may  be  here 
stated  as  follows :  The  members  of  a  wholesale  jewelers'  association 
and  of  a  manufacturing  jewelers'  association  were  enjoined  from 
agreeing  not  to  purchase  from  manufacturers  of  jewelry  who  sold  to 
jobbers  not  recognized  by  the  association,  or  to  retailers,  or  to  any 
person  desiring  to  purchase,  or  from  preventing  sales  between  any 
persons  whomsover  desiring  to  buy  or  sell  jewelry.  They  were  also 
enjoined  from  boycotting,  threatening,  intimidating,  whitelisting,  or 
blacklisting  any  of  the  classes  of  persons  contemplated  by  the  decree, 
or  from  trying  to  induce  manufacturers  not  to  sell  to  any  person.^ 
A  plumbers'  supply  association  was  enjoined  from  publishing  lists 
of  members  for  the  purpose  of  preventing  sales  by  manufacturers  to 
nonmembers,  or  lists  of  manufacturers  who  agreed  to  sell  only  to 

1  This  agreement  by  all  members  of  a  publishers'  association  controlling  90  per  cpnt 
of  the  book  business  in  the  country  was  held  to  be  an  agreement  relating  to  interstate 
trade  or  commerce  within  the  antitrust  act  (act  of  July  2,  1890,  chap.  647,  26  Stat.,  209). 
A  black  list  was  kept,  containing  the  names  of  those  who  cut  prices  on  copyrighted 
books  and  those  who  sold  to  price  cutters,  and  no  one  on  the  black  list  could  buy  any 
books  of  anybody  in  the  scheme.  It  was  held  that  such  scheme  constituted  a  conspiracy 
in  restraint  of  interstate  trade  or  commerce.  The  rights  acquired  by  publishers  of 
copyrighted  books  under  the  copyright  law  did  not  justify  them  in  combining  and 
agreeing  that  their  books  should  be  subject  to  the  ruies  laid  down  by  the  united  owners, 
one  of  which  was  that  no  member  of  the  association  should  sell  any  books  to  a  black- 
listed purchaser  who  was  known  to  cut  prices.     Mines  v.  Scribner,  147  Fed.,  927   (1906). 

A  somewhat  similar  case  is  found  in  Straus  t\  American  Publishers'  Assn.,  231  U.  S., 
222   (1913). 

"  Hold,  that  these  acts  constituted  a  violation  of  the  decree,  since,  considered  in  con- 
nection with  the  former  policy  of  coercion,  they  constituted  a  deliberate  utilization  by 
the  association  of  the  influence  over  the  manufacturers  which  its  previous  policy  had 
gained  for  it,  especially  where  subsequent  to  the  decree  it  mailed  to  manufacturers 
a  circular  stating  that  it  would  continue  to  issue  the  "Green  Book"  [containing  lists 
of  exclusive  wholesale  grocers,  and  used  as  a  means  of  compelling  manufacturers  to 
confine  their  sales  to  those  whose  names  appeared  on  the  list].  This  circular  stated 
that  none  of  its  methods,  rules  of  practice,  or  activities  would  be  affected  by  the  decree. 
Difficulty  was  experienced  in  the  direct  buying  from  certain  manufacturers  supplied 
with  lists  unless  the  buyer's  name  appeared  on  the  lists,  and  a  general  impression 
prevailed  that  listing  was  essential  to  direct-buying  privileges.  (United  States  v. 
Southern  Wholesale  Grocers'  Assn.  et  al.,  207  Fed.,  434.) 

sTlie  United  States  Supreme  Court  held  that  the  circulation  of  this  report  "tended 
to  prevent  members  of  the  association  from  dealing  with  the  listed  dealers  referred  to 
in  the  report,  and  to  directly  and  unreasonably  restrain  trade  by  preventing  it  with 
such  listed  dealers,  and  was  within  the  prohibitions  of  the  Sherman  Law  "  ;  and  that 
"  while  a  retail  dealer  may  unquestionably  stop  dealing  with  a  wholesaler  for  any 
reason  sufficient  to  himself,  he  and  other  dealers  may  not  combine  and  agree  that  none 
of  them  will  deal  with  such  wholesaler  without,  in  case  interstate  commerce  is  involved, 
violating  the  Sherman  Law."  Eastern  States  Lumber  Dealers'  Assn.  v.  United  States, 
234  U.  S.,  600    (1914). 

*  Consent  decree  in  United  States  v.  National  Wholesale  Jewelers'  Assn.   (1914). 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  729 

members,  or  lists  of  nonmembers,  and  from  boycotting  manufacturers 
for  having  sold  to  nonmembers,  and  from  preventing  jobbers  from 
engaging  in  business;  or  from  engaging  in  any  agreement  which 
restricts  the  "  free-and  unrestrained  "  flow  of  commerce.^  The  decree 
in  the  Southern  Wholesale  Grocers'  case  (above  referred  to)  en- 
joined members  from  combining  or  conspiring  to  prevent  manufac- 
turers from  selling  to  nonmembers,  from  publishing  a  white  list,  from 
coercing  manufacturers  into  refusing  to  sell  to  price  cutters,  and 
from  boycotting  manufacturers  for  having  sold  to  nonmembers. 
The  members  of  the  Philadelphia  Jobbing  Confectioners'  Associa- 
tion were  likewise  enjoined  from  conspiring  to  withhold  their  patron- 
age from  any  manufacturer  for  having  sold  to  nonmembers,  or  from 
conspiring  to  prevent  manufacturers  from  selling  freely  in  the  open 
market,  or  from  publishing  white  lists  of  members  of  the  association 
for  the  purpose  of  influencing  manufacturers  not  to  sell  to  nonmem- 
bers, and  from  conspiring  to  induce  manufacturers  not  to  sell  to 
retailers  or  jobbers  who  were  not  members  of  the  association.-  Cer- 
tain manufacturers  were  enjoined  from  entering  into  any  agreement 
or  understanding  with  each  other  or  with  the  National  Association 
of  Retail  Druggists  or  the  National  Wholesale  Druggists'  Association 
in  refusing  to  sell,  or  from  discriminating  in  sales,  to  persons  whose 
names  appeared  on  any  list  of  persons  purporting  to  adhere  or  not 
to  adhere  to  their  contracts,  or  to  maintain  or  refuse  to  maintain 
prices,  and  from  blacklisting  manufacturers  and  wholesale  contract 
proprietors.^  The  members  of  the  "Association  of  Coaster  Brake 
Licensees,"  an  association  of  owners  of  patent  rights  relating  to 
coaster  brakes,  were  bound  under  patent  and  license  contracts  to 
maintain  uniform  and  noncompetitive  prices  and  resale  prices.  The 
agreement  also  covered  certain  other  unpatented  parts  of  bicycles 
and  motorcycles.  The  association  sought  to  prevent,  among  other 
things,  sales  to  manufacturers,  jobbers,  and  dealers,  who  were  not 
listed  by  the  joint  action  of  members.  By  consent  decree  the  de- 
fendants were  enjoined  from  soliciting,  making  up,  ratifying,  or 
confirming  any  lists  of  manufacturers,  or  jobbers,  or  dealers,  with 
whom  trade  should  or  should  not  be  carried  on.* 

Section  24.  Limitation  of  output. 

As  noted  in  the  first  part  of  this  chapter,  agreement  to  control 
prices  by  curtailing  output  is  frequently  found  in  particular  combi- 
nations, but  not  primarily  as  an  association  activity.  This  is  borno 
out  by  an  examination  of  the  decisions,  many  of  which  condemn  this 

^Consont  docroo  in  Fnitod  States  v.  Pacific  Coast  Plnmhors'  Supply  Assn.  ct  al.   (1912). 
"  Consent    decree,    United    States    v.    Philadelphia    Jobbing    Confectioners'    Association 

(ini3). 

3  Consent  decree.  United  States  r.  National  Association  of  Retail  DniRpists   (1907). 
*  Consent  decree.  United  Slates  r.  New  Departure  Mfg.  Co.   (litl.'i). 


730  EEPOKT   OF    THE   COMMISSIONER   OF   COEPOEATIOKS. 

method  of  control  but  few  of  which  involve  activities  of  associations 
having  any  degree  of  formal  organization.  In  one  case  the  Missouri 
Supreme  Court  found  that  members  of  the  Yellow  Pine  Manufac- 
turers' Association  had  violated  the  Missouri  antitrust  laws,^  by 
curtailing  output  under  agreement  and  through  concerted  action.- 
The  court  suspended  a  writ  of  ouster  upon  certain  conditions  which 
included  the  filing  of  affidavits  declaring  that  respondents  would  not 
be  parties  to  any  agreement  or  understanding  to  control  the  produc- 
tion of  lumber. 

Likewise,  a  Federal  court  condemned,  as  in  violation  of  the  Sher- 
man Antitrust  Act,  an  agreement  to  restrict  the  output  of  shingles 
manufactured  in  the  State  of  Washington  and  sold  and  used  prin- 
cipally in  other  States.^ 

Section  25.  Allotment  of  customers  and  division  of  territory. 

What  has  been  said  of  the  "  limitation  of  output "  is  also  true  of 
the  practice  of  allotting  designated  customers  to  specified  persons, 
namely,  this  is  more  frequently  a  purpose  of  particular  combinations 
than  of  such  associations  as  are  considered  in  this  chapter.  However, 
when  such  purposes  are  involved  in  trade-association  cases  they  have 
been  judicially  condemned.  Thus,  in  reaching  the  conclusion  that  the 
purpose  of  a  certain  printers'  club  was  to  create  a  monopoly  and 
stifle  competition,  the  Supreme  Court  of  Georgia  considered,  among 
other  things,  an  allegation  charging  the  establishment  of  a  system 
whereby  the  manager  of  a  printers'  club  notified  members,  each  in 
his  turn,  to  secure  contracts  as  they  were  asked  for  by  the  city  of 
Atlanta,  w^hile  other  members  refrained  from  submitting  bids  or 
submitted  them  in  such  a  manner  that  the  contract  would  be  awarded 
according  to  a  prearranged  plan;  and  that  in  furtherance  of  this 
system  a  member  who  disregarded  it  was  fined  and  notified  that  the 
right  to  name  future  prices  for  printing  would  "  irrevocably  revert " 
to  the  other  members  of  the  club.* 

Division  of  territory  is  closely,  but  not  inseparably,  connected  with 
allotment  of  customers,  as  the  latter  may  be  accomplished  without 
reference  to  location.    One  form  of  dividing  territory  among  speci- 

1  Missouri  Rev.  Stats.,  1909,  sec.  10299  et  seq. 

estate  ex  inf.  Atty.  Gen.  v.  Arkansas  Lumber  Co.  et  al.,  169  S.  W.,  145  (1914). 

3  The  Washington  Red  Cedar  Shingle  Manufacturers'  Association,  unincorporated,  com- 
posed of  manufacturers  of  rod-cedar  shingles  and  dealers  handling  the  same,  and  having 
for  its  object  the  prevention  of  injurious  competition,  was  charged  with  having  restricted 
tlie  output  of  shingles,  as  above  noted,  and  with  having  established  prices  of  shingles 
below  which  members  were  not  allowed  to  sell.  Held,  a  combination  in  restraint  of 
interstate  trade  and  unlawful  under  the  Sherman  Antitrust  Act.  Gibbs  v,  McNeeley, 
102  Fed.,  594   (1900i  ;  107  Fed.,  210   (1901)  ;  US  Fed.,  120   (1902). 

*  Employing  Printers'  Club  et  al.  v.  Dr.  Blosser  Co.,  122  Ga.,  509  (1905).  See  also 
Leonard  v.  Abnei'-Drury  Brewing  Co.,  25  App.  D.  C,  179  (1905),  where  the  court  con- 
demned an  attempt  by  a  brewers'  association  and  others  to  compel  a  nonmember  to  join 
the  association  in  order  that  its  regulations  looking  to  an  advance  in  the  price  of  beer  and 
the  allotment  of  customers  might  be  enforced. 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  731 

fied  dealers  quite  common  to  association  purposes  is  found  in  attempts 
to  prevent  sales  by  others  in  territory  supplied  by  any  member.  Of 
the  decisions  previously  treated  in  this  chapter,  one  of  early  date, 
rendered  by  a  State  supreme  court,^  and  a  later  one  by  a  Federal 
court,-  indicated  that  association  activities  of  this  nature  were  for- 
merly permissible.  Other  decisions,  and  especially  those  of  recent 
date,  however,  quite  generally  condemn  them. 

Section  26.  Means  of  accomplishing  association  purposes. 

Since  the  legality  of  the  means  adopted  has  been  noted  in  con- 
nection with  the  four  purposes  already  treated,  it  is  sufficient  here 
to  treat  this  phase  of  the  subject  in  a  general  way  only.  Probably 
the  means  most  frequently  used  to  enforce  commercial  relations 
sought  to  be  established  by  trade  associations  is  the  boycott,  and  the 
most  common  form  of  boycott  is  the  actual  or  threatened  withdrawal 
of  patronage.  While  some  of  the  earlier  decisions  at  common  law 
seem  to  have  held  this  to  be  a  legitimate  means  of  enforcing  associa- 
tions rules,^  the  weight  of  authority,  at  common  law  and  numerous 
statutes,  condemn  such  actions  as  unlawful.^ 

In  the  cases  herein  treated  the  usual  method  of  effecting  boycotts 
was  to  circulate  periodically  a  printed  list  containing  the  names  of 
those  who  had  violated  association  regulations,  or  to  convey  similar 
information  by  letter,  or  to  effect  the  same  result  by  publishing  a 
list  limited  to  names  of  those  with  whom  members  were  permitted 
to  deal.  The  first  two  methods  are  known  as  blacklisting  and  the 
last  as  whitelisting.  Various  specific  names,  such  as  Blue  Book,  Red 
List,  Bad-Pay  List,  etc.,  have  been  given  to  lists  of  this  nature  or  to 
similar  expedients. 

The  successful  accomplishment  of  the  four  purposes  above  treated — 
(1)  price  control,  (2)  prevention  of  sales,  (3)  limitation  of  out- 
put, and  (4)  allotment  of  customers  and  division  of  territory — have 
depended  largely  upon  the  exercise  of  restraint,  sometimes  con- 
fined to  the  members  but  usually  applied  also  to  nonmembers;  and 

iBohn  Manufacturing  Co.  v.  Hollis,  54  Minn.,  223   (1893). 

-  Montgomery  Ward  &  Co.  v.  South  Dakota  Merchants  &  Hardware  Dealers'  Association, 
150  Fed.,  413   (C.  C,  1007). 

3Bohn  Mfg.  Co.  v.  Hollis  ot  al.,  54  Minn.,  223  (1893)  ;  Montgomery  Ward  &  Co.  v. 
South  Dakota  Retail  Merchants  &  Hardware  Dealers'  Association,  150  Fed.,  413  (1907)  ; 
Maciiiiley  Bros.  v.  Tierney  et  al..  19  U.  I.,  255   (1895). 

^  Brown  &  Allen  et  al.,  v.  Jacobs  Pharmacy  Co.,  115  Ga.,  429  (1902)  ;  Klingel's  Phar- 
macy V.  Sharp  &  Dohme  et  al.,  104  Md.,  218  (1906)  ;  Employing  Printers'  Club  et  al.  v. 
Dr.  BloKscr  Co.,  122  Ga.,  509  (1905)  ;  Funck  v.  Farmers'  Elevator  Co.  of  Gowrie  et  al., 
142  Iowa,  621  (1909).  See  also  Continental  Insurance  Co.  v.  Board  of  Fire  Under- 
writers, 67  Fed.,  310  (1895)  ;  Purington  r.  Hinchcliff,  120  111.  App.,  523,  affirmed 
219  111.,  159  (1905)  ;  Downes  et  al.  v.  Bennett  et  al.,  63  Kans.,  653  (1901)  ;  Olive  & 
Sterncnberg  v.  Van  Patten,  7  Tex.  Civ.  App.,  630  (1894)  ;  Park  &  Sons  Co.  v.  National 
Wholesale  Druggists'  Association  et  al.,  50  N.  Y.  Supp.,  1060  (1896)  ;  Straus  i'.  American 
Publishers'  Association,  177  N/Y.,  473  (1904)  ;  Walsh  v.  Association  of  Master  Plumbers, 
97  Mo.  App.,  280  (1902)  ;  Retail  Lumber  Dealers'  Association  v.  State  of  Miss.,  95  Miss., 
337   (1909)  ;  Cleland  v.  Anderson,  06  Nebr.,  252  (1902). 


732  KEPORT    OF    THE   COMMISSIONER   OP   CORrORATIONS. 

while  the  decisions  considered  as  a  whole  are  not  in  accord,  yet  it 
fairly  may  be  concluded  that  boycotting  for  the  most  part,  under 
most  circumstances,  is  illegal.  There  is,  however,  a  fifth  class  of 
purposes  (designated  below  as  "mutual  protection  against  delincjuent 
debtors"),  usually  enforced  by  a  species  of  boycott,  which,  in  the 
absence  of  statutory  pi'ohibition,  has  in  many  instances  escaped 
judicial  condemnation. 

Section  27.  Mutual  protection  against  delinquent  debtors. 

r>lacklists  in  the  form  of  bad-pay  lists,  cash-before-delivery  lists, 
abstracts  of  imsettled  accounts,  lists  of  delinquent  debtors,  and  the 
like,  adopted  by  trade  associations  to  lessen  credit  risks  by  the  inter- 
change among  members  of  accurate  information  concerning  the 
financial  standing  of  their  customei's,  are  usually  held  to  give  no 
ground  of  action  at  law  for  damages  to  the  retail  dealer  or  private 
citizen  who  thei-eby  suffers  a  loss  of  credit.  And  this  is  true  even 
where  the  constitutions  or  by-laws  of  the  associations  forbid  the 
members,  under  penalty  of  fine  or  expulsion,  to  extend  further  credit 
to  the  person  reported  as  long  as  his  name  remains  on  the  delinquent 
list.  In  some  cases  there  has  been  a  refusal  to  give  relief  even  where 
the  regidations  forbid  members  to  sell  for  cash  to  the  debtor  until 
he  has  settled  the  claim  for  which  he  has  been  listed. 

The  party  whose  business  or  credit  has  been  tlius  curtailed  or  de- 
stroyed can  not  oi-dinarily  succeed  in  an  action  for  libel.  Proof  of 
the  statement  published  is,  in  the  absence  of  special  statutes,  a  good 
defense  to  such  an  action.  And  where  the  members  can  show  such  a 
common  interest  to  protect  as  to  render  the  statement  qualifiedly 
privileged,  the  aggrieved  party,  in  order  to  succeed,  must  show  not 
only  that  the  statement  is  false  but  also  that  it  was  made  with  express 
malice.^  As  to  the  degree  of  common  interest  necessary  to  establish 
a  privilege,  however,  the  decisions  are  not  in  harmony,  and  in  some 
of  them  the  effect  of  the  privilege  seems  to  be  either  denied  or  dis- 
regarded.^ Where  all  dealings  by  the  members  with  the  debtor,  for 
cash  as  well  as  on  credit,  are  ju-ohibited  until  his  claim  is  settled,  there 
is  a  tendency  to  recognize  an  element  of  coercion  that  is  repugnant  to 

1  Reynolds  v.  rimnl)ors'  Matorinl  rrotoetlvn  AsMoclation,  G3  N.  Y.  Supp.,  ^0^,  (1900); 
amrmcd  by  Couvt  of  Appeals,  Ifi!)  N.  Y.,  614  (lOOLIi  ;  Trapp  v.  Onbois,  78  N.  Y.  Supp., 
r.05  (1902);  Weston  v.  Uarnieoat,  175  Mass.,  451  (1000);  MeTntyro  v.  Woinort,  Itir. 
I'a.,  52  (I'JOO)  ;  Ulery  v.  C'hicaKO  I.ive  Stock  KxclianKc,  54  Ul.  App.,  2:'..''.  (1894)  ;  Wliile 
V.  Parks,  93  Ga.,  6.S3   (1894),  20  S.  E.,  78. 

2Muetze  v.  Tuteur,  77  Wis.,  2.''.fl  (1890)  ;  Woodhouse  v.  Powlos,  4?,  Wash.,  617  (190G)  ; 
Denney  v.  Northwest  Credit  Association,  05  Wash.,  ,331  (1909),  104  Pac,  7G9 ;  Western 
Tinion  Tfloj;r:iph  Co.  r.  Pritehetl,  108  Oa.,  411  (1899)  ;  Werner  v.  Vo<,'eli,  10  Kans.  .\pp., 
5.".0  (1901);  Cleveland  Ketail  (Jroccrs  Association  v.  K.xton,  18  Ohio  Circuit  Coiii-t,  321 
(1899)  ;  Windiseh-Mdhlhanser  P.rewinK  Co.  v.  P.acom,  21  Ky.  L.  R,,  928  (1899)  ;  .Tohn 
Prenner  P.rewinK  Co.  r.  McCill,  2:!  Ky.  L.  R.,  212  (1901)  ;  Nettles  v.  Somervell,  G  Tex. 
Civ.  App.,  627   (1894). 


TEUST    LAWS   AND    UNFAIR  COMPETITION.  733 

the  existence  of  the  privilege ;  ^  and  in  a  case  in  Wisconsin  ^  in  which 
the  restriction  was  not  carried  to  the  extent  of  prohibiting  cash  deal- 
ings, the  court  said  that  communications  sent  to  members  of  an  or- 
ganization to  compel  dclincjuent  debtors  to  pay,  showing  the  name  of 
debtor  on  the  delincjuent  list,  are  libelous  and  not  privileged,  where 
the  object  is  not  to  protect  members  from  trusting  such  debtors,  but 
merely  to  aid  them  in  coercing  payment,  and  the  members  of  the 
association  are  not  interested  in  the  communications  in  any  other 
way  than  to  make  their  own  debtors  pay. 

Actions  for  damages  caused  by  such  combinations  have  apparently 
thus  far,  with  few  exceptions,  also  been  unavailing.  In  one  of  the 
New  York  cases  cited  above ^  the  Plumbers'  Material  Protective  Asso- 
ciation was  incorporated  under  a  law  that,  among  other  things,  author- 
ized it  to  "diffuse  accurate  and  reliable  information  among  its  mem- 
bers as  to  the  standing  of  merchants  and  builders."*  Upon  failure 
to  settle  a  claim  against  him  or  to  either  give  the  association  satis- 
factory reason  for  the  failure  or  submit  to  arbitration,  the  plaintiff 
was  listed,  with  the  result  that  he  could  buy  no  further  supplies  from 
the  members  except  for  cash  before  delivery.  It  was  urged  that  the 
statute  under  which  the  association  was  incorporated  operated  in 
restraint  of  trade  and  against  public  policy  and  hence  was  void. 
But,  in  view  of  the  growth  and  development  of  commercial  enter- 
prise, the  court  regarded  combination  for  mutual  protection  against 
irresponsible  parties  as  a  necessity  and  held  such  combination  among 
the  membei-s  of  the  corporation  not  to  be  unlawful. 

In  one  Kentucky  case°  in  which  recovery  was  denied,  the  position 
was  taken  that  the  plaintiff'  might  recover  in  such  an  action  if  the 
statement  published  was  untrue,  but  in  a  later  case®  in  the  same  State 
it  is  intimated  that  there  can  be  no  recovery  in  such  an  action  even  if 
the  statement  is  false  and  made  by  a  combination  operating  in  viola- 
tion of  an  antitrust  statute  which  absolves  persons  from  liability  for 
payment  for  goods  bought  from  members  of  unlawful  combinations, 
llecovery  is  also  denied  in  Illinois  and  Texas.'^ 

In  Missouri,  however,  an  agreement  among  Kansas  City  brewers 
not  to  sell  beer  to  anyone  who  was  in  debt  to  either  of  the  others  for 
beer  previously  j^urchased  until  he  paid  such  debt,  was  held  to  be  in 
violation  of  the  State  antitrust  statute.    And  by  virtue  of  a  provision 

1  Weston  V.  Harnicoat,  175  Mass.,  4.'j4  (inoO)  ;  Denncy  v.  Northwest  Credit  A.ssocia- 
tlon,  55  Wash.,  ."'..•tl  (1009),  104  Pac,  70".).  See  also  Ilarlnctt  v.  I'lumbers'  Supply  Asso- 
ciation, IGO  Mass.,  2129  (1897)  ;  and  Arbour  v.  Pittsburgh,  etc..  Association,  35  Pa. 
County  Rep.,  595    (1907). 

2M(<utze  r.  Tutenr,  77  Wis.,  2.SG   (189(1). 

"Uoynolds  v.  Plumbers'  Material  i'rotectivc  Association,  O."!  N.  Y.  Supp.,  303  (1900), 
afliriued  1G9  N.  Y.,  614    (1902). 

*Nc\v  Vorlt  Laws.   1S8G,  cliap.  333.  ^ 

cScliulton  r.  P.avarian  HrowinK  Co.,  96  Ky.,  224  (1894). 

"Brewster  v.  Miller's  Sons  Co.,  et  al.,   101   Ky..  308   (1897). 

^Ulery  v.  Chicago  Live  Stock  Exchange,  54  111.  App.,  233  (1894)  ;  Dclz  v.  Wlnfree,  6 
Tex.  Civ.  App.,  11   (1894). 


734  EEPORT   OP    THE   COMMISSIONER  OF    COEPOEATIONS. 

in  the  statute  a  party  was  allowed  to  set  up  the  agreement  as  a  com- 
plete defense  to  an  action  by  one  of  such  brewers  to  recover  the  price 
of  beer  sold.^ 

In  Nebraska  the  court  seemed  to  feel  no  hesitancy  whatever  in 
allowing  recovery.^  Here  the  association's  constitution  provided 
that  when  an  account  against  any  person  had  been  listed  in  the 
"  abstract  of  unsettled  accounts  "  no  member  should  open  an  account 
with  the  delinquent  without  security,  without  rendering  himself 
liable  to  a  $20  fine  or  to  expulsion.  The  plaintiff  suffered  injury  to 
his  credit  as  a  result  of  being  listed  for  failure  to  pay  a  note  for 
$13.40.  The  court  said  that,  where  the  holder  of  a  claim  sets  in  mo- 
tion such  a  contrivance  as  this  and  damage  results  to  the  party 
whose  name  he  has  handed  in  to  be  dealt  with,  he  should  respond 
in  damages,  irrespective  of  the  rules  of  law  governing  mere  libelous 
publications. 

In  condemning  the  practice -as  calculated  to  deprive  the  debtor 
of  the  protection  given  him  by  the  exemption  statutes,  the  court 
further  said : 

The  association  in  question  ruthlessly  ignored  both  the  policy  and  the  letter 
of  this  law.  By  it  there  was  allowed  to  the  defendant  neither  the  opportunity 
to  allege  and  prove  a  defense  nor  the  right  of  an  impartial  trial  by  jury,  and 
the  exemptions  as  to  which  the  holder  of  the  claim  had  no  right,  either  equitable 
or  legal,  were  absolutely  denied  the  so-called  "  defendant."  The  holder  of  the 
claim,  by  the  payment  of  $10  in  advance  and  thereafter  $4  annually,  became  a 
privileged  member  of  the  self -constituted  society,  which  was  at  once  the  plaintiff, 
the  judge,  the  jury  and  the  executive  officer,  before  which  the  alleged  defendant 
had  not  even  the  poor  privilege  of  being  heard. 

In  Colorado  the  statute  against  blacklisting  makes  a  special  exemp- 
tion in  favor  of  any  merchant  or  professional  man,  or  any  association 
of  the  same,  maintaining  or  publishing  a  list  concerning  the  credit 
or  financial  responsibility  of  any  person  or  persons  dealing  with  him 
or  them  on  credit.^ 

In  equity,  too,  relief  has  been  denied  the  injured  debtor  in  the 
absence  of  statute.^  And  even  in  a  suit  by  the  Government  against 
the  meat  packers,  that  portion  of  the  decree  which  restrained  the 
defendants  from  violating  the  Sherman  Law  by  "  establishing  and 
maintaining  rules  for  the  giving  of  credit  to  dealers  in  meats,  the 
effect  of  which  rules  will  be  to  restrict  competition,"  was  expressly 
so  qualified  as  not  to  prohibit  the  defendants  from  "  establishing 
and  maintaining  rules  for  the  giving  of  credit  to  dealers  where  such 
rules  in  good  faith  are  calculated  solely  to  protect  the  defendants 
against  dishonest  or  irresponsible  dealers."  ^ 

iHeim  Brewing  Co.  v.  Belinder,  97  Mo.  App.,  64  (1902), 

2  Masters  v.  Lee,  39  Nebr.,  574    (1894). 

3  Colorado  R.  S.   (1908),  sec.  401. 

*  Russell  V.  New  York  Produce  Exchange,  58  N.  Y.  Supp.,  842   (1899). 
e Swift  &  Co.  V.  United  States,  196  U.  S.,  375  (1906). 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  735 

Where  the  practice  is  conducted  by  a  corporation  which  has  no 
charter  authority  for  the  purpose,  and  there  is  a  statute  authorizing 
the  courts  to  inquire  into  the  validity  of  corporate  acts  at  the  instance 
of  private  parties,  relief  has  been  accorded  to  the  injured  debtors.^ 

Section  28.  Conclusion. 

The  foregoing  discussion  of  trade  association  activities  indicates 
their  wide  scope  and  varied  character.  The  general  purposes  pro- 
fessed are  in  most  cases  laudable;  not  only  beneficial  to  their  mem- 
bers, but  also  in  some  cases  promotive  of  the  public  welfare.  More- 
over, concerning  many  of  their  professed  activities,  so  far  as  they  are 
practiced  in  a  bona  fide  manner,  there  can  be  no  question  as  to  their 
legality;  for  example,  their  activities  in  standardizing  materials 
and  products,  in  devising  more  reliable  cost  accounting  methods, 
in  communicating  technical  industrial  information,  in  maintaining 
railroad  traffic  bureaus,  in  organizing  mutual  insurance  for  members, 
in  advocating  legislative  policies,  and  in  promoting  friendly  social 
intercourse. 

An  activity  which  is  in  itself  innocent  may  be  perverted,  however, 
to  become  the  basis  for  unlawful  acts.  Thus,  the  lawful  practice  of 
interchange  of  information  as  to  the  output  of  an  industry  and  the 
extent  of  the  absorption  of  the  product  by  the  market,  or  the  prices 
received  for  the  product,  might  be  used  as  a  cloak  to  conceal  the 
real  purpose  of  an  agreement  to  limit  output  or  fix  prices.  The 
courts  have  clearly  condemned  this  practice,  as  shown  above,  and 
most  of  the  other  forms  of  combination  practiced  by  associations 
which  are  unlawful  have  been  made  plain  in  the  preceding  sections 
of  this  chapter.  Wliile  it  is  not  possible  for  the  courts  to  lay  down 
detailed  rules  concerning  what  is  lawful  and  what  is  unlawful,  which 
will  meet  every  possible  variation  in  association  activity,  their  de- 
cisions have  been  generally  clear  enough  to  guide  the  gi*eat  majority 
who  are  trying  to  obey  rather  than  to  evade  the  law. 

Evasion  or  subterfuge  in  any  case  is  likely  to  prove  of  little  avail 
if  the  true  facts  are  made  plain.  Speaking  of  the  Sherman  Anti- 
Trust  Act,  the  Supreme  Court  stated  in  the  Tobacco  Case^  that  it 
embraced  "every  conceivable  act  which  could  possibly  come  within 
the  spirit  or  purpose  of  the  prohibitions  of  the  law,  without  regard 
to  the  garb  in  which  such  acts  were  clothed ; "  and  declared,  further, 
that  "  there  was  no  possibility  of  frustrating  that  policy  by  resorting 
to  any  disguise  or  subterfuge  of  form,  since  resort  to  reason  rendered 
it  impossible  to  escape  by  indirection  the  prohibitions  of  the  statute." 

1  Hartnett  v.  Plumbers'  Supply  Association,  169  Mass.,  229  (1897)  ;  Arbour  v.  Pitts- 
burg Association,  35  Pa.  County  Rep.,  595    (1907). 

*U.  S.  V.  American  Tobacco  Co.,  221  U.  S.,  106,  181  (1911). 


EXHIBITS 


EXHIBIT   A.— CANADIAN   COMBINES  INVESTIGATION   ACT,    1910. 

(An  Act  to  provide  for  the  investigation  of  Combines,   Monopolies,  Trusts,   and 

Mergers.) 

His  Majesty^  hy  and  wHJi  the  advice  and  consent  of  the  Senate 
and  House  of  Commons  of  Canada^  enacts  as  follows: 

1.  This  Act  may  be  cited  as  "  The  Combines  Investigation  Act." 

Interpretation. 

2.  In  this  Act,  unless  the  context  otherwise  reqiiires, — 

(a)  "  application  "  means  an  application  to  a  judge  for  an  order 
directing  an  investigation  under  the  provisions  of  this  Act ; 

(6)  "Board"  means  a  Board  of  Investigation  established  under 
the  provisions  of  this  Act ; 

(c)  "combine"  means  any  contract,  agreement,  arrangement  or 
combination  which  has,  or  is  designed  to  have,  the  effect  of  increas- 
ing or  fixing  the  price  or  rental  of  any  article  of  trade  or  commerce 
or  the  cost  of  the  storage  or  transportation  thereof,  or  of  the  restrict- 
ing competition  in  or  of  controlling  the  production,  manufacture, 
transportation,  storage,  sale  or  supply  thereof,  to  the  detriment  of 
consumers  or  producers  of  such  article  of  trade  or  commerce,  and 
includes  the  acquisition,  leasing  or  otherwise  taking  over,  or  obtain- 
ing by  any  person  to  the  end  aforesaid,  of  any  control  over  or  interest 
in  the  business,  or  .any  portion  of  the  business,  of  any  other  person, 
and  also  includes  what  is  known  as  a  trust,  monopoly  or  merger; 

(d)  "  Department  "  means  the  Department  of  Labour; 

(e)  "judge"  means,  in  the  province  of  Ontario,  any  judge  of  the 
High  Court  of  Justice;  in  the  province  of  Quebec,  any  judge  of  the 
Superior  Court;  in  the  provinces  of  Nova  Scotia,  New  BrunsAvick, 
British  Columbia,  Prince  Edward  Island,  Saskatchewan  and  Alberta, 
any  judge  of  the  Supreme  Court;  in  the  province  of  Manitoba,  any 
judge  of  the  Court  of  King's  Bench,  and  in  the  Yukon  territory,  any 
judge  of  the  Territorial  Court ; 

(/)   "Minister"  means  the  Minister  of  Labour; 

{(/)  "order"  means  an  order  of  a  judge  under  the  provisions  of 
this  Act; 

(h)  "prescribed"  means  prescribed  by  this  Act,  or  by  any  rule 
or  regiihition  made  thereundei-; 

(0"  liegistrar"  means  the  llegistrar  of  Boards  of  Investigation 
appointed  under  this  Act. 

30035°— 16 i7  -  737 


738  EEPOET    Ol'^    THE    COMMISSIONER    OF    COEPOEATIONS. 

Administration. 

8.  The  Minister  shall  haA'e  the  general  administration  of  this  Act. 

4.  The  Governor  in  Council  shall  appoint  a  Registrar  of  Boards  of 
Investigation,  who  shall  have  the  powers  and  perform  the  duties 
prescribed. 

(2.)  The  office  of  Registrar  may  be  held  either  separately  or  in  con- 
junction with  any  other  office  in  the  public  service,  and  in  the  latter 
case  the  Registrar  may,  if  the  Governor  in  Council  thinks  fit,  be  ap- 
pointed by  reference  to  such  other  office,  whereupon  the  person  who 
for  the  time  being  holds  such  office  or  performs  its  duties  shall,  by 
virtue  thereof  and  without  thereby  being  entitled  to  any  additional 
remuneration,  be  the  Registrar. 

Okder  for  Investigation. 

5.  Where  six  or  more  persons,  British  subjects  resident  in  Canada 
and  of  full  age,  are  of  opinion  that  a  combine  exists,  and  that  prices 
have  been  enhanced  or  competition  restricted  by  reason  of  such  com- 
bine, to  the  detriment  of  consumers  or  producers,  such  persons  may 
make  an  application  to  a  judge  for  an  order  directing  an  investiga- 
tion into  such  alleged  combine. 

(2.)  Such  application  shall  be  in  writing  addressed  to  the  judge, 
and  shall  ask  for  an  order  directing  an  investigation  into  the  alleged 
combine,  and  shall  also  ask  the  judge  to  fix  a  time  and  place  for  the 
hearing  of  the  a])plicants  or  their  representative. 

(3.)  The  application  shall  be  accompanied  by  a  statement  setting 
forth, — 

(a)  The  nature  of  the  alleged  combine  and  the  persons  believed  to 
be  concerned  therein; 

(h)  The  manner  in  which  the  alleged  combine  affects  prices  or 
restricts  competition,  and  the  extent  to  which  the  alleged  combine  is 
believed  to  operate  to  the  detriment  of  consumers  or  producers ; 

(c)  The  names  and  addresses  of  the  parties  making  the  application 
and  the  name  and  address  of  one  of  their  number  or  of  some  other 
person  whom  they  authorize  to  act  as  their  representative  for  the 
purposes  of  this  xVct  and  to  receive  communications  and  conduct 
negotiations  on  their  behalf. 

(4.)  The  application  shall  also  be  accompanied  by  a  statutory 
declaration  from  each  a]5plicaiit  declaring  that  tlie  alleged  combine 
operates  to  the  detriment  of  the  declarant  as  a  consumer  or  producer, 
and  that  to  the  best  of  his  knowledge  and  belief  the  combine  alleged 
in  the  statement  exists  and  that  such  combine  is  injurious  to  trade  or 
has  operated  to  the  detriment  of  consumers  or  producers  in  the  man- 
ner and  to  the  extent  described,  and  that  it  is  in  the  public  interest 
that  an  investigation  should  be  had  into  such  combine. 

6.  Within  thirty  days  after  the  judge  receives  the  application  he 
shall  fix  a  time  and  place  for  hearing  the  applicants  and  shall  send 
due  notice,  by  registered  letter,  to  the  representative  authorized  by 
the  statement  to  receive  communications  on  behalf  of  the  applicants. 
At  such  hearing  the  applicants  may  appear  in  person  or  by  their 
representative  or  by  counsel. 

7.  If  upon  such  hearing  the  judge  is  satisfied  that  there  is  reason- 
able ground  for  believing  that  a  combine  exists  which  is  injurious  to 


TEUST   LAWS   AND  UNFAIR  COMPETITION.  739 

trade  or  which  has  operated  to  the  detriment  of  consumers  or  pro- 
ducers, and  that  it  is  in  the  public  interest  that  an  investigation 
shoukl  be  hekl,  the  judge  shall  direct  an  investigation  under  the 
provisions  of  this  Act;  or  if  not  so  satisfied,  and  the  judge  is  of 
opinion  that  in  the  circumstances  an  adjournment  should  be  ordered, 
tb.e  judge  may  adjourn  such  hearing  until  further  evidence  in  sup- 
port of  the  application  is  given,  or  he  may  refuse  to  make  an  order 
for  an  investigation. 

(2.)  The  judge  shall  have  all  the  powers  vested  in  the  court  of 
which  he  is  a  judge  to  summon  before  him  and  enforce  the  attendance 
of  witnesses,  to  administer  oaths,  and  to  require  witnesses  to  give  evi- 
dence on  oath  or  on  solemn  affirmation  (if  they  are  persons  entitled 
to  affirm  in  civil  matters),  and  to  produce  such  books,  papers  or  other 
documents  or  things  as  the  judge  deems  requisite. 

8.  The  order  of  the  judge  directing  an  investigation  shall  be  trans- 
mitted by  him  to  the  Registrar  by  registered  letter,  and  shall  be  ac- 
companied by  the  application,  the  statement,  a  certified  copy  of  any 
evidence  taken  before  the  judge,  and  the  statutory  declarations.  The 
order  shall  state  the  matters  to  be  investigated,  the  names  of  the 
persons  alleged  to  be  concerned  in  the  combine,  and  the  names  and 
addresses  of  one  or  more  of  their  number  with  whom,  in  the  opinion 
of  the  judge,  the  Minister  should  communicate  in  order  to  obtain  the 
recommendation  for  the  apj^ointment  of  a  person  as  a  member  of  the 
Board  as  hereinafter  provided. 

Appointment  or  Boards. 

9.  Upon  receipt  b}?-  the  Registrar  of  the  order  directing  an  investi- 
gation the  Minister  shall  forthwith  proceed  to  appoint  a  Board. 

10.  Every  Board  shall  consist  of  three  members,  who  shall  be  ap- 
pointed by  the  Minister  under  his  hand  and  seal  of  office. 

11.  Of  the  three  members  of  the  Board  one  shall  be  appointed  on 
tlie  recommendation  of  the  persons  upon  whose  application  the  order 
has  been  granted,  one  on  the  recommendation  of  the  jDcrsons  named 
in  the  order  as  being  concerned  in  the  alleged  combine,  and  the  third 
on  the  recommendation  of  the  two  members  so  chosen. 

12.  The  persons  upon  whose  application  the  order  has  been  granted 
and  the  persons  named  in  tlie  order  as  being  concerned  in  the  alleged 
combine,  within  seven  days  after  being  requested  so  to  do  by  the 
Registrar,  may  each  respectively  recommend  the  name  of  a  person 
who  is  willing  and  ready  to  act  as  a  member  of  the  Board,  and  the 
jSlinister  shall  appoint  such  persons  members  of  the  Board. 

(2.)  For  the  purpose  of  obtaining  the  recommendations  referred 
to  in  subsection  1  of  this  section  it  shall  be  sufficient,  as  respects  the 
a]iplicants,  for  the  Registrar  to  communicate  with  the  representative 
menticmed  in  the  statement  as  authorized  to  receive  communicaticms. 
on  their  behalf,  and  as  respects  the  persons  concerned  in  the  alleged 
combine  it  shall  be  sufficient  for  the  Registrar  to  communicate  with 
the  i)ersons  named  in  the  order,  as  the  persons  with  whom  the  INIinis- 
ter  should  comuuuiicate  for  this  j^urpose. 

(8.)  If  the  parties,  or  either  of  them,  fail  or  neglect  to  make  any 
reconnnendation  within  the  said  period,  or  such  extension  thereof  as 
the  Minister,  on  cause  shown,  grants,  the  IMinister  slialh  as  soon  there- 


740  EEPOET   OP    THE    COMMISSIONER   OF    CORPOEATIONS. 

after  as  jjossible,  select  and  appoint  a  fit  person  or  persons  to  be  a 
member  or  members  of  the  Board. 

(4.)  The  two  members  so  appointed  may,  within  seven  days  after 
their  appointment,  recommend  the  name  of  a  judge  of  any  court  of 
record  in  Canada  wdio  is  willing  and  ready  to  act  as  a  tliird  memV)er 
of  the  Board,  and  the  Minister  shall  appoint  such  judge  as  a  member 
of  the  Board,  and  if  they  fail  or  neglect  to  make  a  recommenda- 
tion within  the  said  period,  or  such  extension  thereof  as  the  Minister 
on  cause  shown  grants,  the  Minister  shall,  as  soon  thereafter  as  pos- 
sible, select  and  appoint  a  judge  of  any  court  of  record  in  Canada  to 
be  the  third  member  of  the  Board. 

(5.)   The  third  member  of  the  Board  shall  be  its  chairman. 

(6.)  A  vacancy  in  the  membership  of  a  Board  shall  be  filled  in  the 
same  manner  as  an  original  appointment  is  made. 

13.  No  person  shall  act  as  a  member  of  the  Board  wdio  is  one  of 
the  applicants  for  the  Board  or  who  has  any  direct  pecuniary  inter- 
est in  the  alleged  combine  that  is  the  subject  of  investigation  by  such 
Board,  or  who  is  not  a  British  subject. 

14.  xVs  soon  as  possible  after  all  the  members  of  the  Board  have 
been  appointed  by  the  Minister,  the  Registrar  shall  notify  the  parties 
of  the  names  of  the  chairman  and  other  members  of  the  Board. 

15.  Before  entering  upon  the  exercise  of  the  functions  of  their 
office  the  members  of  the  Board  shall  take  the  following  oath : — 

I, ,  do  solemnly  swear, — 

That  I  will  truly,  faithfully  and  impartially  perform  my  duties 
as  a  member  of  the  Board  appointed  to  investigate . 

That  I  am  a  British  subject. 

That  I  have  no  direct  pecuniary  interest  in  the  alleged  combine 
that  is  to  be  the  subject  of  investigation. 

That  I  have  not  received  nor  will  I  accept  either  directly  or  indi- 
rectly any  perquisite,  gift,  fee  or  gratuity  from  any  person  in  any 
way  interested  in  any  matter  or  thing  to  be  investigated  by  the 
Board. 

That  I  am  not  immediately  connected  in  business  w^th  any  of  the 
parties  applying  for  this  investigation,  and  am  not  acting  in  collu- 
sion with  any  person  herein. 

16.  The  Department  may  provide  the  Board  wdth  a  stenographer 
and  such  clerical  and  other  assistance  as  to  the  Minister  appears 
necessary  for  the  efficient  carrying  out  of  the  provisions  of  this  Act. 
The  Department  shall  also  repay  any  reasonable  and  proper  dis- 
bursements made  or  authorized  and  certified  by  the  judge  who  grants 
the  order  directing  the  investigation. 

17.  Upon  the  appointment  of  the  Board  the  Registrar  shall  for- 
ward to  the  chairman  copies  of  the  application,  statement,  evidence, 
if  any,  taken  before  the  judge,  and  order  for  investigation,  and  the 
Board  shall  forthwith  proceed  to  deal  with  the  matters  referred  to 
therein. 

Inquiry  and  Report. 

18.  The  Board  shall  expeditiously,  fully  and  carefully  inquire  into 
the  matters  referred  to  it  and  all  matters  aft'ecting  the  merits  thereof, 
including  the  question  of  whether  or  not  the  ]~)rice  or  rental  of  any 
article  concerned  has  been  unreasonably  enhanced,  or  couipetition  in 
the  supply  thereof  unduly  restricted,  in  consequence  of  a  combine, 


TRUST   LAWS   AND   UNFAIR  COMPETITION.  741 

and  shall  make  a  full  and  detailed  report  thereon  to  the  Minister, 
Avhicli  report  shall  set  forth  the  various  proceedings  and  steps  taken 
by  the  Board  for  the  purpose  of  fully  and  carefully  ascertaining  all 
the  facts  and  circumstances  connected  with  the  alleged  combine,  in- 
cluding such  findings  and  recommendations  as,  in  the  opinion  of  the 
Board,  are  in  accordance  with  the  merits  and  requirements  of  the 
case. 

(2)  In  deciding  any  question  that  may  affect  the  scope  or  extent 
of  the  investigation,  the  Board  shall  consider  what  is  required  to 
make  the  investigation  as  thorough  and  complete  as  the  public 
interest  demands. 

10.  The  Board's  report  shall  be  in  writing,  and  shall  be  signed  by 
at  least  two  of  the  members  of  the  Board.  The  report  shall  be 
transmitted  by  the  chairman  to  the  Eegistrar,  together  with  the  evi- 
dence taken  at  such  investigation  certified  by  the  chairman,  and  any 
documents  and  papers  remaining  in  the  custody  of  the  Board.  A 
minoi'ity  report  may  be  made  and  transmitted  to  the  Eegistrar  by 
any  dissenting  member  of  the  Board. 

20.  Upon  receipt  of  the  Board's  report  and  of  the  minority  report, 
if  any,  a  copy  thereof  shall  be  sent  free  of  charge  to  the  parties  anct 
to  the  representative  of  any  newspaper  in  Canada  who  applies 
therefor,  and  the  report  and  minority  report,  if  any,  shall  also  be 
published  without  delay  in  The  Canada  Gazette.  The  Minister  may 
distribute  copies  of  the  report,  and  of  any  minority  report,  in  such 
manner  as  to  him  seems  most  desirable,  as  a  means  of  securing  a 
compliance  with  the  Board's  recommendations.  The  Eegistrar  shall, 
upon  payment  of  such  fees  as  may  be  prescribed,  supply  a  certified 
copy  of  any  report  or  minority  report  to  any  person  applying  for  it. 

21.  Whenever,  from  or  as  a  result  of  an  investigation  under  the 
provisions  of  this  Act,  or  from  or  as  a  result  of  a  judgment  of  the 
Supreme  Court  or  Exchequer  Court  of  Canada  or  oi  any  superior 
court,  or  circuit,  district  or  county  court  in  Canada,  it  appears  to 
the  satisfaction  of  the  (lovernor  in  Council  that  with  regard  to  any 
article  there  exists  any  combine  to  promote  unduly  the  advantage  of 
the  manufacturers  or  dealers  at  the  expense  of  the  consumers,  and 
if  it  appears  to  the  Governor  in  Council  that  such  disadvantage  to 
the  consumer  is  facilitated  by  the  duties  of  customs  imposed  on  the 
article,  or  on  any  like  article,  the  Governor  in  Council  may  direct 
either  that  such  article  be  admitted  into  Canada  free  of  duty  or  that 
the  duty  thereon  be  reduced  to  such  amount  or  rate  as  will,  in  the 
opinion  of  the  Governor  in  Council,  give  the  public  the  benefit  of 
reasonable  competition. 

22.  In  case  the  owner  or  holder  of  any  patent  issued  under  the 
Patent  Act  has  made  use  of  the  exclusive  rights  and  privileges  which, 
as  such  owner  or  holder  he  controls,  so  as  unduly  to  limit  the  facili- 
ties for  transporting,  producing,  manufacturing,  supplying,  storing 
or  dealing  in  any  article  which  may  be  a  subject  of  trade  or  com- 
merce, or  so  as  to  restrain  or  injure  trade  or  commerce  in  relation  to 
any  such  article,  or  unduly  to  prevent,  limit  or  lessen  the  manufac- 
ture or  production  of  any  article  or  unreasonably  to  enhance  the 
price  thereof,  or  undidy  to  prevent  or  lessen  competition  in  the  ]>ro- 
duction,  manufacture,  purchase,  barter,  sale,  transportation,  storage 
or  supply  of  any  article,  such  patent  shall  lie  liable  to  be  revoked. 
And,  if  a  Board  repoi-ts  that  a  patent  has  been  so  made  use  of,  the 


742  EEPOET   OF    THE   COMMISSIONER   OP   CORPORATIONS. 

Minister  of  Justice  may  exhibit  an  information  in  the  Exchequer 
Court  of  Canada  praying  for  a  judgment  revoking  such  patent,  and 
the  court  shall  thereupon  have  jurisdiction  to  hear  and  decide  the 
matter  and  to  give  judgment  revoking  the  patent  or  otherwise  as 
the  evidence  before  the  court  may  require. 

23.  Any  person  reported  by  a  Board  to  have  been  guilty  of  unduly 
limiting  the  facilities  for  transporting,  producing,  manufacturing, 
supplying,  storing  or  dealing  in  any  article  which  may  be  a  subject 
of  trade  or  commerce;  or  of  restraining  or  injuring  trade  or  com- 
merce in  relation  to  any  such  article ;  or  of  unduly  preventing,  limit- 
ing or  lessening  the  manufacture  or  production  of  any  such  article; 
or  of  unreasonably  enhancing  the  price  thereof;  or  of  undul}^  pre- 
venting or  lessening  competition  in  the  production,  manufacture, 
purchase,  barter,  sale,  transportation,  storage  or  supply  of  any  such 
article,  and  wdio  thereafter  continues  so  to  offend,  is  guilty  of  an 
indictable  offence  and  shall  be  liable  to  a  penalty  not  exceeding  one 
thousand  dollars  and  costs  for  each  day  after  the  expiration  of  10 
days,  or  such  further  extension  of  time  as  in  the  opinion  of  the 
Board  may  be  necessary,  from  the  date  of  the  publication  of  the 
report  of  the  Board  in  The  Canada  Gazette  during  which  such  per- 
son so  continues  to  offend. 

Sittings  or  Board. 

24.  The  sittings  of  the  Board  shall  be  held  at  such  times  and  places 
as  are  fixed  by  the  chairman,  after  consultation  with  the  other  mem- 
bers of  the  Board,  and  the  parties  shall  be  notified  by  the  chairman  as 
to  the  times  and  places  at  which  sittings  are  to  be  held :  Provided  that, 
so  far  as  practicable,  the  Board  shall  sit  in  the  locality  within  which 
the  subject-matter  of  the  proceedings  before  it  arose. 

25.  The  proceedings  of  the  Board  shall  be  conducted  in  public,  but 
the  Board  may  order  that  any  portion  of  the  proceedings  shall  be 
conducted  in  private. 

26.  The  decision  of  any  two  of  the  members  present  at  a  sitting  of 
the  Board  shall  be  the  decision  of  the  Board. 

27.  The  presence  of  the  chairman  and  at  least  one  other  member  of 
the  Board  shall  be  necessary  to  constitute  a  sitting  of  the  Board. 

28.  In  case  of  the  absence  of  any  one  member  from  a  meeting  of 
the  Board  the  other  two  members  shall  not  proceed,  unless  it  is 
shown  that  the  absent  member  has  been  notified  of  the  meeting  in 
ample  time  to  admit  of  his  attendance. 

29.  Any  party  to  an  investigation  may  appear  before  the  Board 
in  person  or  may  be  represented  by  any  other  person  or  persons,  or, 
with  the  consent  of  the  Board,  may  be  represented  by  counsel. 

30.  Whenever  in  the  opinion  of  the  Minister  the  public  interest  so 
requires,  the  Minister  may  apply  to  the  Minister  of  Justice  to  in- 
struct counsel  to  conduct  the  investigation  before  a  Board,  and  upon 
such  application  the  Minister  of  Justice  may  instruct  counsel  ac- 
cordingly. The  fees  and  expenses  allowed  to  such  counsel  by  the 
Minister  of  Justice  shall  be  paid  out  of  such  appropriations  as  are 
made  by  Parliament  to  provide  for  the  cost  of  administering  this 
act. 

31.  If,  in  any  proceedings  before  the  Board,  any  person  wilfully 
insults  any  member  of  the  Board,  or  wilfullj^  interrupts  the  pro- 


TRUST    LAWS   AKD    UNFAIR   COMPETITION.  743 

ceedings,  or  without  good  cause  refuses  to  give  evidence,  or  is  guilty 
in  any  other  manner  of  any  wilful  contempt  in  the  face  of  the  Board, 
any  officer  of  the  Board,  or  any  constable  may  take  the  person  offend- 
ing into  custody  and  remove  him  from  the  precincts  t)f  the  Board,  to 
be  detained  in  custody  until  the  conclusion  of  that  day's  sitting  of 
the  Board,  and  the  person  so  offending  shall  be  liable,  upon  summary 
conviction,  to  a  penalty  not  exceeding  one  hmidred  dollars. 

Witnesses  and  Evidence. 

32.  For  the  purposes  of  an  investigation  the  Board  shall  have  all 
powers  which  are  vested  in  any  court  of  record  in  civil  cases  for  the 
following  purposes,  namely :  the  summoning  of  witnesses  before  it, 
and  enforcing  their  attendance  from  any  part  of  Canada,  of  admin- 
istering oaths,  and  of  requiring  witnesses  to  give  evidence  on  oath 
or  on  solemn  affirmation  (if  they  are  persons  entitled  to  affirm  in 
civil  matters)  and  to  produce  such  books,  papers  or  other  documents 
or  things  as  the  Board  deems  requisite  to  the  full  investigation  of  the 
matters  into  which  it  is  iiKjuiring. 

(2.)  Any  member  of  the  Board  may  administer  an  oath. 
(3.)   Summonses  to  witnesses  and  all  other  orders,  process  and 
proceedings  shall  be  signed  by  the  chairman. 

33.  All  "books,  papers  and  other  documents  or  things  produced  be- 
fore the  Board,  whether  voluntarily  or  in  pursuance  of  summons, 
may  be  inspected  by  the  Boa«rd,  and  also  by  such  parties  as  the  Board 
allows. 

34.  Any  party  to  the  proceedings  shall  be  competent  and  may  be 
cornpellecl  to  give  evidence  as  a  witness. 

35.  Every  person  who  is  summoned  and  duly  attends  as  a  witness 
shall  be  entitled  to  an  allowance  for  attendance  and  traveling  ex- 
penses according  to  the  scale  in  force  with  respect  to  witnesses  in 
civil  suits  in  the  superior  courts  of  the  province  in  which  the  inquiry 
is  being  conducted, 

36.  If  any  person  who  has  been  duly  served  with  a  summons  and 
to  whom  at  the  time  of  service  payment  or  tender  has  been  made  of 
his  reasonable  traveling  expenses  according  to  the  aforesaid  scale, 
fails  to  attend  or  to  produce  any  book,  paper  or  other  document  or 
thing  as  required  by  his  summons,  he  shall,  unless  he  shows  that 
there  was  good  and  sufficient  cause  for  such  failure,  l)e  guilty  of  an 
offence  and  liable  upon  summary  conviction  to  a  penalty  not  exceed- 
ing one  hundred  dollars. 

37.  The  Board  may,  with  the  consent  of  the  Minister,  employ  com- 
petent experts  to  examine  books  or  official  reports,  and  to  advise  it 
upon  any  technical  or  other  matter  material  to  the  investigation,  but 
the  information  oljtained  therefrom  shall  not,  except  in  so  far  as  the 
Board  deems  it  expedient,  be  made  public,  and  such  parts  of  the 
books,  papers  or  other  documents  as  in  the  opinion  of  the  Board  are 
not  material  to  the  investigation  may  be  sealed  up. 

Remuneration  and  Expenses  of  Board. 

38.  The  members  of  a  Board  shall  be  remunerated  for  their  services 
as  follows: — 

(a)  To  the  two  members  first  a]:)pointed  an  allowance  of  five  dol- 
lars each  per  day  for  a  time  not  exceeding  throe  days  during  which 


744  KEPOET    OF    THE    COMMTSSIONEE    OF    CORPORATIONS. 

they  may  be  actually  engaged  in  selecting  the  third  member  of  the 
Board. 

(h)  To  each  member  an  allowance  at  the  rate  of  twenty  dollars 
for  each  day's  sitting  of  the  Board. 

39.  Each  member  of  the  Board  shall  be  entitled  to  his  actual  and 
necessary  travelling  expenses  and  an  allowance  of  ten  dollars  per 
day  for  each  day  that  he  is  engaged  in  travelling  from  or  to  his 
place  of  residence  for  the  purpose  of  attending  or  after  having  at- 
tended a  meeting  of  the  Board. 

40.  No  member  of  the  Board  shall  accept,  in  addition  to  his  travel- 
ling expenses  and  allowances  as  a  member  of  the  Board,  any  perqui- 
site, gift,  fee  or  gratuity  of  any  kind  from  any  person  in  any  way 
interested  in  any  matter  or  thing  that  is  being  investigated  by  the 
Board.  The  acceptance  of  any  such  perquisite,  gift,  fee  or  gratuity 
by  any  member  of  the  Board  shall  be  an  offence,  and  shall  render 
such  member  liable  upon  summary  conviction  to  a  fine  not  exceeding 
one  thousand  dollars,  and  he  shall  thereafter  be  disqualified  to  act 
as  a  member  of  any  Board. 

41.  All  expenses  of  the  Board,  including  expenses  for  transporta- 
tion incurred  by  the  members  thereof  or  by  persons  under  its  order 
in  making  investigations  under  this  Act,  salaries  of  employees  and 
agents,  and  fees  and  travelling  expenses  of  witnesses,  shall  be  allowed 
and  paid  upon  the  presentation  of  itemized  vouchers  therefor,  ap- 
proved and  certified  by  the  chairman  of  the  Board,  which  vouchers 
shall  be  forwarded  by  the  chairman  to  the  Eegistrar.  The  chairman 
shall  also  forward  to  the  Eegistrar  a  certified  and  detailed  state- 
ment of  the  sittings  of  the  Board,  and  of  the  members  present  at  each 
of  such  sittings. 

Miscellaneous. 

42.  No  proceedings  under  this  Act  shall  be  deemed  invalid  by 
reason  of  any  defect  of  form  or  any  technical  irregularity. 

43.  Evidence  of  a  report  of  a  Board  may  be  given  in  any  court  by 
the  production  of  a  copy  of  The  Canada  Gazette  purporting  to  con- 
tain a  copy  of  such  report,  or  by  the  production  of  a  copy  of  the  re- 
port purporting  to  be  certified  by  the  Registrar  to  be  a  true  copy. 

44.  The  Minister  shall  determine  the  allowance  or  amounts  to  be 
paid  to  all  persons,  other  than  the  members  of  a  Board  employed  by 
the  Government  or  any  Board,  including  the  secretaries,  clerks,  ex- 
perts, stenographers  or  other  persons  performing  any  services  under 
the  provisions  of  this  Act. 

45.  The  Governor  in  Council  may  make  such  regulations,  not  in- 
consistent Avith  this  Act,  as  to  him  seem  necessary  for  carrjdng  out 
the  provisions  of  this  Act  and  for  the  efficient  administration  thereof. 

(2.)  Such  regulations  shall  be  published  in  The  Canada  Gazette^ 
and  upon  being  so  published  they  shall  have  the  same  force  as  if  they 
formed  part  of  this  Act. 

(3.)  The  regulations  shall  be  laid  before  both  Houses  of  Parlia- 
ment within  fifteen  days  after  such  publication  if  Parliament  is  then 
sitting,  and  if  Parliament  is  not  then  sitting  then  within  fifteen  days 
after  the  opening  of  the  next  session  thereof. 

46.  The  Minister  shall  lay  lief  ore  Parliament,  within  the  first  fif- 
teen days  of  the  then  next  session,  an  annual  report  of  the  proceed- 
ings under  this  Act. 


TKUST   LAWS   AND   UNFAIR  COMPETITION.  745 

47.  Subsection  1  of  section  12  of  The  Customs  Tariff,  1007,  is  re- 
pealed. 

48.  This  Act  shall  not  be  construed  to  repeal,  amend  or  in  any  way 
affect  The  Trade  Unions  Act,  chapter  125  of  the  Revised  Statutes, 
1906. 

SCHEDULE. 

[Form  1.] 

Application  for  Order  Directing  an  Investigation. 

"  The  Combines  Investigation  Act." 

(Section  5.) 

Duted  at tliis clay  of ,  191—. 

In  the  matter  of  an  alleged  combine  [licre  state  shortly  the  nature  of  the 
com'bine'\. 

To  the  Honoural)le  [Jirrc  insert  the  name  of  the  jinlfir'],  a  .Tudcre  [or,  Chief 
Justice  as  the  case  may  he^  of  the  [here  insert  the  title  of  the  court]. 

The  undersigned  are  of  opinion  that  a  combine  exists  [liere  state  shortly  the 
nature  of  the  alleged  combine]  and  that  prices  have  been  enhanced  [or,  compe- 
tition has  been  restricted  by  such  combine,  as  the  case  may  he]  to  the  detriment 
of  consumers  [or.  producers,  as  the  case  may  be]. 

The  undersigned  therefore  apply  for  an  order  under  "  The  Combines  Investiga- 
tion Act"  directing  an  investigation  into  sucli  alleged  combine. 

[Here  state — (a)  the  nature  of  the  alleged  combine  and  the  persons  Relieved 
to  be  concerned  tlierein ;  and,  (b)  the  manner  in  which  the  alleged  combine 
affects  2)''ices  or  restricts  competition,  and  the  c-rtent  to  irhicJi.  the  alleged  com- 
bine is  believed  to  operate  to  the  detriment  of  consumers  or  producers,  as  the 
case  may  he.] 

STATEMENT   ACCOMPANYING   APPLICATION    FOR   ORDER. 

Dated  at  ■ this day  of ,  19—. 

The  undersigned  hereby  authorize  of [give  name  and  place  of 

residence]  to  act  as  our  representative  for  the  purposes  of  "  The  Combines  Inves- 
tisation  Act,"  and  to  receive  communications  and  conduct  negotiations  on  our 
behalf. 

The  names  and  addresses  of  the  persons  applying  for  the  aforesaid  order  are 
as  follows : 


Names. 


Addresses. 


stati'toky  declaration  accompanying   application  for  okder.^ 

Canada : 

Province  of ,  To  Wit: 

I, ,  of  the of in  the of do  solemnly  de- 
clare:— 

L  That  the  alleged  combine  operates  to  my  detrini(>nt  jis  a  consumer  [or, 
producer,  as  the  case  nuni  be]-. 

2.  Tlint  to  the  best  of  my  knowledge  and  belief  the  comldnc  alleged  in  the 
foregoing  statement  exists  and  that  such  combine  is  injurious  to  trade  [or.  has 
operated  to  tlie  detriment  of  consumers,  or,  producers,  as  the  case  may  he]  in 
the  manner  and  to  the  extent  described. 

1  A  declaration  as  abovo  must  Ix'  made  by  each  applicant. 


746  REPOET   OF   THE   COMMISSIONER  OP   CORPORATIONS. 

3.  That  it  is  in  the  public  interest  tliat  au  investigation  sliould  be  bad  into 
such  combine. 

And  I  nialce  this  solemn  declaration  conscientionsiy  believing  it  to  be  true, 
and  knowing  that  it  is  of  the  same  force  and  effect  as  if  made  under  oath,  and 
by  virtue  of  The  Canada  Evidence  Act. 

Declared  before  me  at in  the  county  of this day  of , 

19—. 

[Form  2.] 

Order  Directing  Investigation. 

"  The  Combines  Investigating  Act." 

(Section  7.) 

In  the  matter  of  the  application  of   [here  im^crt  the  vamcs  of  applicants] 

dated  the day  of ,  19 ,  for  an  order  directing  an  investigation  imder 

"The  Combines  Investigation  Act"  into  an  alleged  combine  [here  state  shortJy 
the  nature  of  the  comhine'\. 

I,  the  Honourable ,  a  .Judge  [or.  Chief  .Tustice,  as  the  case  may  be]  of 

[here  insert  the  name  of  court],  after  having  read  the  application  of  [names  of 

applicants],  dated  the day  of ,  19 ,  the  statement  and  statutory 

declarations  accompanying  the  same  and  the  evidence  produced  by  the  said 
applicants,  am  satisfied  that  there  is  reasonable  ground  for  believing  that  a 
combine  exists  [here  describe  nature  of  combine],  which  is  injurious  to  trade 
[or,  which  has  operated  to  the  detriment  of  consumers,  or,  producers,  as  the 
case  may  be],  and  that  it  is  in  the  public  intei'e.st  that  an  investigation  should 
be  held,  and  I  do  therefore  direct  that  an  investigation  be  held,  under  the  pro- 
visions of  the  said  Act,  into  the  following  matters,  that  is  to  say :  [Here  set 
out  the  matters  to  be  investigated.] 

The  names  of  the  persons  alleged  to  be  concerned  in  the  alleged  combine  are 
[here  insert  names  and  addresses]  and  I  am  of  opinion  that  the  Minister  of 
Labour  should  communicate  with  [here  insert  tJie  name  or  nanies  icitli.  in  eacli 
case,  the  address]  in  order  to  obtain  the  recommendation  for  the  appointment 
of  a  person  as  a  member  of  the  Board  of  Investigation  on  behalf  of  those  con- 
cerned in  the  said  alleged  combine. 

Dated  at this day  of ,  19__. 


EXHIBIT   B.— AUSTRALIAN    INDUSTRIES    PRESERVATION    ACT, 

1906-1910. 

[As  amended  liy  tlie  acts  of  1907,  1909,  and  1910.] 

(An  Act  for  the  preservation  of  Au.stralian  inddstrib.s^  and  for  the  repression  of 

destructive  monopolies.) 

[Assented  to  24tli  September,  1906.] 

Be  it  enacted  hy  the  King''s  Most  Excellent  Majesty^  the  Senate^ 
and  the  House  of  Representatives  of  the  C ommonwealth  of  Austra- 
lia.^ as  follows: 

Part  I. — Preliminary. 

1.  This  x\ct  may  be  cited  as  the  Australian  Industries  Preservation 
Act,  1906-1910. 

2.  This  Act  is  divided  into  parts  as  follows:  Part  I,  Preliminary; 
Part  II,  Eepression  of  Monopolies ;  Part  III,  Prevention  of  Dumping. 

3.  In  this  Act,  imless  the  contrary  intention  appears — 

"  Commercial  Trust "  includes  a  combination,  wheth'er  w  holly  or 
pai'tly  within  or  beyond  Australia,  of  .separate  and  independent  per- 
sons (corporate  or  unincorporate)  whose  voting  power  or  determina- 


TEUST   LAWS   AND  UNFAIR  COMPETITION.  747 

tions  are  controlled  or  controllable  by — (a)  the  creation  of  a  trust 
as  understood  in  eqiiity,  or  of  a  corporation,  Avherein  the  trustees  or 
corporation  hold  the  interests,  shares,  or  stock  of  the  constituent  per- 
sons; or  (b)  an  agreement;  or  (c)  the  creation  of  a  l)oard  of  manage- 
ment or  its  equivalent;  or  (d)  some  similar  means;  and  includes  any 
division,  part,  constituent  person,  or  agent  of  a  Commercial  Trust. 

"  Inadequate  remuneration  for  labour "  includes  inadequate  pay 
or  excessive  liours  or  any  terms  or  conditions  of  labour  or  emploj^ment 
unduly  disadvantageous  to  v^'orkers; 

"  Person  "  includes  corporation  and  firm  and  a  Commercial  Trust. 

"The  Comptroller-General"  means  the  Comptroller-General  of 
Customs. 

"Answer  questions  "  means  that  the  person  on  whom  the  obliga- 
tion of  answering  questions  is  cast  shall  to  the  best  of  his  laiowledge, 
information  and  belief  truly  answer  all  questions  on  the  subject 
mentioned  that  the  Comptroller-General  or  the  person  named  by  him 
shall  ask. 

"  Produce  documents  "  means  that  the  person  on  whom  the  obliga- 
tion to  produce  documents  is  cast  shall  to  the  best  of  his  power  i)ro- 
duce  to  the  Comptroller-General  or  to  the  person  named  by  him  all 
documents  relating  to  the  subject-matter  mentioned. 

Part  II. — Eepression  of  Monopolies. 

4. —  (1)  Any  person  who,  either  as  principal  or  as  agent,  makes  or 
enters  into  any  contract,  or  is  or  continues  to  be  a  member  of  or 
engages  in  any  combination,  in  relation  to  trade  or  commerce  witli 
othercountriesor  among  the  States — (a)  in  restraint  of  or  with  intent 
to  restrain  trade  or  commerce;  or  (b)  to  the  destruction  or  injury 
of  or  with  intent  to  destroy  or  injure  by  means  of  unfair  competition, 
any  Australian  industry,  the  preservation  of  which  is  advantageous 
to  the  Commonwealth,  having  due  regard  io  tlie  interests  of  i)ro- 
ducers,  workers,  and  consumers,  is  guilty  of  an  offence. 

Penalty:  Five  hundred  pounds,  or,  in  the  case  of  a  continuing 
offence,  Five  hundred  pounds  for  each  day  during  which  the  offence 
continues. 

(2)  Every  contract  made  or  entered  into  in  contravention  of  this 
section  shall  be  absolutely  illegal  and  void. 

(3)  It  shall  be  a  defence  to  a  proceeding  for  an  offence  under  para- 
graph (a)  of  subsection  (1)  of  this  section,  and  an  answer  to  an  alle- 
gation that  a  contract  was  made  or  entered  into  in  restraint  of,  or 
with  intent  to  restrain,  trade  or  commerce,  if  the  party  alleged  to 
have  contravened  this  section  proves — (a)  that  the  matter  or  thing 
alleged  to  have  been  done  in  restraint  of,  or  with  intent  to  restrain, 
trade  or  commerce,  was  not  to  the  detriment  of  the  i)ublic,  and  (b) 
that  the  restraint  of  trade  or  commerce  effected  or  intended  was  not 
unreasonable.^ 

******* 

6. —  (1)  For  the  purpose  of  section  four  and  section  ten  of  this 
Act,  unfair  competition  means  competition  which  is  unfair  in  the 

^  Section  5  of  this  Act  w:is  ropralorl  bv  poction  ?,  of  tlio  Australian  Indnstrios  Prosorva- 
tion  Act   (No.  26)   of  1009. 


748  REPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

circumstances;  and  in  tlie  following  cases  the  competition  shall  be 
deemed  to  be  unfair  unless  the  contrary  is  proved : — 

(a)  if  the  defendant  is  a  Commercial  Trust ; 

(h)  if  the  competition  would  probably  or  does  in  fact  result  in  an 
inadequate  remuneration  for  labour  in  the  Australian  industry; 

(c)  if  the  competition  would  probably  or  does  in  fact  result  in 
creating  substantial  disorganisation  in  Australian  industry  or  throw- 
ing workers  out  of  employment; 

(d)  if  the  defendant,  with  respect  to  any  goods  or  sei'vices  which 
are  the  subject  of  the  competition,  gives,  offers,  or  promises  to  any 
person  any  rebate,  refund,  discount,  or  reward  upon  condition  that 
that  person  deals,  or  in  consideration  of  that  person  having  dealt, 
with  the  defendant  to  the  exclusion  of  other  persons  dealing  in  similar 
goods  or  services. 

(2)  In  determining  whether  the  competition  is  unfair,  regard  shall 
be  had  to  the  management,  the  processes,  the  plant,  and  the  machinery 
employed  or  adopted  in  the  Australian  industry  affected  by  the  com- 
petition being  reasonably  efficient,  effective,  and  up-to-date. 

7. —  (1)  Any  person  who  monopolises  or  attempts  to  monopolise, 
or  combines  or  conspires  with  any  other  person  to  monopolise,  any 
part  of  the  trade  or  commerce  with  other  countries  or  among  the 
States,  is  guilty  of  an  indictable  offence. 

Penalty :  Five  hundred  pounds  for  each  day  during  which  the 
offence  continues,  or  one  year's  imprisonment,  or  both ;  or,  in  the  case 
of  a  corporation.  One  thousand  pounds  for  each  day  during  which 
the  offence  continues. 

(2)  Every  contract  made  or  entered  into  in  contravention  of  this 
section  shall  be  absolutely  illegal  and  void. 

(3)  The  Attorney-General  may  elect,  instead  of  proceeding  by 
indictment  for  an  offence  against  this  section,  to  institute  proceed- 
ings in  the  High  Court  by  way  of  civil  action  for  the  recovery  of  the 
pecuniary  penalties  for  the  offence;  in  which  case  the  action  shall  be 
tried  before  a  Justice  of  that  Court  without  a  jury. 

7A. —  (1)  Any  person  who,  in  relation  to  trade  or  commerce  with 
other  countries  or  among  the  States,  either  as  principal  or  agent,  in 
respect  of  dealings  in  any  goods  or  services  gives  offers  or  promises 
to  any  other  person  any  rebate,  refund,  discount,  concession,  or  re- 
ward, for  the  reason,  or  upon  the  condition,  express  or  implied,  that 
the  latter  person — (a)  deals,  or  has  dealt,  or  will  deal,  or  intends  to 
deal  exclusively  with  any  person,  either  in  relation  to  any  particular 
goods  or  services  or  generally;  or  (h)  deals,  or  has  dealt,  or  will  deal, 
or  intends  to  deal,  exclusively  with  members  of  a  Commercial  Trust, 
either  in  relation  to  any  particular  goods  or  services  or  generally; 
or  (c)  does  not  deal,  or  has  not  dealt,  or  will  not  deal,  or  does  not  in- 
tend to  deal,  with  certain  persons,  either  in  relation  to  any  particular 
goods  or  services  or  generally;  or  (d)  is  or  becomes  a  member  of  a 
Commercial  Trust,  is  guilty  of  an  offence. 

Penalty:  Five  hundred  pounds. 

(2)  Every  contract  made  or  entered  into  in  contravention  of  this 
section  shall  be  absolutely  illegal  and  void. 

(3)  It  shall  be  a  defense  to  a  prosecution  under  this  section,  and 
an  answer  to  an  allegation  that  a  contract  was  made  or  entered  into 
in  contravention  of  this  section,  if  the  party  alleged  to  have  con- 
travened this  section  proves  that  the  matter  or  thing  alleged  to  have 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  749 

been  clone  in  contravention  of  this  section  was  not  to  the  detriment  of 
the  public,  and  did  not  constitute  competition  which  was  unfair  in 
the  circumstances,  and  was  not  destructive  of  or  injurious  to  any 
Australian  industry. 

7B.  Any  person  who,  in  relation  to  trade  and  commerce  with  other 
countries  or  among  the  States,  either  as  principal  or  agent,  refuses 
either  absolutely  or  except  upon  disadvantageous  conditions  to  sell 
or  supply  to  any  other  person  any  goods  or  services  for  the  reason 
that  the  latter  person — (a)  deals,  or  has  dealt,  or  will  deal,  or  intends 
to  deal,  with  any  person;  or  (h)  deals,  or  has  dealt,  or  will  deal,  or 
intends  to  deal,  with  persons  who  are  not  members  of  a  Commercial 
Trust;  or  (c)  is  not  a  member  of  a  Commercial  Trust,  is  guilty  of  an 
oifence. 

Penalty:  Five  hundred  pounds.^ 

Jj*  ',»  "i^  'I'  "I"  1"  V 

9.  Whoever  aids,  abets,  counsels,  or  procures,  or  by  act  or  omission 
is  in  any  way,  directly  or  indirectly,  knowingly  concerned  in  or  privy 
to — (a)  the  commission  of  any  offence  against  this  part  of  this  Act; 
or  (h)  the  doing  of  any  act  outside  Australia  Avhich  would,  if  done 
within  Australia,  be  an  offence  against  tliis  part  of  this  Act,  shall  be 
deemed  to  have  committed  the  offence. 

Penalty:  Five  hundred  pounds. 

10.  (ij  The  Attorney-General,  or  any  person  thereto  authorized 
by  him,  may  institute  proceedings  in  the  High  Court  to  restrain  by 
injunction  after  hearing  and  determining  the  merits  and  not  by  way 
of  interlocutory  order  the  carrying  out  of  any  contract  made  or 
entered  into  after  the  commencement  of  this  Act  or  any  combination 
which — {a)  is  in  restraint  of  trade  or  commerce;  or  {h)  is  destructive 
or  injurious,  by  means  of  unfair  competition,  to  any  Australian  in- 
dustry the  preservation  of  which  is  advantageous  to  the  Common- 
wealth, having  due  regard  to  the  interests  of  producers,  workers,  and 
consumers. 

Provided,  that  this  section  shall  only  apply  to  contracts  or  combi- 
nations in  relation  to  commerce  wath  other  countries  or  among  the 
States. 

(2)  On  the  conviction  of  any  person  for  an  offence  under  this  part 
of  this  Act  the  Justice  before  whom  the  trial  takes  place  shall,  upon 
application  by  or  on  behalf  of  the  Attorney-General  or  any  person 
thereto  authorized  by  him,  grant  an  injunction  restraining  the  con- 
victed person  and  his  servants  and  agents  from  the  repetition  or  con- 
tinuance of  the  offence  of  which  he  has  been  convicted. 

lOA. —  (1)  Any  person  who  does  any  act  or  thing  in  disobedience 
of  an  injunction  granted  under  this  part  of  this  Act  shall  be  guilty 
of  an  oil'ence. 

Penalty:  Five  hundred  pounds  for  each  day  during  which  the 
offence  continues. 

(2)  This  section  shall  not  be  deemed  to  derogate  from  the  power 
of  the  High  Court,  apart  from  this  section,  to  enforce  obedience  to 
the  injunction. 

11. —  (1)  Any  person  who  is  injured  in  his  person  or  property  by 
any  other  person,  by  reason  of  any  act  or  thing  done  by  that  other  per- 

1  Section  R  was  ropcalod  liv  section  6  of  tho  Australian  Industries  Preservation  Act  (No. 
26)    of  1009. 


750  KEPOET   OF    THE   COMMISSIOlSrEE   OP   CORPOKATIONS. 

son  in  contravention  of  this  part  of  this  Act,  or  by  reason  of  any  act 
or  thing  done  in  contravention  of  any  injunction  granted  under  this 
part  of  this  Act  may,  in  the  High  Court,  before  a  Justice  without  a 
jury,  sue  for  and  recover  treble  damages  for  the  injury. 

(2)  No  person  shall,  in  any  proceeding  under  this  section,  be  ex- 
cused from  answering  any  question  put  either  viva  voce  or  by  inter- 
rogatory, or  from  making  any  discovery  of  documents,  on  the  ground 
that  the  answer  or  discovery  may  criminate  or  tend  to  criminate  him ; 
but  his  answer  shall  not  be  admissible  in  evidence  against  him  in  any 
criminal  proceeding  other  than  a  prosecution  for  perjury. 

12.  The  jury  panel  for  the  trial  of  any  offence  against  this  part  of 
this  Act,  or  for  the  trial  of  any  action  or  issue  under  this  part  of  this 
Act,  shall  be  taken  from  the  list  of  special  jurors  (if  any)  in  the 
State  or  part  of  the  Commonwealth  in  which  the  trial  takes  place. 

13. —  (1)  Proceedings  for  the  recovery  of  pecuniar}^  penalties  for 
offences  against  this  part  of  this  Act  (other  than  indictable  offences  or 
offences  against  section  fifteen  B,  section  fifteen  C,  or  section  fifteen 
E)  shall  be  instituted  in  the  High  Court  by  way  of  civil  action  and 
shall  be  tried  before  a  Justice  of  that  Court  without  a  jury. 

(2)  Any  offence  against  this  part  of  this  Act  committed  by  a  per- 
son who  has  previously  been  convicted  of  any  offence  against  this 
part  of  this  Act  shall  be  an  indictable  offence,  punishable  on  convic- 
tion by  a  penalty  not  exceeding  Five  hundred  pounds,  or  imprison- 
ment for  any  term  not  exceeding  one  year,  or  both ;  in  the  case  of  a 
corporation,  hy  a  penalty  not  exceeding  One  thousand  pounds. 

14. —  (1)  No  proceeding  for  an  indictable  offence  or  for  the  re- 
covery of  penalties  shall  be  instituted  under  this  part  except  by  the 
Attorney-General  or  some  person  authorized  by  him. 

(2)  No  other  proceeding  shall  be  instituted  under  this  part  with- 
out the  written  consent  of  the  Attorney-General. 

14A.  In  any  proceeding  for  an  offence  against  this  part  of  this 
Act,  and  indictment,  information,  statement  of  claim,  conviction, 
warrant,  or  other  process  shall  suffice  if  the  offence  is  set  forth  as 
nearly  as  may  be  in  the  words  of  this  Act. 

14B.  No  person  shall,  in  any  proceeding  for  an  offence  against 
this  part  of  this  Act,  be  excused  from  answering  any  question,  put 
either  viva  voce  or  by  interrogatory,  or  from  making  any  discovery 
of  documents,  on  the  ground  that  the  answer  or  discovery  may  tend 
to  criminate  him  or  make  him  liable  to  a  penalty;  but  his  answer 
shall  not  be  admissible  in  evidence  against  him  in  any  civil  or  crimi- 
nal proceeding  other  than  a  proceeding  for  an  offence  against  this 
Act  or  a  prosecution  for  perjury. 

,  14C.  In  any  proceeding  for  an  offence  against  this  part  of  this 
Act,  wherein  a  combination  or  conspiracy  or  attempted  combination 
or  conspiracy  in  contravention  of  this  Act  is  alleged,  any  book,  docu- 
ment, paper  or  writing  containing — {a)  any  minute,  note,  record  or 
memorandum  of  any  proceeding  at  any  meeting  of  the  persons  or  any 
of  the  persons  alleged  to  have  been  parties  or  privy  to  the  combina- 
tion, conspiracy  or  attempt,  or  {h)  any  entry  purporting  to  be  a  copy 
of  or  extract  from  any  such  book,  document,  paper  or  writing,  shall, 
upon  proof  that  it  was  produced  by  or  came  from  the  custody  of 
those  persons  or  any  of  them,  or  of  a  responsible  officer  or  a  repre- 
sentative of  those  persons  or  any  of  them, —  (i)  be  admissible  in  evi- 


TEUST   LAWS  AND  UNFAIR  COMPETITION.  751 

dence  against  those  persons;  and  (ii)  be  evidence  that  the  matter 
and  things  thereby  appearing  to  have  been  done  by  those  persons,  or 
any  of  them,  were  so  done,  and  that  any  person  thereby  appearing  to 
have  been  present  at  the  meeting  was  so  present. 

14D.  In  any  proceeding  for  an  oifence  against  this  part  of  this 
Act,  any  book,  letter,  document,  paper  or  writing,  or  anything  pur- 
porting to  be  a  copy  of,  or  extract  from,  any  book,  letter,  document, 
paper  or  Meriting,  containing  any  reference  to  any  matter  or  thing 
alleged  to  be  done  in  contravention  of  this  Act,  shall,  upon  proof  that 
it  was  produced  by  or  came  from  the  custody  of  a  person  charged 
with  the  offence,  or  a  responsible  officer  or  a  representative  of  that 
person, —  (a)  be  admissible  in  evidence  against  that  person;  and  (6) 
be  evidence  of  the  matters  and  things  thereby  appearing,  and  that 
the  book,  letter,  document,  paper  or  writing  (or,  in  the  case  of  a  copy, 
that  the  original  thereof)  was  written,  signed,  despatched,  and  re- 
ceived by  the  persons  by  whom  it  purports  to  have  been  written, 
signed,  despatched,  and  received,  and  that  any  such  copy  or  extract 
is  a  true  copy  of,  or  extract  from,  the  original  of  or  from  which  it 
l^urports  to  be  a  copy  or  extract. 

_  15. —  (1)  Any  person  party  to  a  contract  or  member  of  a  combina- 
tion or  in  any  way  concerned  in  carrying  out  the  contract  or  the 
objects  of  tlie  combination  may — (a)  lodge  with  the  Attorney-Gen- 
eral a  statutory  declaration  by  himself,  or  in  the  case  of  a  corpora- 
tion by  some  one  approved  of  in  that  behalf  by  the  Attorney- 
General,  setting  forth  truly,  fully  and  completely  the  terms  and 
particulars  of  the  contract,  or  the  purposes,  objects  and  terms  of 
agreement  or  constitution  of  the  combination,  as  the  case  may  be, 
and  an  address  in  Australia  to  which  notices  may  be  sent  by  the 
Attorney-General;  and  (h)  publish  the  statutory  declaration  in  the 
Gazette. 

(2)  The  Attorney-General  may  at  any  time  send  notice  to  the  per- 
son above-mentioned  (hereinafter  called  the  declarant),  to  the  ad- 
dress mentioned  in  the  statutory  declaration,  that  he  considers  the 
contract  or  combination  likely  to  restrain  trade  or  commerce  to  the 
detriment  of  the  public,  or  to  destroy  or  injure  an  Australian  in- 
dustry by  unfair  competition. 

(3)  In  any  proceeding  against  the  declarant  in  respect  of  any 
offence  against  section  4  of  this  Act,  alleged  to  have  lieen  committed 
by  him  in  relation  to  the  contract  or  combination  after  the  time  the 
statutory  declaration  has  been  lodged  and  published,  and  before  any 
notice  as  aforesaid  has  been  sent  to  him  by  the  Attorney-General, 
it  shall  be  deemed  (but  as  regards  the  declarant  only  and  not  as 
regards  any  other  person)  that  the  declarant  had  no  intent  to  contra- 
vene the  provisions  of  the  section,  if  he  proves  that  the  statutory 
declaration  contains  a  true,  full  and  complete  statement  of  the  terms 
and  particulars  of  the  contract,  or  the  purposes,  objects,  and  terms  of 
agreement  or  constitution  of  the  combination,  as  the  case  may  be, 
at  the  date  of  the  statutory  declaration  and  at  the  date  of  the  alleged 
offence. 

15A.  In  any  prosecution  for  an  offence  against  sections  4,  7,  7A, 
7P>,  or  9  of  this  Act  the  avei-nients  of  the  prosecutor  contained  in  the 
information,  declaration  oi-  claim  shall  be  deemed  to  be  jiroved  in  the 
absence  of  proof  to  the  coutrary,  but  so  that — {<A  the  averment  in 
the  information  of  intent  shall  not  be  deemed  sufficient  to  prove  such 


752  EEPORT   OF    THE    COMMISSIONER   OF   COKPOEATIONS. 

intent,  and  (b)  in  all  proceedings  for  an  indictable  offence  the  guilt 
of  the  defendant  must  be  established  by  evidence. 

15B. —  (1)  If  the  Comptroller-General  believes  that  an  offence  has 
been  committed  against  this  part  of  this  Act,  or  if  a  complaint  has 
been  made  in  writing  to  the  Comptroller-General  that  an  offence 
has  been  committed  against  this  part  of  this  Act  and  the  Comptroller- 
General  believes  that  the  offence  has  been  committed,  he  may  by 
writing  under  his  hand  require  any  person  whom  he  believes  to  be 
capable  of  giving  any  information  in  relation  to  the  alleged  offence 
to  answer  questions  and  to  produce  documents  to  him  or  to  some 
person  named  by  him  in  relation  to  the  alleged  offence. 

(2)  No  person  shall  refuse  or  fail  to  answer  questions  or  produce 
documents  when  required  to  do  so  in  pursuance  of  this  section. 

Penalty :  Fifty  pounds. 

(3)  The  Comptroller-General  or  any  person  to  whom  any  docu- 
ments are  produced  in  pursuance  of  this  section  may  take  copies  of 
or  extracts  from  those  documents. 

(4)  No  i^erson  shall  be  excused  from  answering  any  questions  or 
producing  any  documents  when  required  to  do  so  under  this  section 
on  the  ground  that  the  answer  to  the  question  or  the  production  of 
the  document  might  tend  to  criminate  him  or  make  him  liable  to  a 
penalty;  but  his  answer  shall  not  be  admissible  in  evidence  against 
him  in  any  civil  or  criminal  proceeding  other  than  a  proceeding  for 
an  offence  against  this  part  of  this  Act. 

15C, —  (1)  Whenever  a  complaint  on  oath  has  been  made  in  writ- 
ing to  the  Comptroller-General  that  any  person  or  any  foreign  cor- 
poration or  any  trading  or  financial  corporation  formed  within  the 
Commonwealth  has  been  guilty  of  any  offence  against  this  part  of 
this  Act,  the  Comptroller-General,  if  he  believes  the  complaint  to  be 
Avell  founded,  may,  by  writing,  require  any  such  person  or  foreign 
corporation  or  trading  or  financial  corporation  or  any  member, 
officer  or  agent  of  any  such  corporation,  to  produce  and  hand  over 
to  him  or  to  some  person  appointed  by  him  in  writing  all  books  and 
documents  relating  to  the  subject-matter  of  the  complaint  and  all 
books  and  documents  of  any  kind  whatsoever  wherein  any  entry  or 
memorandum  appears  in  any  way  relating  to  the  subject-matter  of 
the  complaint. 

(2)  Every  person  or  foreign  corporation,  or  trading  or  financial 
corporation,  required  by  the  Comptroller-General  as  aforesaid  to 
produce  to  him  or  to  some  ])erson  appointed  by  him  in  writing  any 
books  or  documents  shall  forthwith  produce  and  hand  over  such 
boc»ks  or  documents  accordingly. 

Penalty :  One  hundred  poinids. 

(3)  The  Comptroller-General  or  any  person  appointed  by  him  in 
writing  may  inspect  all  books  and  documents  produced  in  pursuance 
of  this  section  and  may  make  copies  of  or  extracts  from  those  books 
or  documents. 

15D.  The  Comptroller-General  may  impound  or  retain  any  book  or 
document  produced  to  him  or  to  any  person  so  appointed  by  him  in 
pursuance  of  the  preceding  section,  but  the  person  or  corporation 
otherwise  entitled  to  such  book  or  document  shall  in  lieu  thereof  l)e 
entitled  to  a  copy  certified  as  correct  by  the  C^omptroller-General,  and 
such  certified  copy  shall  be  receivable  in  all  Courts  as  evidence  and  of 
equal  validity  with  the  original.    And  until  such  certified  copy  is 


TRUST   LAWS  AND   UNFAIR   COMPETITION.  753 

supplied  the  Comptroller-General  may  at  such  times  and  places  as 
he  shall  think  proper  permit  such  person,  or  in  the  case  of  a  corpora- 
tion any  person  appointed  for  the  purpose  by  the  corporation,  to  in- 
spect and  take  extracts  from  the  books  or  documents  so  impounded 
or  retained. 

loE.  No  person  shall  disclose  any  information  gained  by  him  in  the 
exercise  of  the  powers  conferred  by  the  last  three  preceding  sections 
except  — (a)  to  the  Attorne3^-General,  or  some  person  authorized  by 
him;  (h)  to  the  Comptroller-General;  (c)  when  giving  evidence  in 
any  proceeding  for  an  offence  against  this  part  of  this  Act. 

Penalty :  Fif t}^  pounds. 

Part  III. — Prevention  of  Dumping. 

16.  In  this  Part  of  this  Act — 

"Justice"  means  a  Justice  of  the  High  Court; 

"The  Comptroller-General"  means  the  Comptroller-General  of 
Customs ; 

"  Imported  goods  "  and  "Australian  goods  "  include  goods  of  those 
classes,  respectively,  and  all  parts  or  ingredients  thereof; 

"  Produced "  includes  manufactured,  and  "  Producer "  includes 
manufacturer ; 

"  Trade  "  includes  production  of  every  kind ; 

"  Industries  "  shall  not  include  industries  in  which  in  the  opinion 
of  the  Comptroller-General  or  Justice  as  the  case  may  be,  the  ma- 
jority of  workers  do  not  receive  adequate  remuneration  or  are  sub- 
ject to  unfair  terms  or  conditions  of  labour  or  employment. 

17.  Unfair  competition  has  in  all  cases  reference  to  competition 
with  those  Australian  industries,  tlie  preservation  of  which,  in  the 
opinion  of  the  Comptroller-General  or  a  Justice  as  the  case  may  be, 
is  advantageous  to  the  Commonwealth,  having  due  regard  to  the 
interests  of  producers,  workers,  and  consumers. 

18. —  (1.)  For  the  purposes  of  this  Part  of  this  Act,  competition 
shall  be  deemed  to  be  unfair,  unless  the  contrary  is  proved,  if — (a) 
under  ordinary  circumstances  of  trade  it  would  probably  lead  to  the 
Australian  goods  being  no  longer  produced  or  being  withdrawn  from 
the  market  or  being  sold  at  a  loss  unless  produced  at  an  inadequate 
remuneration  for  labour;  or  (b)  the  means  adopted  by  the  person 
importing  or  selling  the  imported  goods  are,  in  the  opinion  of  the 
Comptroller-General  or  a  Justice  as  the  case  may  be,  unfair  in  the 
circumstances;  or  (c)  the  competition  would  probably  or  does  in  fact 
result  in  an  inadequate  remuneration  for  labour  in  the  Australian  in- 
dustry; or  (d)  the  competition  would  probably  or  does  in  fact  result 
in  creating  any  substantial  disorganization  in  Australian  industry  or 
throwing  workers  out  of  employment;  or  (e)  the  imported  goods 
have  been  purchased  abroad  by  or  for  the  importer,  from  the  manu- 
facturer or  some  person  acting  for  or  in  combination  Avith  him  or 
accounting  to  him,  at  prices  greatly  below  their  ordinary  cost  of  pro- 
duction where  produced  or  market  price  where  purchased;  or  (/) 
the  imported  goods  are  imported  by  or  for  the  manufacturer,  or  some 
person  acting  for  or  in  combination  with  him  or  accounting  to  him, 
and  are  being  sold  in  Australia  at  a  price  which  is  less  than  gives  the 
person  importing  or  selling  them  a  fair  profit  upon  their  fair  foreign 

30035°— 16 48 


754  EEPOKT   OF   THE   COMMISSIONER  OF   COEPOEATIONS. 

market  value,  or  their  fair  selling  value  if  sold  in  the  country  of  pro- 
duction, together  with  all  charges  after  shipment  from  the  place 
whence  the  goods  are  exported  directly  to  Australia  (including  Cus- 
toms duty). 

(2.)  In  determining  whether  the  competition  is  unfair,  regard 
shall  be  had  to  the  management,  the  processes,  the  plant,  and  the  ma- 
chinery employed  or  adopted  in  the  Australian  industry  affected  by 
the  competition  being  reasonably  efficient,  effective,  and  up-to-date. 

19. —  (1.)  The  Comptroller-General,  whenever  he  has  received  a 
"complaint  in  writing  and  has  reason  to  believe  that  any  person  (here- 
inafter called  the  importer),  either  singly  or  in  combination  with 
any  other  person  within  or  beyond  the  Commonwealth,  is  importing 
into  Australia  goods  (hereinafter  called  imported  goods)  with  intent 
to  destroy  or  injure  any  Australian  industry  l)y  their  sale  or  disposal 
within  the  Commonwealth  in  unfair  competition  with  any  Austra- 
lian goods,  may  certify  to  the  Minister  accordingly. 

(2.)  The  certificate  of  the  Comptroller-General  shall  specify — (a) 
the  imported  goods;  {h)  the  Australian  industry  and  goods;  (c) 
the  importer;  {d)  the  grounds  of  unfairness  in  the  competition;  (e) 
the  name,  address,  and  occupation  of  any  person  (not  being  an  officer 
of  the  public  service)  upon  whose  information  he  may  have  acted. 

(3.)  The  Comptroller-General  may  add  to  his  certificate  a  state- 
ment of  such  other  facts  as  in  his  opinion  ought  to  be  specified  to 
give  the  importer  fair  notice  of  the  matters  complained  of. 

(4.)  The  Comptroller-General  shall,  before  making  his  certificate, 
give  to  the  importer  an  opportunity  to  show  cause  why  the  certificate 
should  not  be  made  and  furnish  him  with  a  copy  of  the  complaint. 

(5.)  On  receipt  of  the  certificate  the  Minister  may — (a)  by  order 
in  writing  refer  to  a  Justice  the  investigation  and  determination  of 
the  question  whether  the  imported  goods  are  being  imported  with 
the  intent  alleged;  and  if  so,  whether  the  importation  of  the  goods 
should  be  prohibited  either  absolutely  or  subject  to  any  specified  con- 
ditions or  restrictions  or  limitations;  (h)  notify  in  the  Gazette  that 
the  question  has  been  so  referred;  and  (c)  forward  to  the  Justice  a 
copy  of  the  certificate. 

20.  From  the  date  of  the  Gazette  notice  until  the  publication  in 
the  Gazette  of  the  determination  of  the  question  bj^  the  Justice,  goods 
the  subject  of  the  investigation,  shall  not  be  imported  unless  the  im- 
porter—  («)  gives  to  the  Minister  a  bond  with  such  sureties  as  the 
Minister  approves,  for  such  amount  (not  exceeding  the  true  value  of 
the  goods  for  Customs  purposes)  as  the  Minister  considers  just  and 
reasonable  by  way  of  precaution  in  the  circumstances,  and  condi- 
tioned to  be  void  if  the  Justice  determines  the  question  in  favor  of 
the  importer;  or  (6)  gives  such  other  security  and  complies  with 
such  other  conditions  as  the  Minister  approves;  and  those  goods  shall, 
if  imported  in  contravention  of  this  section,  be  deemed  to  be  pro- 
hibited imports  within  the  meaning  of  the  Customs  Act  1901,  and 
the  provisions  of  that  Act  shall  apply  to  the  goods  accordingly. 

21. —  (1.)  The  Justice  shall  proceed  to  expeditiously  and  carefully 
investigate  and  determine  the  matter,  and  for  the  purpose  of  the 
proceeding  shall  have  power  to  inquire  as  to  anv  goods,  things,  and 
matters  whatsoever  which  he  considers  pertinent,  necessary,  or  ma- 
terial. 


TEUST   LAWS  AND  UNFAIR  COMPETITION.  755 

(2.)  For  the  purpose  of  the  proceeding  the  Justice  shall  sit  in  open 
Court,  and  shall  have  all  the  powers  of  a  Justice  in  the  exercise  of 
the  ordinary  jurisdiction  of  the  High  Court.  He  may,  if  he  thinks 
fit,  and  shall  on  the  application  of  either  party,  state  a  case  for  the 
opinion  of  the  Full  Court  upon  any  question  of  law  arising  in  the 
proceeding.  And  he  may  if  he  thinks  fit,  at  any  stage  of  the  pro- 
ceeding, refer  the  investigation  and  determination  of  the  matter  to 
the  Full  Court,  which  shall  in  that  case  have  all  the  powers  and  func- 
tions of  a  Justice  under  this  Part  of  this  Act. 

(3.)  The  certificate  of  the  Comptroller-General  shall  be  prima 
facie  evidence  of  facts  by  sub-section  (2.)  of  section  nineteen  of  this 
Act  required  to  be  specified  therein. 

(4.)  In  addition  to  the  Comptroller-General  and  the  importer  the 
Justice  may,  if  he  thinks  fit,  allow  any  person  interested  in  importing 
imported  goods  to  be  represented  at  the  investigation. 

(5.)  The  Justice  shall  be  guided  by  good  conscience  and  the  sub- 
stantial merits  of  the  case,  without  regard  to  legal  forms  or  techni- 
calities, or  whether  the  evidence  before  him  is  in  accordance  with  the 
law  of  evidence  or  not. 

(6.)  No  person  shall  in  any  proceeding  before  a  Justice  be  excused 
from  answering  any  question  or  producing  documents  on  the  ground 
that  the  answer  or  production  may  criminate  or  tend  to  criminate 
him,  but  his  answer  shall  not  be  admissible  in  evidence  against  him 
in  any  criminal  proceeding  other  than  a  prosecution  for  perjury. 

(7.)  The  Justice  shall  forward  his  determination  to  the  Minister. 

(8.)  In  the  case  of  the  following  agricultural  implements: — Plows 
of  all  kinds  over  1^  cwt.,  tine  harrows,  disk  harrows,  gi'ain  drills, 
combined  grain  seed  and  manure  drills,  land  rollers,  cultivators,  chaff 
cutters,  seed  cleaners,  stripper  harvesters,  and  any  other  implement 
usually  used  in  agriculture,  the  Justice  shall  inquire  into  and  deter- 
mine the  question  whether  the  goods  are  being  imported  with  the 
effect  of  benefiting  the  primary  producers  without  unfairly  injuring 
any  other  section  of  the  community  of  the  Commonwealth. 

(9.)  The  determination  of  the  Justice  shall  be  final  and  conclusive 
and  without  appeal,  and  shall  not  be  questioned  in  any  way. 

22. —  (1.)  Upon  the  receipt  of  the  determination  of  the  Justice  the 
Minister  sliall  forthwith  cause  it  to  be  published  in  the  Gazette. 

(2.)  If  the  Justice  determines  that  the  imported  goods  are  being 
imported  with  the  intent  alleged,  and  that  their  importation  should 
be  prohibited  either  absolutely  or  subject  to  any  specified  conditions 
or  restrictions  or  limitations  of  any  kind  whatsoever — («)  the  deter- 
mination when  so  published  shall  have  the  effect  of  a  proclamation 
under  the  Customs  Act  1901  prohibiting  the  importation  of  the 
goods  either  absolutely  or  subject  to  those  conditions  or  restrictions 
or  limitations  as  the  case  may  be;  and  in  that  case  the  provisions  of 
that  Act  shall  apply  to  goods  so  prohibited;  and  {!>)  the  Justice  may 
by  order  reduce  the  amount  recoverable  under  any  bond  given  in  pur- 
suance of  this  Part  of  this  Act  to  such  sum  as  the  importer  satisfies 
him  is  reasonable  and  just  in  the  circumstances. 

23.  The  Governor-General  may  at  any  time,  by  proclamation, 
simultaneously  with  or  subsequently  to  any  prohibition  under  this 
part  of  this  Act,  rescind  in  whole  or  in  part,  the  prohibition  or  any 
condition  or  restriction  or  limitation  on  importation  imposed  thereby. 


756  REPORT  OF   THE   COMMISSIONER  OF   CORPORATIONS. 

21.  In  all  cases  of  prohibition  the  determination  of  the  Justice 
and  any  proclamation  affecting  the  same,  shall  be  laid  before  both 
Houses  of  the  Parliament  within  seven  days  after  the  publication  in 
Ihe  Gazette,  or,  if  the  Parliament  is  not  then  sitting,  within  seven 
days  after  the  next  meeting  of  Parliament. 

25.  The  Justices  of  the  High  Court,  or  a  majority  of  them,  may 
make  Eules  of  Court  not  inconsistent  with  this  Act,  for  regulating 
the  proceedings  before  a  Justice  under  this  Part  of  this  Act,  and  for 
carrying  this  Part  of  this  Act  into  effect. 

26. —  (1.)  Any  person  who  wilfully — {a)  makes  to  the  Comptroller- 
General  or  to  any  officer  of  Customs  any  false  statement  in  relation 
to  any  action  or  proceedings  taken  or  proposed  to  be  taken  under  this 
Part  of  this  Act;  or  (b)  misleads  the  Comptroller-General  in  any 
particular  likely  to  affect  the  discharge  of  his  duty  under  this  Act; 
shall  be  guilty  of  an  offence. 

Penalty :  One  hundred  pounds  or  twelve  months'  imprisonment. 

(2.)  Any  person  convicted  under  the  last  preceding  subsection  may 
be  ordered  by  the  Justice  to  whom  a  question  is  referred  under  this 
Part  of  this  Act  to  pay  the  whole  or  part  of  the  costs  incurred  by 
the  importer  in  whose  favor  the  question  is  determined. 


EXHIBIT   C— AUSTRALIAN  INTER-STATE   COMMISSION   ACT,    1912. 

(An  Act  relating  to  the  ixter-state  commission.) 
[Assented  to  24th  December,  1912.] 

Be  it  enacted  l>y  the  Kinrfs  Most  Excellent  Majesty,  the  Senate, 
and  the  House  of  Representatives  of  the  G ormnonwealth  of  Aus- 
tralia, as  folloivs: 

Part  I. — Preliminary. 

1.  This  Act  may  be  cited  as  the  Inter-State  Commission  Act  1912. 

2.  This  Act  is  divided  into  Parts,  as  follows : — 

Part  I. — Preliminary. 

Part  II. — The  Inter-State  Commission. 

Part  III. — Investigations. 

Part  IV.— Inter- State  Traffic. 

Part  V. — Judicial  Powers  of  the  Commission. 

Part  VI. — Miscellaneous. 

3.  In  this  Act,  unless  the  contrary  intention  appears — 

"  Commerce  "  includes  trade  and  traffic  of  all  descriptions  by  land 
or  water ; 

"  The  Commission  "  means  the  Inter-State  Commission ; 

"  Commissioner"  means  a  member  of  the  Inter-State  Commission; 

"  Common  carrier  "  includes  the  Railway  Commissioners,  and  any 
persons  or  authorities  controlling  the  railways,  ferries,  or  other  carry- 
ing agencies,  of  the  Common Avealth  or  of  a  State ; 

"  External  commerce  "  means  commerce  with  other  countries,  and 
includes  all  commerce  (whether  or  not  under  a  common  control,  man- 
agement, or  arrangement,  and  whether  or  not  by  a  continuous  car- 
riage or  shipment)  from  any  place  in  the  Commonwealth  to  or 
through  another  country,  or  from  another  country  to  or  through  any 
place  in  the  Commonwealth; 


TRUST   LAWS   AND   UNFAIR  COMPETITION.  757 

"  Inter-State  commerce  "  means  commerce  among  the  States,  and 
includes  all  commerce  (whether  or  not  imder  a  common  control, 
management,  or  arrangement,  and  whether  or  not  by  a  continuous 
carriage  or  shipment)  from  one  State  or  Territory  of  the  Common- 
wealth to  or  through  another-  State  or  Territory  of  the  Common- 
wealth ; 

'"Goods"  includes  animals  of  all  descriptions: 
"  Order  "  includes  adjudication,  determination,  decision  and  award  : 
"  Party  "  includes  a  State,  or  State  authority,  being  a  party : 
"  Rate  "  includes  any  rate,  fare,  toll,  or  charge  for  any  service  ren- 
dered in  connexion  with  the  transportation  of  passengers  or  goods, 
or  in  connexion  with  the  receiving,  delivering,  storage,  or  handling 
of  goods : 

"  State  Authority  "  means  any  authority  constituted  under  a  State : 
"  State  Railway  Authority  "  includes  the  Railway  Commissioners 
of  a  State,  and  any  persons  or  authorities  controlling  any  railways  the 
property  of  a  State: 

"  The  Minister  "  means  the  Minister  for  Trade  and  Customs : 

"  Traffic  "  includes  the  transportation  of  passengers  and  of  goods. 

Part  II. — The  Inter- State  Commission. 

4.-(l.)  The  Commission  shall  consist  of  three  members,  of  whom 
one  shall  be  of  experience  in  the  law.  It  shall  be  a  body  corporate, 
with  perpetual  succession  and  a  common  seal,  and  capaljle  of  suing 
and  being  sued. 

(2.)  All  courts,  judges,  and  persons  acting  judicially  shall  take 
judicial  notice  of  the  seal  of  the  Commission  affixed  to  any  docu- 
ment or  notice,  and  shall  presume  that  it  was  duly  affixed. 

5.-(l.)  The  Governor-General  shall,  as  soon  as  convenient!}^  prac- 
ticable, appoint  three  persons  to  be  Commissioners,  and  on  the  hap- 
pening of  any  vacancy  in  the  office  of  Commissioner  the  Governor- 
General  shall  appoint  a  person  to  the  vacant  office. 

(2.)  Every  such  appointment  shall,  subject  to  the  Constitution, 
be  for  a  term  of  seven  years ;  and  every  person  so  appointed  shall  on 
the  expiration  of  his  term  of  office  be  eligible  for  re-appointment. 

(3.)  In  case  of  the  illness,  suspension,  or  absence  of  any  Commis- 
sioner, the  Governor-General  may  appoint  a  person  to  act  as  a  Dep- 
uty Commissioner  during  the  illness,  suspension,  or  absence,  and  the 
deputy  shall  whilst  so  acting  have  all  the  powers  and  perform  all  the 
duties  of  a  Commissioner : 

Provided  that  where  the  Commissioner  is  required  by  this  Act  to  be 
of  experience  in  the  law,  the  deputy  shall  be  of  experience  in  the  law. 

G.-(l.)  The  Governor-General  shall  appoint  one  of  the  three  Com- 
missioners to  be  Chief  Commissioner,  and  on  the  happening  of  any 
vacancy  in  the  office  of  Chief  Commissioner  the  Governor-General 
shall  appoint  a  person  to  fill  that  office. 

(2.)  In  case  of  the  illness,  suspension,  or  absence  of  the  Chief  Com- 
missioner, the  Governoi'-General  shall  appoint  one  of  the  other  Com- 
missioners to  act  as  Chief  Commissioner  during  the  illness,  suspen- 
sion, or  absence. 

7.-(l.)  The  Chief  Commissioner  shall  receive  a  salary  of  Two 
thousand  five  hundred  pounds  a  year,  and  each  of  the  other  Commis- 
sioners sliall  receive  a  salary  of  Two  thousand  pounds  a  year. 


758  KEPOET   OF   THE   COMMISSIONER   OF   COKPOEATIONS. 

(2.)  There  shall  be  paid  to  each  Commissioner,  on  account  of  his 
expenses  in  travelling  to  discharge  the  duties  of  his  office,  such  sums 
as  are  considered  reasonable  by  the  Governor-General. 

8.  Every  member  of  the  Commission  shall,  before  proceeding  to 
discharge  the  duties  of  his  oifice,  take  an  oath  or  affirmation  of 
allegiance  in  the  form  of  the  Schedule  to  the  Constitution,  and  also 
an  oath  or  affirmation  in  the  form  following: — 

I,  A.  B.,  do  swear  that  I  will  well  and  truly  serve  our  Sovereign 
Lord  the  King  in  the  office  of  a  member  of  the  Inter-State  Commis- 
sion, and  I  will  do  right  to  all  manner  of  people  according  to  law, 
without  fear  or  favour,  affection,  or  ill-will :  So  help  me  God. 

or,  I,  A.  B.,  do  solemnly  and  sincerely  promise  and  declare  that  (&c., 
as  above,  except  the  words  "  So  help  me  God  "). 

9.-(l.)  The  Governor-General  may  suspend  any  Commissioner  from 
office  for  misbehaviour  or  incapacity.  The  Minister  shall,  within 
seven  days  after  the  suspension,  if  the  Parliament  is  then  sitting,  or 
if  the  Parliament  is  not  then  sitting,  within  seven  days  after  the  next 
meeting  of  the  Parliament,  cause  to  be  laid  before  both  Houses  of 
the  Parliament  a  full  statement  of  the  grounds  of  suspension. 

(2.)  A  Commissioner  who  has  been  suspended  shall  be  restored  to 
office  unless  each  House  of  Parliament  within  forty  days  after  the 
statement  has  been  laid  before  it,  and  in  the  same  session,  passes  an 
address  praying  for  his  removal  on  the  grounds  of  proved  misbe- 
haviour or  incapacity. 

10.- (1.)  Subject  to  the  regulations,  the  Commission  may  hold  sit- 
tings in  any  part  of  the  Commonwealth  in  such  place  or  places  as  it 
may  deem  most  convenient  for  the  transaction  of  its  business  or  pro- 
ceedings, and  shall  keep  minutes  of  its  proceedings  in  the  prescribed 
form. 

(2.)  The  Chief  Commissioner  shall  preside  as  Chairman  at  all 
meetings  of  the  Commission  at  which  he  is  present,  and  in  his  ab- 
sence the  senior  Commissioner  present  shall  preside  as  Chairman. 

ll.-(l.)  For  the  conduct  of  business  any  two  Commissioners  shall 
be  a  quorum,  and  shall  have,  subject  to  the  next  subsection,  all  the 
powers  of  the  Commission. 

(2.)  At  a  meeting  of  the  Commission  the  decision  of  the  majority 
shall  prevail. 

(3.)  If,  at  any  meeting  of  the  Commission  at  which  only  two  Com- 
missioners are  present,  those  Commissioners  differ  in  opinion  upon 
any  matter,  the  determination  of  the  matter  shall  be  postponed  until 
all  the  Commissioners  are  present. 

12.  No  act  or  proceeding  of  the  Commission  shall  be  invalidated 
or  prejudiced  by  reason  only  of  there  being,  at  the  time  when  the  act 
or  proceeding  was  done,  taken,  or  commenced,  a  vacancy  in  the  office 
of  any  one  Commissioner. 

13.  A  Commissioner  shall  not  be  in  the  employment  of  or  hold  any 
official  relation  to  any  common  carrier,  or  be  in  any  way  concerned 
or  interested  in  the  business  of  a  common  carrier,  or  in  any  way  par- 
ticipate or  claim  to  be  entitled  to  participate  in  any  profit,  benefit, 
or  emolument  arising  from  any  such  business. 

14.  A  Commissioner  shall'  not  exercise  any  power  by  this  Act  con- 
ferred upon  him  in  any  matter  in  Avhich  he  is  directly  or  indirectly 
interested. 


TRUST  LAWS   AND   UNFAIE   COMPETITION.  759 

15.  The  Commissioners  shall  devote  the  whole  of  their  time  to  the 
performance  of  their  duties,  and  no  Commissioner  shall  accept  or 
hold  any  paid  employment  outside  the  duties  of  his  office  as  a  Com- 
missioner, or  be  a  director  of  a  company. 

Part  III. — Investigations. 

16.  The  Commission  shall  be  charged  with  the  duty  of  investi- 
gating, from  time  to  time,  all  matters  which  in  the  opinion  of  the 
Coimnission  ought  in  the  public  interest  to  be  investigated  affecting — 

(a)  the  production  of  and  trade  in  commodities ; 
(h)  the  encouragement,  improvement,  and  extension  of  Australian 
inclustries  and  manufactures; 

(c)  markets  outside  Australia,  and  the  opening  up  of  external 
trade  generally; 

(d)  the  effect  and  operation  of  any  Tariff  Act  or  other  legislation 
of  the  Commonwealth  in  regard  to  revenue,  Australian  manufac- 
tures, and  industry  and  trade  generally ; 

(e)  prices  of  commodities; 

(/)  profits  of  trade  and  manufacture ; 

(g)   wages  and  social  and  industrial  conditions; 

(h)  labour,  employment,  and  unemployment; 

(«')  bounties  paid  by  foreign  countries  to  encourage  shipping  or 
export  trade; 

(i)  population; 

(k)  immigration;  and 

(l)  other  matters  referred  to  the  Commission  by  either  House  of 
the  Parliament,  by  resolution,  for  investigation. 

17. —  (1.)  The  Commission  may  investigate  all  matters  affecting — ■ 

{a)  the  extent  of  diversions  or  proposed  diversions,  or  works  or 
proposed  works  for  diversions,  from  any  river  and  its  tributaries, 
and  their  effect  or  probable  effect  on  the  navigability  of  rivers  that 
by  themselves  or  by  their  connexion  with  other  waters  constitute 
highways  for  inter-state  trade  and  commerce ; 

(h)  the  maintenance  and  the  improvement  of  the  navigability  of 
such  rivers; 

(c)  the  abridgment  by  the  Commonwealth  by  any  law  or  regu- 
lation of  trade  or  commerce  of  the  rights  of  any  State  or  the  resi- 
dents therein  to  the  reasonable  use  of  the  waters  of  rivers  for  con- 
servation or  irrigation ; 

{d)  the  violation  by  any  State,  or  by  the  people  of  any  State,  of 
the  rights  of  any  other  State,  or  the  people  of  any  other  State,  with 
respect  to  the  waters  of  rivers. 

(2.)  In  this  section  "diversions"  includes  obstructions,  impound- 
ings,  and  appropriations  of  water  that  diminish  or  retard  the  volume 
of  flow  of  a  river. 

Part  IV. — Inter-State  Traffic. 

RATES  AND   PREFERENCES. 

18.  All  rates  fixed  or  made  by  any  common  carrier — 
(a)  for  any  service  rendered  in  respect  of  inter-state  commerce;  or 
(h)  which  affect  inter-state  conunerce,  shall  be  reasonable  and  just, 
and  every  such  rate  which  is  unreasonable  or  unjust  is  hereby  pro- 
hibited. 


760  REPORT   OF    THE   COMMISSIONER   OF   CORPORATIONS. 

RATES  ON  STATE  RAILWAYS. 

19. —  (1.)  It  shall  not  be  lawful  for  any  State,  or  for  any  State 
Railway  Authority,  to  give  or  make  upon  any  railway  the  property 
of  the  State,  in  respect  of  inter-state  commerce,  or  so  as  to  affect 
such  commerce,  any  preference  or  discrimination  which  is  undue  and 
unreasonable,  or  unjust  to  any  State. 

(2.)  In  deciding  whether  a  lower  charge  or  difference  of  treatment 
constitutes  within  the  meaning  of  this  section  a  preference  or  dis- 
crimination which  is  undue  or  unreasonable,  or  unjust  to  any  State, 
the  Commission  shall  have  due  regard  to  the  financial  responsibilities 
incurred  by  any  State  in  connexion  with  the  construction  and  main- 
tenance of  its  railways. 

20.  Nothing  in  this  Act  shall  render  unlawful  any  rate  for  the 
carriage  of  goods  upon  a  railway,  the  property  of  a  State,  if  the  rate 
is  deemed  by  the  Commission  to  be  necessary  for  the  development  of 
the  territory  of  the  State,  and  if  the  rate  applies  equally  to  goods 
within  the  State  and  to  goods  passing  into  the  State  from  other 
States. 

CARRIERS    AND    STATE    AUTHORITIES    OTHER   THAN    STATE    RAILWAY 

AUTHORITIES. 

21.  No  common  carrier  or  State  Authority,  other  than  a  State 
Railway  Authority,  shall,  in  respect  of  inter-state  commerce,  or  so 
as  to  affect  such  commerce — 

(a)  make  or  give  any  undue  or  unreasonable  preference  or  advan- 
tage to  any  particular  person.  State,  locality,  or  description  of 
traffic;  or 

(h)  subject  any  particular  person.  State,  locality  or  description 
of  traffic  to  any  undue  or  unreasonable  prejudice  or  disadvantage. 

22. —  (1.)  Whenever  it  is  shown  that  any  common  carrier  or  State 
Authority,  other  than  a  State  Railway  Authority,  in  respect  of  inter- 
state commerce,  or  so  as  to  affect  such  commerce — 

(a)  charges  to  any  person  or  class  of  persons,  or  to  the  persons  in 
any  locality  or  State,  lower  rates  for  the  same  or  similar  goods,  or 
for  the  same  or  similar  services,  than  the  carrier  or  authority  charges 
to  other  persons  or  classes  of  persons,  or  to  the  persons  in  another 
locality  or  State;  or 

(h)  makes  any  difference  in  treatment  in  respect  of  any  such 
persons, 

the  burden  of  proving  that  the  lower  rate  or  difference  in  treat- 
ment is  not  an  undue  or  unreasonable  preference  or  advantage  shall 
lie  on  the  common  carrier  or  authority. 

(2.)  In  deciding  whether  a  lower  rate  or  difference  of  treatment 
constitutes  an  undue  preference,  the  Commission  may  as  far  as  it 
thinks  reasonable,  in  addition  to  any  other  circumstances  affecting  the 
case,  take  into  consideration  whether  the  lower  rate  or  difference  of 
treatment  is  necessary  for  the  purpose  of  securing  in  the  interests  of 
the  public  the  traffic  in  respect  of  which  it  is  made,  and  whether  the 
inequality  cannot  be  removed  without  unduly  reducing  the  rates 
charged  to  the  complainant. 


TRUST   LAWS   AND  UNFAIR  COMPETITION.  761 

Part  Y. — Judicial  Powers  of  the  Co.aimission. 
jurisdiction. 

23.  The  Commission,  in  the  exercise  of  its  powers  for  the  hearing 
or  determination  of  any  comphiint,  dispute,  or  question,  or  for  the 
adjudication  of  any  matter,  shall  be  a  court  of  record. 

24.  The  Commission  shall  have  jurisdiction  to  hear  and  determine 
any  complaint,  dispute,  or  question,  and  to  adjudicate  upon  any 
matter  arising  as  to — 

(a)  any  preference,  advantage,  prejudice,  disadvantage,  or  dis- 
crimination given  or  made  by  any  State  or  by  any  State  authority 
or  by  any  common  carrier  in  contravention  of  this  Act,  or  of  the 
provisions  of  the  Constitution  relating  to  trade  and  commerce  or 
any  law  made  thereunder; 

(b)  the  justice  or  reasonableness  of  any  rate  in  respect  of  inter- 
state commerce,  or  affecting  such  commerce; 

(c)  anything  done  or  omitted  to  be  done  by  any  State  or  by  any 
State  Authority  or  by  any  common  carrier  or  by  any  person  in  con- 
travention of  this  Act  or  of  the  provisions  of  the  Constitution  relat- 
ing to  trade  or  commerce  or  any  law  made  thereunder. 

25.  Any  person  complaining  against  any  State,  State  Authority, 
common  carrier,  or  person  of  anything  done  or  left  undone  in  contra- 
vention of  this  Act,  or  of  the  provisions  of  the  Constitution  relating 
to  trade  and  commerce,  or  any  law  made  thereunder,  may  apply  to 
the  Commission,  and  the  Commission  ma}'^  hear  and  determine  the 
niatter  of  the  complaint  according  to  equity  and  good  conscience  and 
in  such  manner  as  to  do  justice  between  the  parties,  and  may  for 
that  purpose  if  it  thinks  fit  direct  and  prosecute,  in  such  mode  and 
by  such  persons  as  it  thinks  proper,  all  such  inquiries  as  it  deems 
necessary. 

26.  Any  of  the  following  authorities,  that  is  to  say — 
(a)  the  Commonwealth; 

(h)  any  State,  or  any  State  Eailway  Authority; 

(c)  any  borough,  municipality,  or  body  politic ; 

(d)  any  Harbor  Board,  Marine  Board,  or  other  State  Authority ; 

or 

(e)  any  such  association  of  traders  or  freighters,  or  chamber  of 
commerce,  manufacturers,  or  agriculture,  as  is  in  the  opinion  of  the 
Commission  a  proper  body  to  make  the  complaint,  may  make  to  the 
Commission  any  complaint  which  the  Commission  has  jurisdiction 
to  determine,  and  may  do  so  without  proof  that  the  authoritj?"  is 
directly  aggi-ieved  by  the  matter  complained  of,  and  any  such  au- 
thority may  appear  in  opposition  to  any  such  complaint  in  any  case 
where  the  authority,  or  the  ]:)ersons  represented  by  it,  appear  to  the 
Commission  to  be  likely  to  bo  affected  b}'^  any  determination  of  the 
Commission  upon  the  complaint. 

27.  The  Commission  may  of  its  own  motion  summon  before  it  any 
State  authority,  common  carrier,  or  i^erson  who  it  has  reason  to 
believe  has  done  anything  oi-  left  anything  undone  in  contravention 
of  this  Act,  or  of  the  provisions  of  the  Constitution  relating  to  trade 
and  commerce  or  any  law  made  thereunder,  and  sliall  have  jurisdic- 
tion to  hear  and  determine  the  matter  and  mav  make  such  orders  in 


762  REPORT   OF    THE    COMMISSIONER   OF    CORPORATIONS. 

relation  thereto  as  if  complaint  had  been  made  to  it  of  the  contra- 
vention. 

28.  Any  complaint,  dispute,  question,  or  difference  whatever  relat- 
ing to  external  or  inter-state  commerce  may,  upon  the  application 
of  the  parties,  and  with  the  consent  of  the  Commission,  be  referred 
to  the  Commission  for  decision ;  and  the  Commission  shall  thereupon 
have  the  same  jurisdiction  to  hear  and  determine  the  complaint,  dis- 
pute, question,  or  difference,  and  the  decision  of  the  Commission 
thereon  may  be  carried  into  effect  in  the  same  way,  as  in  other 
matters  in  which  the  Commission  has  jurisdiction. 

RELIEF. 

29.  The  Commission,  in  any  matter  in  which  it  has  jurisdiction, 
shall  have  power  to  grant  and  shall  grant,  either  absolutely  or  on 
such  terms  and  conditions  as  may  be  just,  all  relief  to  which  any  of 
the  parties  are  entitled  in  respect  of  any  claim  properly  brought  for- 
ward by  them  in  the  matter ;  so  that  as  far  as  possible  all  matters  in 
controversy  between  the  parties  regarding  the  matter  of  complaint, 
or  arising  out  of  or  connected  with  it,  may  be  completely  and  finally 
determined,  and  all  multiplicity  of  proceedings  concerning  any  of 
such  matters  may  be  avoided. 

30. —  (1.)  Where  the  Commission  has  jurisdiction  to  hear  and  deter- 
mine any  matter,  it  may,  in  addition  to  or  in  substitution  for  any 
other  relief,  award  to  any  complaining  party  wdio  is  aggrieved  such 
damages  as  it  finds  him  to  have  sustained  : 

Provided  that  damages  shall  not  be  awarded  unless  complaint  has 
been  made  to  the  Commission  within  one  year  from  the  discovery  by 
the  party  aggrieved  of  the  matter  complained  of. 

(2.)  The  Commission  may  ascertain  the  amount  of  the  damages 
either  by  trial  before  itself,  or  by  directing  an  inquiry  to  be  taken 
before  one  or  more  of  the  Commissioners  or  before  some  officer  of  the 
Commission. 

31.  If  it  appears  to  the  Commission,  on  the  hearing  of  any  com- 
plaint, that  anything  has  been  done  or  left  undone  by  any  party  in 
contravention  of  this  Act  or  of  the  provisions  of  the  Constitution 
relating  to  trade  and  commerce,  or  any  law  made  thereunder,  the 
Commission  may  order  that  the  party  be  restrained  by  injunction  or 
other  proper  process  mandatory  or  otherwise  from  further  con- 
tinuing the  contravention. 

32.  If  it  appears  to  the  Commission,  on  the  hearing  of  any  com- 
plaint, that  anything  done  or  left  undone  in  contravention  of  this 
Act,  or  of  the  provisions  of  the  Constitution  relating  to  trade  and 
commerce,  or  any  law  made  thereunder,  has  been  so  done  or  left 
undone  in  pursuance  of  any  regulation  made  by  any  State  or  by  any 
State  Authority,  the  Commission  may  declare  the  regulation,  or  any 
part  thereof,  to  be  void,  and  thereupon  the  same  shall  cease  to  have 
any  effect. 

33. —  (1.)  If  it  appears  to  the  Commission,  on  the  hearing  of  any 
complaint,  that  anything  has  been  done  or  left  undone  by  any  party 
in  contravention  of  this  Act,  or  of  the  provisions  of  the  Constitution 
relating  to  trade  and  commerce,  or  any  law  made  thereunder,  it  may, 
by  the  order  made  on  the  hearing  or  by  any  subsequent  order,  declare 
the  thing  which  the  party  is  required  to  do  or  not  to  do  for  the 
future  to  bring  himself  into  conformity  with  this  Act  or  with  the 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  763 

Constitution  or  with  any  such  law  and  for  that  purpose  it  shall  have 
power — 

(a)  to  name  a  maximum  rate  for  any  service; 

(h)  to  name  both  a  maximum  and  a  minimum  rate,  when  that  is 
necessary  to  prevent  an  unlawful  preference  or  discrimination ; 

(c)  to  name  a  maximum  or  minimum  of  difference 'betweenj  two 
rates,  when  that  is  necessary  to  prevent  an  unlawful  preference  or 
discrimination ; 

(d)  to  determine  the  apportionment  between  carriers  of  a  joint 
rate  and  the  terms  and  conditions  under  which  business  shall  be 
interchanged  when  that  is  necessary  to  the  execution  of  the  provi- 
sions of  this  Act  or  of  the  Constitution  or  of  any  such  law ;  and 

(e)  to  require  any  such  amendment  in  the  rules  and  regulations  for 
the  movement  of  traffic  as  is  required  to  bring  them  into  conformity 
with  the  provisions  of  this  Act  or  of  the  Constitution  or  of  any  such 
law. 

(2.)  The  foregoing  enumeration  of  powers  shall  not  exclude  any 
power  which  the  Commission  would  otherwise  have  in  the  making 
of  any  order  under  the  provisions  of  this  Act. 

34. —  (1.)  When  the  Commission  makes  an  order  in  pursuance  of 
the  powers  conferred  by  this  Part,  it  may  by  the  same  or  a  subse- 
quent order  fix  pecuniary  penalties,  or  maximum  pecuniary  penalties, 
or  maximum  and  minimum  pecuniar}'^  penalties,  for  disobedience  of 
the  order  or  any  part  thereof. 

(2.)  A  penalty  so  fixed  shall  not  exceed  Two  huadred  pounds;  or, 
in  the  case  of  a  continuing  disobedience.  Two  hundred  pounds  for 
each  day  during  which  the  disol)edience  continues. 

(3.)  Any  party  or  person  who  disobeys  any  order  of  the  Com- 
mission shall  be  guilty  of  an  offence,  and  shall  be  liable  on  summary 
conviction  to  the  penalty  so  fixed,  or  to  a  penalty  within  the  limits 
so  fixed,  as  the  case  may  be ;  and  where  no  penalty  has  been  so  fixed, 
shall  be  liable  to  a  penalty  not  exceeding  One  hundred  pounds;  or, 
in  the  case  of  a  continuing  disobedience.  One  hundred  pounds  for 
each  day  during  which  the  disobedience  continues. 

(4)  For  the  purposes  of  this  section,  an  act,  omission,  or  failure 
of  an  officer,  servant,  agent,  or  other  person  acting  for  or  employed 
by  a  partjT^,  within  the  scope  of  his  employment,  shall  be  deemed  to 
be  the  act,  omission,  or  failure  of  the  party  as  well  as  of  the  person. 

35. —  (1.)  Any  order  made  by  the  Commission  for  the  purpose  of 
carrying  into  effect  any  provision  of  this  Act  or  of  the  Constitution 
or  of  any  law  may  be  made  a  rule  or  order  of  the  High  Court,  and 
shall  be  enforced  in  like  manner  as  any  rule  or  order  of  the  High 
Court. 

(2.)  For  the  purpose  of  carrying  this  section  into  effect,  the  Jus- 
tices of  the  High  Court,  or  such  of  them  as  ma,y  make  Ivules  of  Court 
in  other  cases,  may  make  general  rules  and  orders  in  the  same 
manner  as  they  may  make  general  rules  and  orders  with  respect  to 
any  other  proceedings  in  the  High  Court. 

POWERS  AND  PROCEEDINGS. 

3G.  For  the  purposes  of  this  Part  of  this  Act,  the  Commission  shall 
have  full  juiisdiction  to  hear  and  determine  all  mattei's,  \Yhether  of 
law  or  of  fact,  and  shall,  as  respects  the  attendance  and  examination 


Y64  EEPOET   OF    THE   COMMISSIONER   OF    CORPORATIONS. 

of  witnesses,  the  production  and  inspection  of  documents,  the  entry 
on  and  inspection  of  property,  and  all  other  matters  whatsoever  neces- 
sary or  proper  for  the  due  exercise  of  its  jurisdiction  under  this  Part 
or  otherwise  for  carrying  this  Part  into  effect,  have  all  such  powers 
rights  and  privileges  as  are  vested  in  the  High  Court. 

37. —  (1.)  The  Commission  may,  in  the  exercise  of  any  jurisdiction 
conferred  on  it  by  this  Part,  call  in  the  aid  of  one  or  more  assessors, 
who  shall  be  persons  of  engineering  commercial  or  other  technical 
knowledge. 

(2.)  There  shall  be  paid  to  the  assessors  such  remuneration  as  the 
Minister  upon  the  recommendation  of  the  Commission  directs. 

38.  In  any  proceedings  under  this  Act  any  party  may  appear 
before  the  Commission  either  in  person  or  by  barrister  or  solicitor. 

39.  Every  finding  of  fact  made  by  the  Commission  in  respect  of 
any  complaint  shall,  in  any  other  complaint  before  the  Commission, 
be  evidence  of  each  and  every  fact  found. 

40.  The  costs  of  and  incidental  to  any  proceedings  before  the  Com- 
mission shall  be  in  the  discretion  of  the  Commission,  which  may  order 
by  whom  and  to  whom  they  are  to  be  paid  and  by  whom  they  are 
to  be  taxed. 

41.  The  Commission  may  review  and  rescind  or  vary  any  order 
made  by  it,  but  save  as  is  by  this  Act  provided  every  order  of  the 
Commission  shall  be  final. 

APPEALS. 

42. —  (1.)  No  appeal  shall  lie  from  the  Commission  except  an  ap- 
peal to  the  High  Court  on  questions  of  law  only. 

(2.)  An  appeal  shall  not  be  brought  except  in  conformity  with 
such  rules  of  court  as  may  be  made  in  relation  to  such  appeals  by  the 
Justices  of  the  High  Court,  or  such  of  them  as  have  power  to  make 
rules  of  court  in  other  cases. 

(3.)  On  the  hearing  of  an  appeal  the  High  Court  may  draw  all 
such  inferences  as  are  not  inconsistent  with  the  facts  expressly  found 
and  are  necessary  for  determining  the  question  of  law,  and  shall  have 
all  such  powers  for  that  purpose  as  if  the  appeal  were  an  appeal 
from  a  judgment  of  a  Justice  exercising  the  original  jurisdiction  of 
the  High  Court,  and  may  make  any  order  which  the  Commission 
could  have  made  and  also  such  further  or  other  order  as  may  be  just. 

(4)  The  costs  of  and  incidental  to  an  appeal  shall  be  in  the  discre- 
tion of  the  High  Court,  but  no  Commissioner  shall  be  liable  to  costs 
by  reason  or  in  respect  of  any  appeal. 

(5)  The  operation  of  any  order  of  the  Commission  shall  not  be 
stayed  pending  the  decision  of  an  appeal  unless  the  Commission  or 
the  High  Court  otherwise  orders. 

43. —  (1.)  The  Commission  may,  if  it  thinks  fit,  in  any  proceeding 
before  it  under  this  Act,  at  the  instance  of  any  party  to  the  proceed- 
ing, and  upon  such  security  being  given  by  the  appellant  as  the  Com- 
mission may  direct,  state  a  case  in  writing  for  the  opinion  of  the 
High  Court  upon  any  question  which  in  the  opinion  of  the  Com- 
mission is  a  question  of  law. 

(2)  The  High  Court  shall  hear  and  determine  the  questions  of 
law  arising  thereon,  and  shall  thereupon  affirm,  reverse,  or  amend 
the  order  in  respect  of  which  the  case  has  been  stated,  or  remit  the 


TEUST   LAWS   AND   UNFAIR  COMPETITION.  765 

matter  to  the  Commission  with  the  opinion  of  the  High  Court 
thereon,  or  may  make  such  other  order  in  rehition  to  the  matter,  and 
such  order  as  to  costs,  as  it  thinks  fit. 

44.  Save  as  provided  by  this  Act,  an  order  or  proceeding  of  the 
Commission  shall  not  be  questioned  or  reviewed,  and  shall  not  be 
restrained  or  removed  by  prohibition,  injunction,  certiorari,  or  other- 
wise either  at  the  instance  of  the  Crown  or  otherwise. 

Part  VI. — Miscellaneous. 

45.  The  Commission  shall  once  in  every  year  make  a  report  to  the 
Minister  containing  a  summary  of  the  work  done  and  investigations 
made  and  proceedings  taken  by  the  Commission  during  the  preced- 
ing year,  and  such  information  and  data  collected  by  the  Commission 
as  it  may  deem  of  value  for  the  determination  of  questions  connected 
with  any  matter  dealt  wdth  by  the  Commission  under  this  Act,  to- 
gether with  such  recommendations  as  to  further  legislation  as  the 
Commission  thinks  expedient. 

46.  The  Commission  shall  from  time  to  time  forward  to  the  Min- 
ister reports  concerning  investigations  and  proceedings  made  or 
taken  by  the  Commission. 

47.  The  Minister  shall  cause  the  yearly  report  and  all  reports  con- 
cerning investigations  and  proceedings  received  by  him  from  the 
Commission  to  be  laid  before  both  Houses  of  the  Parliament  within 
thirty  days  after  the  receipt  thereof  if  the  Parliament  is  then  sitting, 
and  if  not  within  thirty  days  after  the  next  meeting  of  the  Parlia- 
ment. 

48.  The  Commission  may  publish  such  information  relating  to 
any  matter  investigated  by  it  as  it  thinks  fit. 

49.  The  Commission  may,  in  connection  with  any  investigation  or 
proceeding,  take  evidence  in  public  or  in  private,  but  it  shall  only 
take  evidence  in  private  where  it  considers  that  it  is  desirable  in  the 
public  interest  that  the  evidence  should  be  taken  in  private. 

50.  The  Chief  Commissioner  may  by  writing  under  his  hand  sum- 
mon any  person  to  attend  the  Commission  at  a  time  and  place  named 
in  the  summons,  and  then  and  there  to  give  evidence  and  to  produce 
any  books  documents  or  writings  in  his  custody  or  control  which  he 
is  required  by  the  summons  to  produce. 

51.  Every  witness  who  has  been  summoned  to  attend  the  Commis- 
sion shall  appear  and  report  himself  from  day  to  day  unless  excused 
by  the  Chief  Commissioner  or  Chairman  or  until  he  is  released  from 
further  attendance  by  the  Chief  Commissioner  or  Chairman. 

52.  Any  of  the  Commissioners  may  administer  an  oath  to  any 
person  appearing  as  a  witness  before  the  Commission,  whether  the 
witness  has  been  summoned  or  appears  without  being  summoned, 
and  may  examine  the  witness  upon  oath. 

53.- (1.)  Where  any  witness  to  be  examined  before  the  Commis- 
sion conscientiously  objects  to  take  an  oath,  he  may  make  an  affir- 
mation that  he  conscientiously  olijects  to  take  an  oath,  and  that  he 
will  state  the  truth,  the  whole  truth,  and  nothing  but  the  truth,  to  all 
questions  that  may  be  asked  him. 

(2.)  An  affirmation  so  made  shall  be  of  the  same  force  and  effect, 
and  shall  entail  the  same  liabilities,  as  an  oath. 


766  REPORT  OF    THE   COMMISSIONER  OF   CORPORATIONS. 

54.- (1.)  If  any  person  served  with  a  summons  to  attend  the  Com- 
mission as  a  witness  fails  to  attend  the  Commission  in  answer  to  the 
summons,  the  Chief  Commissioner  or  Chairman  may,  on  proof  by 
statutory  declaration  of  the  service  of  the  summons,  issue  a  warrant 
for  his  apprehension. 

(2.)  The  warrant  shall  authorize  the  apprehension  of  the  witness 
and  his  being  brought  before  the  Commission,  and  his  detention  in 
custody  for  that  purpose  until  he  is  released  by  order  of  the  Chief 
Commissioner  or  Chairman. 

(3.)  The  warrant  may  be  executed  by  any  member  of  the  police 
force  of  the  Commonwealth  or  of  a  State  or  Territory,  or  by  any 
person  to  whom  it  is  addressed,  and  the  person  executing  it  shall 
have  the  power  to  break  and  enter  any  place  building  or  vessel  for 
the  purpose  of  executing  it. 

(4.)  The  apprehension  of  any  witness  under  this  section  shall  not 
relieve  him  from  any  liability  incurred  by  him  by  reason  of  his  non- 
compliance with  the  summons. 

55.- (1.)  If  any  person  served  with  a  summons  to  attend  the  Com- 
mission, when  the  summons  is  served  personally,  fails  without  reason- 
able excuse,  to  attend  the  Commission,  or  to  produce  any  documents, 
books,  or  writings  in  his  custody  or  control  which  he  was  required 
by  the  summons  to  produce,  he  shall  be  guilty  of  an  offence. 

Penalty :  Five  hundred  pounds. 

(2.)  It  shall  be  a  defence  to  a  prosecution  under  this  section  for 
failing  without  reasonable  excuse  to  produce  any  documents,  books, 
or  writings,  if  the  defendant  proves  that  the  documents,  books,  or 
writings  were  not  relevant  to  the  investigation  or  proceeding. 

.56.  If  any  person  appearing  as  a  witness  before  the  Commission 
refuses  to  be  sworn  or  to  make  an  affirmation  or  to  answer  any  ques- 
tion relevant  to  the  investigation  or  proceeding  put  to  him  by  any  of 
the  Commissioners  he  shall  be  guilty  of  an  offence. 

Penalty :  Five  hundred  pounds. 

57.- (1.)  Where  any  person  has  on  any  day  done  or  omitted  to  do 
something,  and  his  act  or  omission  amounts  to  an  offence  against 
either  of  the  last  two  preceding  sections,  and  does  or  omits  to  do  the 
same  thing  at  any  meeting  of  the  Commission  held  on  some  other 
day,  each  such  act  or  omission  shall  be  a  separate  offence. 

(2.)  Where  any  person,  who  has  been  convicted  of  any  offence 
against  ■  either  of  the  last  two  preceding  sections,  is  subsequently 
convicted  on  information  by  the  Attorney-General  of  any  offence 
against  either  of  those  sections,  committed  by  him  after  the  first 
mentioned  conviction  and  in  relation  to  the  same  investigation  or  pro- 
ceeding, he  shall  be  liable  to  a  penalty  of  not  less  than  Five  hundred 
pounds  and  not  more  than  One  thousand  pounds,  and  to  imprison- 
ment for  such  period  not  exceeding  three  months  as  the  Court  thinks 
fit  to  order. 

58.  Nothing  in  this  Act  shall  make  it  compulsory  for  any  witness 
before  the  Commission  to  disclose  to  the  Commission  any  secret 
process  of  manufacture. 

59.  A  statement  or  disclosure  made  by  any  witness  in  answer  to 
any  question  put  to  him  by  the  Commission  or  any  of  the  Commis- 
sioners shall  not  (except  in  proceedings  for  an  offence  against  this 
Act)  be  admissible  in  evidence  against  him  in  any  civil  or  criminal 


TRUST  LAWS  AND   UNFAIR  COMPETITION.  767 

proceedings  in  any  Commonwealth  or  State  Court  or  any  Court  of 
any  Territory  of  the  Commonwealth. 

60.  The  Commission  may  inspect  any  documents,  books,  or  writ- 
ings produced  before  it,  and  may  retain  them  for  such  reasonable 
period  as  it  thinks  fit,  and  may  make  copies  of  such  matter  as  is  rele- 
vant to  the  inquiry  or  take  extracts  from  them. 

61.  Any  witness  before  the  Commission  who  knowingly  gives  false 
testimony  touching  any  matter,  material  to  any  investigation  or  pro- 
ceeding before  the  Commission,  shall  be  guilty  of  an  indictable 
offence. 

Penalty :  Imprisonment  for  five  years. 

62.  Any  person  who — 

(a)  gives,  confers,  or  procures,  or  promises  or  offers  to  give  or 
confer,  or  to  procure  or  attempt  to  procure,  any  property  or  benefit 
of  any  kind  to,  upon,  or  for,  any  person,  upon  any  agreement  or 
understanding  that  any  person  called  or  to  be  called  as  a  witness 
before  the  Commission  shall  give  false  testimony  or  withhold  true 
testimony,  or 

(h)  attempts  by  any  means  to  induce  a  person  called  or  to  be 
called  as  a  witness  before  the  Commission  to  give  false  testimony,  or 
to  withhold  true  testimony,  or 

(<?)  asks,  receives  or  obtains,  or  agrees  or  attempts  to  receive  or 
obtain  any  property  or  benefit  of  any  kind  for  himself,  or  i\nj  other 
person,  upon  any  agreement  or  understanding  that  any  person  shall 
as  a  witness  before  the  Commission  give  false  testimony  or  withhold 
true  testimony, 
shall  be  guilty  of  an  indictable  offence. 

Penalty :  Imprisonment  for  five  years, 

63.  Any  person  who  practises  any  fraud  or  deceit,  or  knowingly 
makes  or  exhibits  any  false  statement,  representation,  token,  or 
writing,  to  any  person  called  or  to  be  called  as  a  witness  before  the 
Commission,  with  intent  to  affect  the  testimony  of  that  person  as  a 
witness,  shall  be  guilty  of  an  indictable  offence. 

Penalty :  Imprisonment  for  two  years. 

64.  Any  person  who,  laiowing  that  any  book,  dociuncnt,  or  writing 
is  or  may  be  required  in  evidence  before  the  Commission,  wilfully 
destroys  it  or  renders  it  illegible  or  undecipheral)le  or  incapable  of 
identification,  Avith  intent  thereby  to  prevent  it  from  being  used  in 
evidence,  shall  be  guilty  of  an  indictal^le  offence. 

Penalty:  Imprisonment  for  two  years. 

65.  Any  person  who  wilfully  prevents  or  wilfully  endeavors  to  pre- 
vent any  person  who  has  been  vsummoned  to  attend  as  a  witness  before 
the  Commission  from  attending  as  a  witness  or  from  ]irodiicing  any- 
thing in  evidence  pursuant  to  the  summons  to  attend  shall  be  gtiilty 
of  an  indictable  offence. 

Penalty :  Imprisonment  for  one  year. 

66.  Any  person  who  uses,  causes,  inflicts,  or  procures,  any  violence, 
punishment,  damage,  loss,  or  disadvantage  to  any  person  for  or  on 
account  of  his  having  appeared  as  a  witness  before  tlie  Commission, 
or  for  or  on  account  of  any  evidence  given  by  him  before  the  Com- 
mission, shall  be  guilty  of  an  indictable  offence. 

Penalty:  Five  hundred  pounds,  or  imprisonment  for  one  year. 
67, —  (i.)   Any  employer  who  dismisses  any  employee  from  his  em- 
ployment, or  prejudices  any  employee  in  his  employment,  for  or  on 


768  KEPOET   OF   THE   COMMISSIONER   OF   CORPORATIONS. 

account  of  the  employee  haWng  appeared  as  a  witness  before  the 
Commission,  or  for  or  on  account  of  the  employee  having  given 
evidence  before  the  Commission,  shall  be  gnilty  of  an  indictable 
offence. 

Penalty :  Five  hundred  pounds,  or  imprisonment  for  one  year. 

(2)  In  any  proceeding  for  any  offence  against  this  section  it  shall 
lie  upon  the  employer  to  prove  that  any  employee  shown  to  have 
been  dismissed  or  prejudiced  in  his  employment  was  so  dismissed  oi' 
prejudiced  for  some  reason  other  than  the  reasons  mentioned  in  sub- 
section (1.)  of  this  section. 

68. —  (1.)  Any  person  who  wilfully  insults  or  disturbs  the  Com- 
mission, or  interrupts  the  proceedings  of  the  Commission,  or  uses 
any  insulting  language  towards  the  Commission,  or  by  writing  or 
speech  uses  words  false  and  defamatory  of  the  Commission,  or  is  in 
any  manner  guilty  of  any  wilful  contempt  of  the  Commission,  shall 
be  guilty  of  an  offence. 

Penalty :  One  hundred  pounds,  or  imprisonment  for  three  months. 

(2.)  When  the  Commission  is  sitting  in  the  exercise  of  its  powers 
under  Part  V.  of  this  Act,  the  Chief  Commissioner  or  Chairman 
shall,  in  relation  to  any  offence  against  sub-section  (1.)  of  this  section 
committed  in  the  face  of  the  Commission,  have  all  the  powers  of  a 
Justice  of  the  High  Court  sitting  in  open  Court  in  relation  to  a  con- 
tempt committed  in  face  of  the  Court,  except  that  any  punishment 
inflicted  shall  not  exceed  the  punishment  provided  by  sub-section  (1.) 
of  this  section. 

69. —  (1.)  Each  Commissioner  shall  in  the  exercise  of  his  duty  as 
Commissioner  have  the  same  protection  and  immunity  as  a  Justice 
of  the  High  Court. 

(2.)  Every  witness  summoned  to  attend  or  appearing  before  the 
Commission  shall  have  the  same  protection,  and  shall  in  addition  to 
the  penalties  provided  by  this  Act  be  subject  to  the  same  liabilities 
in  any  civil  or  criminal  proceeding,  as  a  witne&s  in  any  case  tried  in 
the  High  Court. 

(3.)  Where  the  expenses  allowable  to  a  witness  summoned  under 
this  Act,  for  travelling  from  the  place  where  the  summons  is  served 
to  the  place  at  which  he  is  summoned  to  attend,  exceed  five  shillings, 
the  amount  of  such  expenses  shall  be  tendered  to  him  before  the 
journey. 

70. —  (1.)  The  Governor-General  may  make  regulations  prescribing 
a  scale  of  allowances  to  be  paid  to  any  witness  summoned  under  this 
Act  for  his  travelling  and  other  expenses. 

(2.)  The  claim  to  allowance  of  any  such  witness,  certified  by  the 
Chief  Commissioner  or  Chairman,  shall  be  paid  by  the  Treasurer  out 
of  moneys  to  be  provided  by  the  Parliament  for  the  purposes  of  the 
Commission. 

71.  Proceedings  for  the  commitment  for  trial  of  any  person 
charged  with  an  indictable  offence  against  this  Act  may  be  instituted 
by  any  person. 

72. —  (1.)  Proceedings  in  respect  of  any  offence  against  this  Act 
(other  than  an  indictable  offence)  may  be  instituted  by  action,  in- 
formation, or  other  appropriate  proceeding,  in  the  High  Court  by 
the  Attorney-General  in  the  name  of  the  King,  or  by  information  or 
other  appropriate  proceeding  by  any  person  in  any  court  of  summary 
jurisdiction. 


TEUST   LAWS  AND  UNFAIR  COMPETITION.  769 

(2.)  Any  proceedings  in  the  High  Court  under  this  section  may 
be  heard  and  determined  by  a  single  Justice  of  the  High  Court  sitting 
without  a  jury. 

73.  Proceedings  in  the  High  Court  under  the  last  preceding  sec- 
tion may  be  commenced,  prosecuted,  and  proceeded  with  in  accord- 
ance with  the  practice  and  procedure  of  the  Court  applicable  to 
Crown  suits  for  the  recovery  of  penalties,  or  in  accordance  with  the 
directions  of  the  Court  or  a  Justice. 

74.  Where  any  pecuniary  penalty  is  adjudged  to  be  paid  by  any 
person  convicted  of  an  offence  against  this  Act  the  Court  may — 

(a)  commit  the  offender  to  gaol  until  the  penalty  is  paid;^  or 

(b)  release  the  offender  upon  his  giving  security  for  the  payment 
of  the  penalty ;  or 

(c)  exercise  for  the  enforcement  and  recovery  of  the  penalty  any 
power  of  distress  or  execution  possessed  by  the  Court  for  the  enforce- 
ment and  recovery  of  penalties  in  any  other  case. 

75.  The  powers  of  distress  and  execution  for  the  enforcement  and 
recovery  of  penalties  may  be  exercised  in  the  case  of  any  pecuniary 
penalty  adjudged  to  be  paid  by  any  offender,  notwithstanding  that 
he  has  been  committed  to  gaol  until  the  penalty  is  paid. 

76.  The  gaoler  of  any  gaol  to  which  any  offender  has  been  com- 
mitted for  non-payment  of  any  penalty  shall  discharge  him — 

(a)  on  payment,  by  the  offender  to  him,  of  the  penalty  adjudged ;  or 

(b)  on  a  certificate  from  the  proper  officer  of  the  Court  that  the 
penalty  has  been  paid  or  realized ;  or 

(c)  if  the  penalty  adjudged  to  be  paid  is  not  paid  or  realized 
according  to  the  f olloAving  table : — 


Amount  of  Penalty. 

Period  after  com- 
mencement    of 
Imprisonment  at 
the  expiration  of 
which  Defendant 
is     to     be     dis- 
charged. 

£2  or  under 

Seven  days. 
Fourteen  days. 
One  month 

Over  £2  and  not  more  than  £5 

Over  £5  and  not  more  than  £20 

Over  £20  and  not  more  than  £50 

Two  months 

Over  £50  and  not  more  than  £100 

Tlirec  months. 

Over  £100  and  not  more  than  £200 

Six  months. 

Over  £200 

One  year. 

77.  In  any  proceedings  for  an  offence  against  this  Act  (other  than 
proceedings  for  the  commitment  for  trial  of  a  person  charged  with 
an  indictable  offence)  the  Court  may  award  costs  against  any  party, 
and  all  provisions  of  this  Act  relating  to  the  recovery  of  penalties, 
except  as  to  commitment  to  gaol,  shall  extend  to  the  recovery  of  any 
costs  adjudged  to  be  |>aid. 

78.  All  fees,  fines,  and  penalties  paid  or  recovered  under  this  Act 
shall  be  paid  to  the  Consolidated  Revenue  Fund. 

79.  The  Governor-General  may  make  regulations,  not  inconsistent 
with  this  Act.  prescribing  all  matters  which  by  this  Act  are  required 
or  permitted  to  be  prescribed,  or  are  necessary  or  convenient  to  be 

30035°— 16 i9 


770  REPORT  OF   THE  COMMISSIONER  OF   CORPORATIONS. 

prescribed,  for  giving  effect  to  this  Act,  and  in  particular  for  any  of 
the  following  purposes: — 

(a)  for  prescribing  the  procedure  and  practice  of  the  Commission 
under  this  Act ; 

(b)  for  enabling  the  Commission  in  cases  to  be  specified  in  such 
regulations  to  exercise  its  jurisdiction  by  any  one  Commissioner; 

Provided  that  any  person  aggrieved  by  any  order  or  decision  made 
in  any  such  case  may  require  a  rehearing  by  all  the  Commissioners ; 

(<?)  For  prescribing  the  fees  to  be  taken  and  scales  of  costs  to  be 
allowed  in  relation  to  any  proceedings  before  the  Commission; 

(d)  for  imposing  penalties  (not  exceeding  in  the  case  of  a  pecu- 
niary penalty  One  hundred  pounds  and  in  the  case  of  imprisonment 
a  period  of  three  months)  for  any  breach  of  the  regulations. 


EXHIBIT  D.— GERMAN  LAW  CONCERNING  THE   SALE  OF  POTASH 

SALTS  OF  MAY  25,  1910.' 

We^  William^  hy  God^s  grace  Gernvain  Emperor^  King  of  Prussia^ 
etc.,  decree  in  th-e  nomine  of  the  Empire^  with  the  consent  of  the  Fed- 
eral Cowncil  and  the  Imperial  Diet^  as  follows: 

For  the  period  up  to  Decemher  31, 1935,  the  following  regulations 
are  in  force  relative  to  the  sale  of  p>otash  salts: 

Part  I. — General  Regulations. 

Section  1. 

Potash  salts  may  be  sold  by  the  possessors  of  potash  works  only 
in  accordance  with  the  provisions  of  this  law. 

Section  2. — Definition  of  potash  salts. 

Potash  salts  in  the  meaning  of  this  law  are : 

(a)  Potassic  minerals  obtained  from  potash  salt  mines — crude 
potash  salts — in  solid  or  dissolved  form. 

(h)  Chloride  of  potassium,  sulphate  of  potash,  sulphate  of  potash- 
magnesia,  the  so-called  potash  manure  salts,  as  also  all  other  manu- 
factures containing  potassium,  which  are  generally  produced  directly 
from  the  crude  potash  salts ;  furthermore,  all  residues  of  these  prod- 
ucts containing  potassium. 

(c)  The  mixtures  of  crude  salts  (a)  and  manufactured  products 
(6) — mixed  salts. 

In  doubtful  cases  as  to  whether  a  product  of  the  potash  industry 
belongs  to  the  potash  salts  cited  under  a  to  c,  the  Federal  Council 
decides. 

Section  3. — Definition  of  a  sale. 

A  sale  within  the  meaning  of  this  law  is  any  transfer  of  possession 
of  potash  salts  to  another. 

The  delivery  of  potash  salts  to  a  factory  or  department  of  a  factory 
belonging  to  the  possessor  of  a  potash  works  for  the  purpose  of 

*  Gesetz  liber  den  Absatz  von  Kalisalzen  vom  25  Mai  1910  ;  Reichsgesetzblatt  1910,  S.  775. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  771 

being  further  worked  into  products  not  mentioned  under  section  2, 
paragraphs  1  (b)  and  (c),  constitutes  a  sale. 

Thirdly,  every  shipment  of  potash  salts  to  a  foreign  country  con- 
stitutes a  sale. 

The  delivery  of  crude  salts  to  be  further  worked  into  the  products 
designated  under  section  2,  paragraphs  1  (h)  and  (c),  to  a  factory, 
the  possessor  of  which  is  absolutely  held  to  comph^  with  the  provi- 
sions relative  to  selling,  by  the  possessor  of  the  potash  works  making 
the  delivery,  does  not,  however,  constitute  a  sale.  The  materials  pro- 
duced in  such  factories  are  considered  as  the  products  of  the  potash 
works  supplying  the  crude  salts.  The  apportioning  office  ciecides 
whether  the  factory  comes  under  the  provisions  of  this  paragraph. 

Section  4. — Sulcs  abroad. 

The  sale  of  potash  salts  into  a  foreign  country  may  be  effected 
only  by  the  possessors  of  potash  works. 

Section  5. 

The  products  designated  in  section  2,  paragraph  1,  under  (h)  and 
(c),  may  be  produced  only  by  possessors  of  potash  Avorks  and  the 
possessors  of  separate  factories  (sec.  49)  existing  at  the  time  this 
law  goes  into  effect.  Possessors  of  separate  factories  have  this  right 
only  so  long  as  they  do  not  make  these  products  on  a  larger  scale 
than  heretofore. 

Section  6. — Definition  of  possessor  of  potash  ivorks. 

Anyone  operating  for  his  own  account  a  potash  mine  (potash 
works)  is  the  possessor  of  a  potash  works  within  the  meaning  of 
this  law.  Provisions  made  for  the  possessor  of  a  potash  works  are 
also  valid  for  unions  of  the  same. 

Part  II. — Determination  of  the  Total  Quantity  of  the  Sales 

AND  OF  THE  SlIARE  IN  THE  SaLE  OF  THE  SEPARATE  PoTASH  WoRKS. 
Section  7. — Total  quantity  of  the  sale. 

The  total  quantity  of  the  sale  to  be  allotted  for  the  calendar  5^ear 
to  the  possessors  of  potash  works  is  determined  yearly  by  the  appor- 
tioning office.  It  is  to  be  determined  in  metric  hundredweights  [100 
kg.]  of  pure  potash  (K/))  and  is  to  be  at  least  as  nnicli  as  the  total 
sale  determined  for  the  previous  year  plus  5  per  cent.  At  the  same 
time  the  apportioning  office  has  to  decide  what  part  of  the  total  sales 
quantity  is  for  the  domestic  nuirket  and  for  export  and  what  quan- 
tities of  the  different  sorts  are  to  be  supplied. 

Tlve  apportioning  office  may  subseciuently  increase  the  quantities 
determined  on. 

For  the  period  from  Mixy  1,  1010  to  December  31.  1010,  a  i)ropor- 
tionate  quantity  is  to  be  determined  on  by  the  Federal  Council. 

Section  8. — Quotas. 

The  determination  of  the  relative  shares  of  the  separate  possessors 
of  potash  works  in  the  sale  of  potash  salts  (quotas)  is  made  by  the 
apportioning  office. 


772  KEPOKT  OF   THE   COMMISSIONER  OF   COEPOEATIONS. 

The  possessors  of  potash  works  participate  in  the  domestic  sale  and 
in  the  export  sale,  as  also  in  the  sale  of  the  different  sorts  of  potash 
salts,  in  accordance  with  their  quotas. 

The  possessor  of  a  potash  works  may  exceed  the  sales  quantity 
allotted  to  him  by  at  most  10  per  cent,  if  he  renounces  the  assignment 
iof  a  corresponding  sales  quantity  for  the  following  calendar  year. 

If  he  remains  below  the  sales  quantity  allotted  to  him  by  at  most 
10  per  cent  he  may  deliver  a  corresponding  quantity  within  the  next 
calendar  year. 

Possessors  of  potash  works  who  in  consequence  of  the  nature  of 
their  deposits  can  not  supply  some  of  the  kinds  of  potash  salts  men- 
tioned in  section  20,  paragraph  1,  are  to  be  given  a  proportionate 
participation  in  other  kinds  of  potash  salts  by  the  apportioning 
office  for  the  purpose  of  equalization. 

The  participation  of  a  possessor  of  a  potash  works  in  the  export 
sale  decreases  in  the  same  proportion  in  which  the  possessor  of  a 
potash  works  falls  behind  the  participation  in  the  domestic  sale 
during  the  calendar  year. 

Section  9. — Principles  for  the  determination  of  quotas. 

The  quotas  are  expressed  in  thousandths  of  the  total  sale.  A  di- 
vision of  the  thousandths  may  be  expressed  only  according  to  the 
decimal  system. 

The  size  of  the  quotas  is  to  be  determined  by  the  extent  and  nature 
of  the  potash-salt  deposits  opened  up  by  worldngs  and  borings,  as 
also  by  the  capacity  of  the  operating  equipment. 

Only  one  quota  is  determined  for  each  potash  works. 

Section  10. 

If  from  one  potash  works  several  are  formed,  they  count  only  then 
as  independent  works,  to  be  given  separate  quotas,  even  when  they 
have  been  extended  by  the  purchase  of  parts  of  outside  areas;  if — 

(1)  According  to  the  character  of  the  geological  conditions  and 
according  to  the  information  gained  by  workings  and  borings  at 
least  50,000  metric  hundredw^eights  of  pure  potash  (KoO)  can  be 
supplied  annually  for  50  years. 

(2)  They  are  so  equipped  with  technical  devices  that  they  can 
mine  and  ship  a  quantity  of  crude  salt  corresponding  to  their  quotas. 

Section  11. 

For  a  second  operating  shaft  opened  in  the  same  works  and  con- 
nected with  the  main  shaft  an  addition  to  the  quota  will  be  granted 
from  January  1,  1912,  which  amounts  to  10  per  cent  of  the  average 
quota  of  all  works.  For  second  shafts  which  become  operative  after 
the  1st  of  January,  1912,  the  addition  enters  into  force  with  the  day 
on  which  the  opening  with  the  main  shaft  is  effected. 

Section  12. — Provisional  quotas. 

To  possessors  of  such  potash  works  which  become  capable  of  de- 
livery after  promulgation  of  the  law  there  will  be  assigned  a  pro- 
visional quota  for  the  first  two  years  after  the  potash-salt  deposit  has 


TEUST  LAWS  AND  UNFAIR  COMPETITION.  773 

been  reached  by  workings,  and  if  a  sufficient  determination  of 
the  nature  of  the  deposit  and  operating  conditions  has  not  been 
arrived  at,  then  until  such  determination  is  obtained,  the  same  is  to 
be  made  high  enough  to  allow  of  a  regular  opening  and  prepara- 
tion of  the  deposit.  The  provisional  quota  must  not  exceed  50  per 
cent  of  the  average  quota  of  all  the  works. 

After  determining  the  nature  of  the  deposit  and  the  operating 
conditions,  but  at  the  earliest  not  until  the  expiration  of  two  years 
after  the  potash-salt  deposit  has  been  reached  by  workings,  a  final 
quota  is  established  for  such  works.  For  the  third  year  after  the 
potash  deposit  has  been  reached  the  quota  is  30  per  cent  less  than 
this  final  quota,  for  the  fourth  year  20  per  cent  less,  and  for  the 
fifth  year  10  per  cent  less. 

Potash  works  which  are  in  possession  of  and  in  operation  by  the 
Empire  or  one  of  the  federated  States,  or  in  which  the  Empire  or  a 
federated  State  is  interested  to  the  extent  of  at  least  one-third,  are 
given,  until  the  nature  of  the  deposit  and  operating  conditions  are 
determined,  a  temporary  quota  according  to  paragraph  1,  and  as  soon 
as  the  determination  is  effected  a  final  quota  ;  the  limitations  of  para- 
graph 2  are  not  applicable  to  these  works.  The  same  applies  to 
other  works  which  before  December  17,  1909,  liaA'e  begim  the  sinking 
of  shafts  or  have  evidently  made  serious  preliminary  efforts  therefor; 
that  is,  if  they  have  continued  the  sinking  of  shafts  or  the  prelimi- 
nary work  without  culpable  delay. 

Section  13. — Reduction  of  the  quotas. 

If  in  a  potash  works  the  wages  paid  to  a  class  of  workmen  de- 
crease in  the  yearly  average  for  a  regular  shift  below  the  wage  paid 
to  this  class  on  the  average  for  the  calendar  years  1907  to  1909,  then 
the  quota  of  the  works  is  reduced  for  the  following  year  in  the  same 
proportion  in  which  the  wage  has  decreased  for  the  labor  class 
Avhich  has  suffered  the  greatest  wage  reduction. 

The  quota  is  furthermore  reduced  if  in  a  labor  class  the  regular 
time  of  Avork  is  extended  beyond  the  time  limit  prevailing  in  the 
year  1909,  and  that  reduction  is  in  proportion  to  the  increase  to  the 
labor  class  most  affected. 

The  decrease  in  the  quota  is  at  least  10  per  cent. 

If  potash  works  were  not  yet  in  operation  in  the  year  1909,  or  if 
particular  kinds  of  labor  in  the  works  were  started  only  after  the 
beginning  of  the  year  1909,  or  if  the  operating  conditions  in  the 
Avorks  have  changed  materiall}^  as  compared  Avitli  those  of  the  year 
1909,  a  reduction  is  made  if  the  wage  conditions  or  the  length  of 
shifts  in  the  yearly  aAcrage  after  the  beginning  of  production  Avere 
more  unfavorable  than  they  Avere  in  the  yearly  average  during  the 
years  1907  to  1909  in  other  i^otash  Avorks  with  similar  conditions. 

Section  14. 

A  reduction  of  the  quota  is  not  made  if  the  possessor  of  a  potash 
works  proves  that  the  average  Avage  scale  Avas  not  reduced  for  Avork 
done  on  the  shift  basis  or  by  contract  as  com])ai-ed  Avith  the  wage 
scale  paid  for  similar  work  done  in  the  years  1907  to  1909. 


774  BEPORT   OF   THE   COMMISSIONER  OF   CORPORATIONS. 

Section  15. 

The  increase  in  the  quota  which  occurs  in  consequence  of  the 
deductions  ^  is  not  participated  in  by  the  possessor  of  a  potash  works 
whose  quota  is  decreased  by  the  provision  of  section  13. 

Section  16. 

The  provisions  of  sections  13  and  14  are  not  applicable  to  potash 
works  in  which  the  wage  and  labor  conditions  are  regulated  by  spe- 
cial contracts  made  between  the  possessors  of  potash  works  and  a 
majority,  as  established  by  secret  vote,  of  the  workmen  interested; 
the  contracts  must  not  contain  any  provisions  which  would  hinder 
or  forbid  the  right  of  the  laborers  to  unite. 

Section  17. — YalidUy  of  the  quotas. 

For  the  possessors  of  potash  works  the  quotas  cited  in  the  attached 
tables  are  in  force  until  new  ones  are  determined  upon.  A  new  de- 
termination of  the  quotas  of  all  potash  works  on  the  basis  of  the 
provisions  of  this  section  is  made  with  the  eifect  that  the  new 
quotas  to  be  determined  upon  enter  into  force  on  January  1,  1912. 
From  then  on  there  will  be  a  new  determination  of  the  quotas  every 
five  years  for  all  the  potash  works. 

If  a  potash  works  becomes  permanently  incapable  of  delivering, 
its  quota  is  canceled;  decision  relative  hereto  lies  with  the  appor- 
tioning office. 

If  a  part  of  the  mining  area  is  separated  from  a  potash  works,  for 
which  a  quota  has  been  given,  the  quota  is  determined  anew. 

Section  IS. — Change  of  quotas. 

A  change  of  the  quotas  in  force  by  recalculation  takes  place: 

(a)  In  the  case  of  the  determination  of  a  preliminary  or  final 
quota  for  a  new  works  (sees.  8  to  12). 

(b)  In  the  case  of  section  11. 

(c)  In  the  case  of  sections  13  and  1-1. 

(d)  In  the  case  of  the  permanent  incapacity  of  a  works  to  deliver. 

(e)  In  the  case  of  section  17,  part  3. 
(/)   In  the  case  of  sections  47  and  48. 

The  recalculation  is  to  be  made  b}^  the  apportioning  office. 

Part  III. — Transfer  of  Quotas  and  Exchange. 

Section  19. 

Possessors  of  potash  works  may  transfer  their  share  in  the  sale 
wholly  or  partially  to  other  potash  works  and  exchange  their  right 
of  sale  of  separate  kinds  among  one  another. 

If  on  account  of  the  transference  of  quotas,  workmen  or  officials 
are  out  of  employment  without  l)eing  able  to  find  another  opportunity 
to  work  corresponding  to  their  capal)ilities,  or  if  they  suffer  a  de- 
crease in  their  earnings,  then  the  transferring  potash  works  possessor 

1  Diminishing  reductions  from  the  final  quota   (see  see.  12). 


TRUST  LAWS  AND  UNFAIR   COMPETITION.  775 

must  make  good  the  resulting  loss  in  earnings  up  to  the  period  of  26 
weeks.  In  disputes  on  this  (juestion  between  potash  works  possessors 
and  workmen,  the  industrial  court  or  miners  court,  where  such  exist, 
have  jurisdiction. 

If  the  transfer  exceeds  one-half  of  the  total  allotment  of  the  trans- 
ferring potash  works  possessor  in  pure  potash,  it  requires  the  consent 
of  the  proper  central  authorities  of  the  Province  or  State.  The  con- 
sent is  to  be  made  dependent  on  the  guaranty  of  damage  claims  cited 
in  paragraph  2.  Prior  to  granting  the  consent  the  interested  com- 
munities must  be  heard. 

Part  IV. — Sales  Prices. 

Section  20. — Domestic  prices. 

The  sales  prices  of  the  possessors  of  potash  works  for  the  supply 
of  potash  salts  to  the  domestic  market  must  not  exceed  the  following 
prices  at  the  works  (for  1  per  cent  of  potash  (KoO)  in  a  metric  hun- 
dredweight) : 

Pf. 

I.  Carnalite  with  at  least  9  per  cent  and  less  than  12  per  cent  of  K2O  ^ 8.  5 

II.  Crude  salts  with  12  to  15  per  cent  K2O ' 10.  0 

III.  Manure  salts  with — 

20  to  22  per  cent  of  K2O 14.0 

30  to  32  per  cent  of  K2O 14.  5 

40  to  42  per  cent  of  K2O 15.  5 

The  calculation  of  the  prices  is  on  whole  per  cents.     Fractions  of 
a  per  cent  are  not  taken  into  consideration. 

IV.  Chloride  of  potassium  with — 

50  to  60  per  cent  of  K2O 27.  0 

More  than  GO  per  cent  of  K2O 29.  0 

V.  Sulphate  of  potash  with  over  42  per  cent  of  K2O 35.0 

Sulphate  of  potash-magnesia 31.  0 

For  potash  salts,  which  are  not  indicated  in  paragraph  1,  the 
Federal  Council  determines  the  maximum  price  in  accordance  with 
the  above  determinations  of  prices. 

The  above  maximum  prices  remain  in  force  until  December  31, 
1913.  For  the  following  period  the  maximum  prices  are  determined 
every  five  years  by  the  Federal  Council  after  hearing  the  representa- 
tives of  the  possessors  of  potash  works  and  of  the  consumers.  An  in- 
crease requires  the  consent  of  the  Imperial  Diet.  Until  new  prices 
are  determined  upon,  the  ones  in  force  remain  in  force. 

Section  21. — Discounts. 

The  Federal  Council  may  determine  that  a  corresponding  dis- 
count be  granted  to  buyers  of  larger  quantities  of  potash  salts; 
further,  that  a  discount  be  granted  to  purchasers  for  cash  payments, 
for  testing  whether  goods  are  up  to  sample  and  for  cooperation  in 
furthering  the  sales  of  potash.  All  purchasers  may  unite  in  order 
to  obtain  the  above  discounts.  Under  like  conditions  purchasers 
must  not  be  differently  treated  in  respect  to  the  discounts. 

'  In  a  f^round  condition. 


776  EEPOET   OF   THE   COMMISSIONEE   OF   COEPOEATIONS. 

Section  22. — Freight  equalisation. 

In  the  calculation  of  the  freight  to  be  charged  domestic  con- 
signees an  equalization  of  the  freight  is  made  by  taldng  as  a  basis 
at  least  three  initial  stations,  and  for  destinations  which  are  more 
than  500  kilometers  distant  from  tlie  initial  station  forming  the  basis 
of  the  freight  calculation,  a  freight  rebate  is  granted  according  to 
more  definite  provisions  by  the  Federal  Council. 

The  freight  equalization  and  the  equalization  of  the  freight  rebates 
is  effected  by  the  apportioning  office  for  account  of  all  the  potash 
works  in  accordance  with  their  domestic  sales. 

Section  23. — Guaranty  against  deficient  content. 

The  possessors  of  potash  works  are  required  to  indicate  the  con- 
tent in  pure  potash  when  making  deliveries.  The  permissible  devia- 
tions from  the  indicated  content,  the  manner  of  determining  the 
deficiency,  and  the  compensation  to  be  granted  purchasers  for  the 
deficiency  are  determined  by  the  Federal  Council.  The  analj^sis  of 
the  sample  drawn  at  the  w^orks  is  not  absolutely  conclusive. 

Section  24. 

The  prices  for  sales  and  deliveries  of  potash  salts  to  foreign  coun- 
tries must  not  be  lower  than  the  domestic  prices  indicated  in  sections 
20  and  21  for  the  domestic  market. 

Exceptions  are  permissible  by  consent  of  the  Federal  Council. 

Section  25. 

The  Federal  Council  determines  under  what  conditions  the  regula- 
tions in  force  for  the  domestic  prices  are  applicable  to  deliveries  into 
German  protectorates. 

Part  V. — Taxes. 

Section  26. 

In  so  far  as  the  possessor  of  a  potash  works  exceeds  the  sales 
quantity  of  potash  salts  allotted  to  him,  he  must  pay  a  tax  into  the 
imperial  treasury  for  the  excess  quantities. 

The  tax  is,  per  metric  liundredAveight  of  .pure  potash   (K^O)  — 

Marks. 

In  Group  I  and  II  (sec.  20) 10 

In  Group  II : 

Manure  salts,  with  20  to  22  per  cent  of  K=0 13 

Rlannre  salts,  with  30  to  32  per  cent  of  K2O 14 

Manure  salts,  with  40  to  42  per  cent  of  K2O 16 

In  Group  IV  and  V 18 

For  potash  salts  which  are  not  indicated  in  paragraph  2,  the  Fed- 
eral Council  determines  the  tax  in  accordance  with  the  above-stated 
taxes. 

Section  27. 

Every  possessor  of  a  potash  works  must  pay  into  the  imperial 
treasury  a  tax  of  0.60  mark  for  every  metric  hundredweight  of 
pure  potash  of  his  entire  sale. 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  777 

The  receipts  from  this  tax  are  to  cover  the  expenses  incurred  by 
the  Empire  from  the  enforcement  of  this  law  and  to  increase  the 
sale  of  potash.  The  receipts  and  expenditures  are  to  be  incorporated 
in  the  budget  of  the  Empire. 

Section  28. 

The  taxes  (sees.  26  and  27)  become  due  on  the  daj^  of  the  sale. 

The  collection  of  the  taxes  is  carried  out  by  the  Provincial  or  State 
authorities  in  accordance  with  the  provisions  in  force  for  the  col- 
lection of  public  taxes.  The  Empire  will  compensate  the  federated 
States  for  the  costs  incurred  in  the  enforcement  of  this  law  or  for 
any  further  cooperation. 

Section  29. — Prescription. 

Claims  for  the  payment  or  return  of  taxes  become  outlawed  in 
one  year  from  the  day  when  the  tax  becomes  due.  Claim  to  subse- 
quent payment  of  a  withheld  tax  becomes  outlawed  in  three  years. 

The  prescription  is  interrupted  by  any  action  brought  against  the 
tax  delinquent  by  the  proper  authorities  for  the  purpose  of  enforcing 
the  claim. 

Part  VI. — Apportioning  Office,  Appeal  Commission. 

Section  30. — Apportioning  office. 

The  apportioning  oflice  consists  of  a  presiding  officer  and  six 
members.  The  presiding  officer  and  two  members,  as  also  their  sub- 
stitutes, are  appointed  by  the  Imperial  Chancellor  with  the  consent 
of  the  Federal  Council.  They  must  neither  possess  a  share  in  pri- 
vate potash  works,  nor  be  interested  in  their  proceeds.  Remaining 
members  of  the  apportioning  office  and  their  substitutes  are  elected 
by  the  possessoi*s  of  potash  works. 

In  the  decision  of  the  apportioning  office  on  the  reductions  (sec.  13) 
of  the  quota  there  participate  in  place  of  two  of  the  four  members 
selected  by  the  potash  works  possessors,  two  members  who  are  elected 
by  the  labor  representatives  of  the  miners'  labor  associations  (sees. 
113,  144  of  the  law  on  labor  accident  insurance)  from  among  the 
workmen  engaged  in  potash  mining  and  in  accordance  with  the  more 
definite  directions  of  the  Federal  Council. 

Section  81. — Appeal  eommisfiion. 

The  appeal  commission  consists  of  five  members,  who  are  appointed 
by  the  Imperial  Chancellor  with  the  consent  of  the  Federal  Council. 
A  substitute  is  appointed  for  every  meml^er.  The  members  must 
neither  possess  a  potash  works  nor  shares  in  private  potash  works  or 
be  interested  in  their  proceeds,  nor  belong  to  the  management  or  the 
board  of  directors  of  a  potash  works. 

Section  32. — Contested  iJeterminations. 

The  presiding  member  may  file  complaint  with  the  Federal  Coun- 
cil against  the  determination  of  the  apportioning  office  in  accordance 
with  section  7,  within  the  time  limit  of  one  week  after  the  date  of  the 
determination. 


778  EEPOET  OP   THE   COMMISSIONER  OP   CORPOEATIONS. 

Appeal  to  the  appeal  commission  (sec.  31)  from  the  determina- 
tions and  decisions  of  the  apportioning  office  on  the  basis  of  sections 
3,  8  to  18,  and  22  is  permissible. 

Appeal  must  be  filed  with  the  appeal  commission  within  a  time 
limit  of  one  month  after  the  issuance  of  the  decision  of  the  appor- 
tioning office. 

Section  33. 

Eegiilar  legal  proceedings  are  not  permissible  in  so  far  as  by  this 
law  complaint  against  the  decisions  and  determinations  of  the  appor- 
tioning office  is  had  to  the  Federal  Council,  or  to  the  appeal  coni- 


mission. 


Section  34. — Information. 


The  possessors  of  potash  works  are  required  to  give  information 
to  the  apportioning  office  and  the  appeal  commission  or  their  repre- 
sentatives concerning  the  quantities  of  potash  salts  sold  and  the 
prices  and  the  delivery  conditions  agreed  upon,  concerning  other 
business  measures,  as  also  concerning  the  wage  conditions  and  the 
duration  of  the  work,  and  to  permit  the  inspection  of  the  installa- 
tions and  the  traversing  of  the  mines.  They  are  further  required  to 
show  the  books  and  documents  of  the  potash  works  for  the  purpose 
of  proving  the  statements  made. 

The  apportioning  office,  the  appeal  commission  and  their  repre- 
sentatives are  under  obligation  to  keep  secret  the  business  measures 
of  the  possessors  of  potash  works  which  come  to  their  knowledge. 

Part  VII. — Penal  Provisions. 

Section  35. 

Whoever  attempts  to  defraud  the  Government  of  the  taxes  men- 
tioned in  sections  20  and  27  is  guilty  of  defraudation. 

Whoever  commits  defraudation  is  punishable  by  a  money  fine  to 
the  fourfold  amount  of  the  tax.  The  tax  must,  furthermore,  be  paid. 
If  the  amount  of  the  tax  can  not  be  determined,  a  money  fine  up  to 
500,000  marks  may  be  imposed. 

In  case  of  a  repetition  of  the  defraudation  subsequent  to  a  prior 
punishment,  a  prison  term  may  be  imposed  up  to  six  months. 

Section  36. 

Violations  of  the  provisions  of  sections  4,  5,  20,  and  24  of  this  law 
are  punishable  by  a  money  fine  up  to  100,000  marks. 

In  case  of  repetition  after  previous  punishment,  a  prison  term  up 
to  six  months  may  also  be  imposed. 

Section  37. 

Violations  of  the  provisions  of  this  law  and  the  administrative 
regulations  promulgated  therewith  and  made  known  publicly  or 
specially  to  the  interested  parties,  in  so  far  as  they  are  not  liable 
to  a  special  punishment  as  per  sections  3.5  and  36,  are  punished  by  a 
disciplinary  fine  up  to  10,000  marks. 


TRUST  LAWS  AND  UNFAIR  COMPETITION.  779 

Section  38. 

The  proprietors  of  the  works  are  liable  .for  the  fines  and  the  costs 
of  the  proceedings  incurred  by  their  directors,  business  managers, 
assistants,  and  other  persons  in  their  service  or  pay,  as  per  sections 
35  to  37,  in  case  of  the  inability  of  the  actually  guilty  party  to  pay, 
if  it  can  be  proven  (1)  that  the  violation  has  been  perpetrated  with 
their  loiowledge  or  (2)  that  they  have  not  proceeded  in  the  choice 
and  engagement  of  the  directors,  business  managers,  and  other  per- 
sons in  their  service  or  pay  or  in  their  supervision  with  the  care  of 
an  orderly  business  man. 

Section  39. 

In  case  of  section  35  and,  in  so  far  as  the  violated  proyisions  relate 
to  the  payment  of  taxes,  also  in  the  case  of  section  37,  there  are  ap- 
plicable relative  to  the  administrative  criminal  proceedings  the  de- 
crease in  punishment  and  the  remission  of  the  fine  by  pardon  as  also 
relative  to  the  infliction  of  the  punishment,  the  provisions  which  pre- 
vail in  proceedings  in  violation  of  the  customs  law. 

Section  40. 

The  fines  prescribed  on  the  basis  of  sections  35  to  37  are  payable  to 
the  State  treasury  of  the  federated  State  the  authorities  of  which 
have  imposed  the  punishment. 

In  the  case  of  section  35,  paragraph  2,  sentence  3,  the  fifth  part  of 
the  fine,  taking  the  place  of  a  nondeterminable  tax,  must  be  paid 
into  the  imperial  treasury. 

Section  41. 

For  the  fulfillment  of  the  obligations  established  in  sections  23 
and  24,  the  possessors  of  potash  works,  apart  from  the  determination 
of  the  disciplinary  penalties  may  be  held  by  the  designated  State 
or  Provincial  authorities  through  threat  and  exaction  of  a  fine 
up  to  10,000  marks.  For  the  i)roceedings  the  controlling  provisions 
for  the  authorities  concerning  the  administrative  coercive  measures 
are  applicable. 

Section  42. 

A  fine  which  can  not  be  collected  is  to  be  converted  into  imprison- 
ment. 

Section  43. 

The  prosecution  for  tax  frauds  and  violations  of  section  30  become 
outlawed  in  three  j^ears,  violations  punishable  by  disciplinary  pen- 
alties become  outlawed  in  one  year. 

Paht  VIII.— Costs. 

Section  44. 

The  costs  of  the  apportioning  office  and  of  the  appeal  commission 
are  borne  by  the  Empire.  Ixolative  to  the  costs  of  proceedings  the 
appropriate  provisions  of  sections  91,  92  of  the  Code  of  Civil  Pro- 
cedure are  applicable. 


780  KEPOET  OF   THE   COMMISSIONER  OF   COKPOKATIONS. 

Part  IX. — Transition  Provisions. 

Section  45. 

The  provisions  of  sections  20  to  25  are  not  applicable  to  contracts 
made  prior  to  April  17,  1910. 

Section  46. 

The  Federal  Council  has  authority  to  so  far  modify  the  taxes  of 
section  20  on  deliveries  as  per  contracts  concluded  before  December 
17,  1909,  that  the  prices  for  the  quantities  supplied  after  May  1, 1910, 
inclusive  of  the  taxes  do  not  become  higher  than  those  prevailing  up 
to  June  30,  1909. 

Section  47. 

The  quota  of  the  works  cited  in  the  participation  table  under 
numbers  57  and  59  to  68  is  to  be  increased,  upon  request  of  the  works, 
prior  to  January  1,  1913,  if  the  nature  of  its  deposits  and  operating 
conditions  justify  the  increase  in  accordance  with  Part  II. 

Section  48. 

If,  before  January  1,  1912,  an  independent  potash  works,  to  be 
given  a  separate  quota,  is  detached  from  a  potash  works,  for  which 
a  quota  has  been  determined,  then  the  quota  of  such  works  is  to  be 
deducted  from  the  quota  of  the  potash  works  from  which  it  was 
detached. 

Section  49. 

Possessors  of  potash  works  may  supply  crude  salts  beyond  their 
quota  to  separate  factories  existing  at  the  time  this  law  becomes 
effective,  under  the  conditions  to  be  determined  by  the  Federal  Coun- 
cil ;  the  Federal  Council  may  in  such  case  reduce  the  tax  prescribed  in 
section  26.  These  deliveries  must  not  in  the  aggregate  exceed  the 
quantity  of  pure  potash  obtained  by  the  separate  factories  in  the 
period  from  May  1,  1909,  to  the  same  date  of  1910. 

Part  X. — Final  Provisions. 

Section  50. 

Contracts  for  deliveries  of  potash  salts  which  are  concluded  before 
July  1,  1925,  with  effect  beyond  December  31,  1925,  are  invalid. 

Section  51. — Provisions  relative  to  enforcement. 

The  Federal  Council  issues  the  orders  required  to  enforce  the  law ; 
it  especially  has  the  authority  to  promulgate  further  controlling  pro- 
visions, by  which  the  observance  of  the  provisions  of  this  law  are  se- 
cured. It  has  to  establish  the  principles  for  the  equalization  to  be 
effected  as  per  section  8,  paragraph  5,  for  the  determination  of  the 
quota  (sees.  9  to  12),  and  to  make  provision  for  the  election  of  the 
members,  the  organization  and  method  of  procedure  of  the  appor- 


TRUST   LAWS   AND  UNFAIR   COMPETITION.  781 

tioning  office,  and  of  the  appeal  commission  and  the  reimbursement 
of  expenses  (sec.  28,  par.  2). 

The  Imperial  Diet  is  to  be  kept  informed  of  all  the  decisions,  pro- 
visions, and  orders  issued  by  the  Federal  Council  relative  to  this  law. 

Section  52. — Time  of  entering  into  force  of  the  law. 

This  law  enters  into  force  on  the  day  of  its  publication. 
Authenticated  under  our  own  august  signature  and  affixed  imperial 
seal. 

Issued  at  the  New  Palace,  May  25, 1910. 

[seal.]  William. 

VON  Bethmann  Hollweg. 


EXHIBIT  E.— ITALIAN  LAW  CONCERNING  THE  ESTABLISHMENT 
OF  A  COMPULSORY  ASSOCIATION  FOR  THE  SICILIAN  SULPHUR 
INDUSTRY,  JULY  15,   1916." 

Victor  Emanuel  III,  hy  the  grace  of  God  and  hy  the  will  of  the 
nation,  King  of  Italy. 

The  Senate  and  the  Chamher  of  Deputies  have  approved;  we  have 
sanctioned  and  loe  promulgate  what  follows: 

Chapter  I.  Organization,  Purpose  and  Functions  of  the  Asso- 
ciation. 

Article  1.  From  August  1,  1906,  the  owners  or  possessors  and  oper- 
ators of  the  present  and  future  sulphur  mines  of  Sicily  are  constituted 
by  law  an  association  for  a  term  of  twelve  years  under  the  name  of 
Compulsory  Association  for  the  Sicilian  Sulphur  Industry.^ 

Article  2.  The  association  has  the  purpose  of  selling  the  crude  sul- 
phur for  the  common  account  and  profit  of  all  the  members  of  the 
association. 

The  association  must  not  refuse  to  sell  the  sulphur  to  any  one  who 
demands  it  for  export  to  Italian  and  European  markets,  disposing  of 
the  sales  in  a  manner  to  satisfy  all  demands  of  purchase. 

The  price  shall  be  the  same  for  all  and  shall  be  fixed  by  periods, 
according  to  the  standards  which  shall  be  determined  by  the  regula- 
tions. 

Furthermore,  the  association  aims : 

(1)  To  provide,  with  capital  extraneous  to  the  association,  for  the 
organization  of  an  independent  enterprise  for  the  establishment  and 
operation  of  general  warehouses  for  sulphur  in  the  ports  of  Catania, 
Porto  Empedocle  and  Licata,  and,  when  necessary,  in  other  ports  of 
the  island. 

(2)  To  contribute  without  repayment  according  to  article  23,  a 
capital  of  2,000,000  lire  for  the  establishment  of  an  independent 
mining  credit  bank  for  Sicily,  which  ma}^  make  loans  to  the  pro- 

1  No.  S33.  Lpgge  portnnto  provvcflimonti  o  Tistituzlono  di  mi  consorzio  obbllgatorlo  per 
rindnstria  solflfora  siciliaiia.  15  luplio  1906.  Raccolta  ufflciale  delle  leggi  e  dei  dccreti 
do)  n-uno  d'ltalia.     1000. 

-  Cousorzio  obbligatorio  per  Tindustria  solfifera  sicillana. 


782  REPORT   OF   THE   COMMISSIONER  OF   CORPORATIONS. 

ducers  at  rates  not  greater  than  5  per  cent  with  the  crude  sulphur 
or  other  equivalent  as  security. 

(3)  To  establish  in  conformity  with  article  13  a  special  fund  to 
cover  sickness  and  superannuation  pensions  to  the  laborers  in  Sicilian 
sulphur  mines. 

The  association  in  so  far  as  it  shall  have  need  of  employees  shall, 
as  a  rule,  give  preference  to  those  of  the  Anglo  Sicilian  Sulphur  Com- 
pany. 

Article  3.  The  possessors  of  crude  sulphur  stocks,  existing  in 
Sicily  on  August  1,  1906,  and  in  quantity  greater  than  15,000  tons, 
must,  within  the  first  ten  days  of  the  said  month,  declare  if  they 
intend  to  consign  their  sulphur  to  the  association  for  all  the  purposes 
of  the  preceding  article  or  to  sell  it  to  the  said  association. 

In  the  second  case  the  price  of  the  sulphur  placed  on  board  in 
the  ports  of  loading,  shall  be  calculated  at  the  fixed  rate  of  59  lire 
l^er  ton,  whatever  the  quality,  according  to  the  recognized  commercial 
practices  and  always  without  mixture  of  foreign  substances  and  of 
roasted  sulphur.  This  shall  be  paid  directly  to  the  vendors  by  issu- 
ance at  par  of  obligations  of  the  nominal  value  of  500  lire  to  the 
emission  of  which  the  association  is  authorized  within  the  limits  of 
the  corresponding  purchases. 

Such  obligations  shall  bear  interest  at  3.65  per  cent  net,  exempt 
from  all  imposts,  present  and  future,  payable  semi-annually  on  Feb- 
ruary 1st  and  August  1st  each  year ;  and  they  shall  be  repaid  by  the 
association  within  12  years,  by  means  of  annual  drawing  of  lots  not 
less  than  one-twelfth  each.  The  lots  shall  be  drawn  on  July  first, 
commencing  in  1907. 

The  said  obligations  are  guaranteed  by  the  State  with  respect  to 
both  capital  and  interest  and  shall  not  be  issued  without  the  signature 
of  the  government  inspector  according  to  the  regulations. 

If  in  the  period  indicated  above,  the  declaration  is  lacking,  adhe- 
sion to  the  association  is  considered  to  have  occurred. 

In  case  the  Anglo  Sicilian  Sulphur  Company  prefers  to  sell,  the 
association,  according  to  the  conditions  prescribed  in  the  present 
article,  shall  pay  for  the  stocks  existing  on  August  1,  1906,  according 
to  the  books. 

For  the  guaranty  of  the  quality  of  the  sulphur  given  up  of  which 
delivery  is  made  gradually  at  the  demand  of  the  association  until 
all.  of  it  is  consigned,  which  shall  be  accomplished  not  later  than 
July  1,  1907,  there  shall  remain  as  security  in  the  treasury  of  the 
Bank  of  Sicily  up  to  that  date,  a  tenth  part  of  the  obligations  issued, 
the  interest  of  whicli,  however,  shall  be  received  by  the  sulphur 
company. 

The  expenses  of  custody  incurred  by  the  said  company  up  to  the 
consignment  of  the  sulphur  shall  be  reimbursed  by  the  association 
within  the  limits  of  the  contracts  made  by  it  with  its  warehousemen. 

Regarding  the  sales  made  by  the  said  company  for  consignment  up 
to  July  31,  1906,  the  association  must  respect  the  local  customs. 

Those  who  on  August  1,  1906,  shall  possess  stocks  of  sulphur  less 
than  15,000  tons  shall  be  free  to  sell  them;  but,  within  the  first  ten 
days  of  that  month,  they  must  report  the  quantity;  afterwards, 
according  as  they  shall  make  them,  report  the  respective  sales  in 
such  manner  that  they  may  be  controlled  by  the  association. 


TKUST   LAWS   AND   UNFAIR  COMPETITION.  783 

Article  4-  The  sulphur  destined  for  the  agriculture  of  the  country, 
to  be  identified  in  the  manner  and  with  the  security  which  shall  be 
fixed  by  royal  decree,  shall  be  sold  by  the  association  at  a  price  not 
greater  than  the  average  of  that  indicated  in  the  market  reports  of 
the  three  preceding  years  diminished  by  5  per  cent. 

The  by-laws  shall  fix  the  rules  and  the  guaranties  for  the  eventual 
limitation  of  production  wdien  the  conditions  of  the  market  render 
it  necessary. 

The  limitation  shall  always  be  subject  to  the  approval  of  the 
Minister  of  Agriculture. 

Article  6.  During  the  whole  period  covered  by  Article  1,  the  right 
to  sell  sulphur  covered  by  article  2,  belongs  exclusively  to  the  asso- 
ciation, save  the  exception  in  the  last  paragraph  of  article  3. 

Sulphur  shall  not  be  allowed  to  be  loaded  in  the  ports  of  Sicily, 
without  a  special  demand  of  the  association,  and  it  shall  not  be 
allowed  to  be  transported  by  railway  or  in  other  vehicles  of  the 
island  unless  sent  to  the  warehouses  mentioned  in  Article  21,  or 
unless  the  demand  for  the  shipment  be  made  by  the  association. 

In  the  regulations  mentioned  in  Article  28,  shall  be  determined 
both  the  form  and  extent  of  the  penalties  for  the  violation  of  this 
article. 

A7'.tlcle  6.  The  sales,  grants,  hypothecations,  assignments  of  sul- 
phur and  other  similar  acts,  also  if  they  occurred  prior  to  the  enact- 
ment of  the  present  law  produce  in  relation  to  the  association  merely 
the  effect  to  substitute  the  purchasers,  grantees,  mortgagees  and  the 
like  in  the  rights,  exclusive  of  the  right  to  vote,  and  in  the  obliga- 
tions which  their  legal  predecessors  had  towards  the  association. 

The  association  within  the  limits  of  the  existing  stock  for  the 
account  of  the  vendors  and  excepting  the  deductions  mentioned  in 
Article  13,  must  not  refuse  the  consignment  of  sulphur  sold  under 
contract  of  certain  date  before  July  1,  1906,  when  the  said  sulphur 
is  really  destined  to  the  industry  of  the  island  or  to  exportation,  and 
the  purchaser  pays  promptly  the  agreed  price,  deducting  the  dis- 
counts according  to  the  local  customs,  in  so  far  as  payment  to  the 
vendor  is  provided  by  the  contract.  The  differences  will  be  charged 
against  the  vendors  by  the  association. 

For  this  purpose  it  is  obligatory  that  the  contracts  of  sale  be  re- 
ported to  the  association  up  to  August  15,  1906. 

Article  7.  The  members  of  the  association  can  with  the  authoriza- 
tion of  the  association  use,  or  alienate  to  third  parties,  their  crude 
sulphur  or  their  sulphur  earth  in  order  to  apply  it  in  the  island  to 
the  manufacture  of  industrial  products. 

The  association  has  the  right  to  supervise  such  use  and  to  recover 
the  deductions  mentioned  in  Article  13,  in  proportion  to  the  sulphur 
used. 

Article  8.  The  members  of  the  association  vote  either  according  to 
number  or  according  to  participation ;  in  the  first  case  each  of  them 
has  one  vote;  in  the  second,  the  right  of  voting  and  the  number  of 
votes,  depends  on  the  extent  of  the  participation  which  he  has  in  the 
association. 

In  the  first  year  the  operator  has  according  to  participation  one 
vote  for  each  group  of  ten  laborers  emploj^ed  in  his  mine,  according 
to  the  number  resultinf^  from  the  report  made  on  December  31,  1905, 
to  the  compulsory  syndicate  for  industrial  accidents ;  the  share  of  the 


784  EEPOET   OP   THE   COMMISSIONER   OF   CORPORATIONS. 

proprietor  or  possessor  of  the  mine  is  rated  at  one-fifth  of  that  of 
the  operator. 

In  the  succeeding  years  the  participation  is  in  the  proportion  of 
one  vote  for  every  100  tons  of  sulphur  received  by  the  association  in 
the  warehouses  mentioned  in  Article  21. 

The  various  quotas  in  a  mining  operation  or  the  various  quotas 
of  ownership  or  possession  of  the  same  should  be  represented  by 
a  single  person.  The  representation  belongs  to  the  person  having 
the  greatest  interest  if  it  has  not  been  conferred  on  another  interest 
according  to  Article  678  of  the  Civil  Code. 

Ai'ticle  9.  The  association  is  administered  by  a  committee  of  dele- 
gates, composed  of  50  members,  on  whom  are  conferred  the  powers  of 
a  general  assembly ;  by  a  council  of  administration  composed  of  nine 
titular  members  and  four  alternates,  and  by  the  director  general. 

The  director  general  is  nominated  by  the  government  of  the  King. 

The  minister  of  agriculture,  industry  and  commerce,  the  general 
council  of  the  Bank  of  Sicily,  and  the  chambers  of  commerce  of 
Palermo,  Catania,  Girgenti  and  Caltanissetta  nominate  from  outside 
of  the  members  of  the  association  and  outside  of  their  own  member- 
ship, and  of  those  who  receive  from  their  funds,  salaries,  allowances 
or  even  transitory  compensation,  as  follows : 

the  first  and  the  second,  each,  two  members  of  the  committee  of 
delegates  and  a  titular  and  alternate  member  of  the  council  of  ad- 
ministration, 

and  the  others,  by  a  majority  of  all  votes  combined,  two  members 
of  the  committee  of  delegates  and  only  one  titular  member  of  the 
council  of  administration. 

The  other  members  of  the  committee  of  delegates  and  of  the  coun- 
cil of  administration  are  elected  by  the  association,  from  among  them- 
selves by  secret  vote. 

Half  are  elected  by  voting  according  to  number,  and  the  other  half 
by  voting  according  to  participation. 

In  the  substitutions  one  proceeds  with  the  system  with  which  the 
alternate  has  been  elected. 

That  one  is  elected  who  has  obtained  more  than  half  of  the  votes 
and  not  less  than  one-third  of  the  votes  of  all  the  members.  If  no 
one  has  received  that  number,  a  ballot  is  taken  of  those  who  have 
had  the  most  votes  and  the  majority  decides. 

Article  10.  As  soon  as  the  present  law  shall  be  published  the  Gov- 
ernment of  the  King  shall  nominate  a  commissioner,  who,  having 
compiled  the  list  of  the  members  of  the  association  according  to 
Article  8,  shall  promptly  ]:)ublish  it  in  the  judicial  announcements  of 
the  prefectures  in  the  various  mining  provinces  of  the  island  and  in 
the  official  records  of  the  communes  in  whose  territory  the  mines  are 
situated. 

The  participants  can  make  complaints  in  the  first  instance  to  the 
said  commissioner  within  five  days  after  such  publication  and  in  the 
second  instance  to  the  minister  of  agriculture,  industry  and  com- 
merce, within  five  days  after  notification  of  the  decision  of  the  com- 
missioner which  shall  be  made  by  extract  through  the  communal 
officials. 

Appeal  against  the  decision  of  the  minister  is  not  admitted. 

Article  11.  The  commissioner,  together  with  the  special  committee 
mentioned  in  Article  29,  shall  prepare  the  scheme  of  by-laws  for  the 


TRUST   LAWS   AND   UNFAIR  COMPETITION".  785 

association  and  submit  them  to  the  examination  of  the  committee  of 
delegates. 

The  by-laws  are  approved  by  royal  decree  after  examination  by  the 
minister  of  agriculture,  industry  and  commerce  and  consultation  with 
the  commission  mentioned  in  Article  30,  the  council  of  state  and  the 
council  of  mines. 

Article  12.  The  by-laws  shall  determine  the  principal  office  and 
the  branch  offices  of  the  association ; 

the  rights  and  the  obligations  of  the  members ; 

the  measures  to  carry  out  the  purposes  of  the  association ; 

the  rules  of  administration,  the  powders  and  responsibility  of  the 
organs  of  the  association  and  of  the  individual  functionaries ; 

and  whatever  else  is  necessary  within  the  limits  of  the  law  to  facil- 
itate the  operation  of  the  association. 

Article  13.  From  the  selling  price  of  sulphur  may  be  deducted  only : 

(1)  the  sum  allowed  by  the  committee  of  delegates  for  the  expenses 
of  administration,  which  must  never  exceed  the  limit  of  1  lira  per 
ton. 

(2)  the  sums  requisite  to  provide  for  the  regulations  in  number  2  of 
article  2,  and  in  article  23,  and  in  the  degree  that  is  proved  necessary 
to  provide  compensation  mentioned  in  article  4,  and  for  the  conse- 
quences of  eventual  non-employment  of  laborers,  arising  from  the 
limitation  of  production;  in  the  aggregate  not  exceeding  4  lire  per 
ton. 

(3)  the  sum  of  50  centesimi  per  ton. 

This  quota,  for  giving  effect  to  the  provisions  of  article  2,  number  3, 
shall  be  paid  three  times  a  year  to  the  treasury  "of  the  organ  for  the 
insurance  of  sickness  and  superannuation  of  the  laborers,  which  shall 
administer  the  said  fund  according  to  the  agreement  which  shall  be 
established  between  the  said  treasury  and  the  association. 

Article  lli..  Controversies  between  the  association  and  the  members 
thereof  concerning  all  the  objects  pertaining  to  the  present  law  shall 
be  decided  by  three  arbitrators  without  appeal. 

For  this  purpose  a  board  of  six  arbitrators  is  established,  com- 
posed of  three  experts  in  legal  matters,  and  three  in  mining  matters, 
appointees  and  eventual  alternates,  to  wit,  two  by  the  minister  of 
agriculture,  industry  and  commerce,  tAvo  by  the  first  president  of  the 
court  of  appeal  of  Palermo,  and  two  by  the  committee  of  delegates, 
which  shall  proceed  to  the  nomination  with  limited  vote. 

In  the  decisions  of  every  individual  case  not  more  than  two  experts 
of  a  given  category  can  participate,  nor  more  than  one  of  those  nomi- 
nated by  the  association. 

The  selection  of  the  judges  shall  be  made  at  the  beginning  by  lot 
and  subsequently  by  turn. 

Article  15.  If  the  association  is  discontinued,  its  assets  shall  be 
distributed  among  the  members  of  the  association,  in  proportion  to 
the  quantity  of  sulphur  sold  for  the  account  of  each  of  them. 

Article  16.  In  the  regulations  mentioned  in  article  28  the  rules 
will  be  established  for  the  governmental  supervision  of  the  associa- 
tion and  of  its  organs. 

Article  17.  In  the  month  of  August  of  each  year,  beginning  with 
1907,  the  administration  of  direct  taxes  shall  ascertain  the  amount 
of  the  income  of  the  preceding  operating  year  from  the  principal  real 

30035°— 16 50 


786  EEPORT  OF   THE   COMMISSIONER   OF   CORPOEATIONS. 

estate  tax  upon  the  sulphur  mines  of  Sicily;  the  amount  shall  be 
reimbursed  in  favor  of  the  association,  and  paid  over  for  its  account 
to  the  Bank  of  Sicily. 

In  the  second  half  of  each  year,  beginning  with  1907,  the  adminis- 
tration of  the  railways  of  the  state  shall  ascertain  the  amount  of  the 
income  from  rates  received  for  the  transportation  of  sulphur  on  the 
railways  of  Sicily,  belonging  to  the  State,  during  the  preceding  oper- 
ating year.  Under  the  expenses  of  the  year  it  shall  provide  for  the 
payment  in  favor  of  the  association  of  a  sum  equal  to  one-half  of 
the  said  amount,  paying  the  amount  to  the  Bank  of  Sicily.  In  no 
case  shall  such  sum  exceed  the  limit  of  850,000  lire. 

The  association  as  fast  as  it  shall  sell  the  sulphur  acquired  by  it 
according  to  article  3,  shall  pay  the  price  to  the  Bank  of  Sicily.  This 
like  the  other  payments  shall  be  entered  by  the  bank  in  a  special 
current  account,  in  the  name  of  the  association,  with  a  lien  in  favor 
of  the  State  for  the  guarantee  given  to  the  obligations  to  be  issued 
by  the  association,  mentioned  in  article  3 ;  and  with  a  secondary  lien 
in  favor  of  the  Bank  of  Sicily  to  reimburse  it  for  the  quota  of  the 
capital  contributed  by  it,  as  provided  in  the  first  part  of  article  23 
of  this  law.  Such  sums  shall  be  appropriated  annually  for  the  afore- 
said purposes. 

The  current  account  of  the  Bank  of  Sicily  shall  bear  interest  equal 
to  that  which  the  bank  shall  allow  to  its  savings  deposits  on  current 
interest  bearing  accounts. 

The  banking  facilities  of  the  association  shall  be  provided  gratu- 
itously by  the  Bank  of  Sicily. 

Chapter  II.  Subsidiary  Organs:  General  Warehouses  and  Inde- 
pendent Mining  Credit  Bank. 

Article  18.  The  general  warehouses  mentioned  in  number  1  of 
Article  2  shall  be  established  on  the  basis  of  the  law  of  December  17, 
1882,  number  1154,  and  of  the  law  of  December  26,  1895,  number  720, 
in  so  far  as  they  are  applicable. 

For  providing  the  capital  of  the  general  warehouses  shall  cooper- 
ate— the  Bank  of  Sicily,  which  shall  deduct  the  amount  from  the  re- 
serve fund,  without  prejudice  to  the  profits  allowed  under  the  para- 
graph of  Article  50  of  the  law  concerning  issuing  banks,  approved  by 
royal  decree  October  2,  1900,  number  373 — and  the  Central  Savings 
Bank  Vittorio  Emanuele  in  such  measure  as  shall  be  agreed  upon  be- 
tween the  association  and  the  said  institutions,  subject  to  the  approval 
of  the  minister  of  the  treasury  and  of  the  minister  of  agriculture, 
industry  and  commerce.  In  providing  the  said  capital,  other  institu- 
tions or  private  persons  may  participate. 

The  necessity  of  establishing  general  warehouses  in  other  ports 
than  Catania,  Porto  Empedocle  and  Licata,  shall  be  determined  by 
the  committee  of  delegates  by  a  vote  of  a  three-fourths  majority  of 
the  legal  number  present. 

Article  19.  In  the  by-laws  of  the  general  warehouses  it  shall  be 
provided  that  they  assume  the  obligation  to  prepay  without  interest 
the  expenses  of  transportation  of  Sicilian  sulphur  from  the  railway 
stations  of  shipment  to  the  places  of  storage,  to  be  reimbursed  on  the 
reshipment  of  individual  lots  of  sulphur. 


TKUST   LAWS  AND  UNFAIR  COMPETITION.  787 

•  The  indebtedness  for  the  said  expenses  of  transportation  has  pref- 
erence over  security  deljt. 

Ai'ticle  20.  Besides  those  indicated  in  the  law  under  Article  18,  the 
installations  destined  to  facilitate  the  transportation  of  sulphur  from 
the  places  of  production  to  the  railway  stations  of  shipment  or  from 
those  of  arrival  to  the  general  warehouses  or  from  them  to  on  board 
ship,  are  declared  to  be  of  public  utility. 

Article  21.  All  the  sulphur  of  the  Sicilian  mines  shall  be  deposited 
with  and  put  in  the  custody  of  the  general  warehouses,  at  the  dispo- 
sition of  the  association. 

According  to  the  rules  and  guarantees  which  shall  be  established 
in  the  by-laws 

(«)  the  said  sulphur,  until  the  general  warehouses  are  operating, 
may  be  deposited  in  existing  private  warehouses ;  and  these  may,  in 
agreement  with  the  association,  be  transformed  into  association  ware- 
houses, as  direct  branches  of  the  general  warehouses. 

ih)  the  association  may  allow  the  sulphur  destined  for  consump- 
tion in  the  interior  of  the  island  to  be  consigned  to  purchasers  at  the 
places  of  production  or  at  the  railway  stations. 

Article  22.  For  the  discount  rate  in  favor  of  collateral  notes  on 
sulphur  deposited  in  the  general  warehouses,  the  Bank  of  Sicily  is 
authorized  to  exceed  up  to  10  million  lire  the  sum  of  6  million  lire 
mentioned  in  Article  30  of  the  only  text  of  the  law  cited  regarding 
issuing  banks,  with  the  exemption  of  the  augmentation  of  the  rate 
mentioned  in  Article  23  of  the  said  law,  on  condition  that  the  result- 
ing excess  be  applied  exclusively  to  the  operations  considered  in  this 
article. 

Article  23.  The  capital  of  the  independent  mining  credit  bank  for 
Sicily,  mentioned  in  number  2  of  Article  2,  shall  be  furnished  from 
the  treasury  of  the  State  and  without  right  of  reimbursement  in  the 
sum  of  2,000,000  lire,  to  be  charged  to  the  year  1905-1906,  if  the  sur- 
plus of  the  said  year,  certified  by  the  minister  of  the  treasur}'^,  suffices 
to  cover  the  indicated  assignments,  and  with  an  additional  two 
millions  from  the  Bank  of  Sicily  according  to  necessity,  with  inter- 
est at  a  prudent  minimum,  and  it  shall  be  reimbursed  by  the  associa- 
tion rateably  at  the  end  of  not  more  than  eight  years. 

The  Bank  of  Sicily  shall  deduct  the  2  millions  from  the  reserve 
fund,  excepting  the  effects  of  the  first  paragraph  of  Article  50  of  the 
law  concerning  banks  of  issue. 

The  Bank  of  Sicily  from  the  sum  destined  for  the  establishment  of 
the  mining  bank  shall  make  to  the  special  committee,  mentioned  in 
Article  29,  the  advances  which  will  be  requested  for  the  needs  of  the 
temporary  management.  The  part  of  the  said  advances  destined  for 
expenses  of  administration  shall  be  reimbursed  with  the  deduction 
mentioned  in  Article  13,  number  1. 

Over  the  part  of  the  deductions  mentioned  in  Article  13,  number  2, 
which  shall  be  destined  to  repayment,  and  over  all  the  activities  of 
the  bank,  the  Bank  of  Sicily  shall  have  the  right  of  preference. 

The  by-laws  of  the  bank  shall  be  prepared  and  considered  on  the 
basis  of  Article  11,  and  api)roved  by  the  minister  of  agriculture,  in- 
dustry and  commerce  and  by  tlie  minister  of  the  treasury. 

The  duties  of  administrator  of  the  bank  and  those  of  administrator 
of  the  association  are  incompatible. 


788  REPORT   OF    THE   COMMISSIONER   OP   CORPORATIONS. 

Whoever  has  exercised  one  of  them  cannot  be  nominated  to  the 
other  duty,  if  there  has  not  elapsed  one  year  after  leaving  it. 

Chapter  III.  General  Provisions. 

Article  24.  From  August  1,  1906,  in  the  special  subscription  tax, 
mentioned  in  Article  2  of  the  law  of  July  22,  1897,  No.  317,  are  com- 
prised also  the  registry  taxes  excepted  by  the  said  article  and  the 
taxes  on  the  bills  of  lading  of  sulphur,  provided  for  by  Article  31  of 
the  law  of  July  6,  1862,  No.  680. 

With  this  modification  the  royal  decree  of  January  28, 1906,  No.  11, 
is  converted  into  law,  which  extends  to  the  sulphur  of  the  mines  of 
the  other  provinces  of  the  kingdom  the  provisions  of  the  said  law  of 
July  22,  1897. 

The  industries  of  milling,  milling  with  sulphate  of  copper  for  agri- 
culture, refining  and  distilling  national  sulphur,  are  exempt  from  the 
taxes  by  which  sulphur  has  been  burdened,  by  reason  of  the  special 
subscription  tax. 

From  August  1, 1906,  except  the  provisions  mentioned  in  Article  42 
of  the  law  of  March  1,  1886,  No.  3682,  the  provincial  and  communal 
surtax  on  Sicilian  sulphur  is  consolidated  in  the  aggregate  sum 
recovered  for  the  year  1905. 

The  intendant  of  finance,  in  proportion  to  the  production  of  each 
individual  mine  in  the  preceding  year,  shall  annually  make  the  distri- 
bution of  the  said  sum  to  the  various  mines  in  the  current  year  in  the 
territory  of  the  province  or  of  the  commune  to  which  the  surtax 
relates. 

Article  25.  The  new  commercial  companies  Avhich  may  be  estab- 
lished for  the  purpose  of  operating  sulphur  mines,  industries  and 
commercial  operations  in  which  sulphur  is  the  principal  element,  are 
exempt  from  any  tax  whatever. 

Foreign  companies  established  to  operate  in  Italy  with  the  same 
purposes  shall  enjoy  like  exemptions  throughout  the  duration  of 
their  operations,  if  they  take  the  legal  and  fiscal  measures  to  be 
recognized  in  the  kingdom  or  establish  in  it  a  general  agency  or 
representation. 

Article  26.  The  minister  of  agriculture,  industry  and  commerce, 
conformably  with  the  advice  of  the  superior  council  of  industry  and 
commerce,  shall  concede  a  declaration  of  public  utility  according  to 
the  laws  in  force,  for  the  works  which  shall  be  necessary  for  the 
introduction  and  subsequent  development  of  those  industries  already 
existing  and  which  shall  arise  in  any  province  of  the  kingdom  and 
which  shall  have  for  their  object  the  utilization  of  sulphur  and  its 
derivatives,  exclusive  of  pyrites. 

Article  27.  Within  six  months  of  the  publication  of  this  law  the 
Government  of  the  King  shall  present  to  Parliament  a  project  of  law 
to  regulate  the  contracts  of  labor  in  the  Sicilian  sulphur  mines. 

Article  28.  To  the  Government  of  the  King  is  given  the  power, 
after  hearing  the  commission  mentioned  in  xVrticle  30,-  to  issue  by 
royal  decrees  transitory  regulations,  including  those  temporary  pro- 
visions, necessary  during  the  provisory  administration  mentioned  in 
Article  29  and  all  the  other  dispositions  required  for  the  complete 
execution  of  this  law. 

Regulations  for  the  execution  of  this  law  shall  be  published  within 
three  months  from  the  date  of  the  same. 


TEUST   LAWS   AND  UNFAIR  COMPETITION.  789 

Chapter  IV.  Temporary  Provisions. 

Article  29.  For  the  execution  of  this  law  the  representation  and 
administration  of  the  association  are  entrusted  temporarily  to  a 
special  committee,  composed  of  the  commissioner  mentioned  in  Arti- 
cle 10,  who  presides  over  it  and  executes  its  determinations,  and  of 
four  members  nominated  by  the  Government  of  the  King.  The  com- 
mittee shall  proceed  with  the  rules  and  means  which  shall  be  estab- 
lished by  royal  decree. 

The  functions  of  the  commissioner  and  of  the  special  committee 
shall  cease  from  the  day  of  the  seating  of  the  new  administrators 
elected  according  to  the  by-laws  already  approved. 

During  this  period  the  chambers  of  commerce  and  trades  and  the 
communes  of  the  island  must  give  promptly  gratuitous  execution  to 
all  the  requests  of  the  commissioner. 

Article  30.  Near  the  minister  of  agriculture,  industry  and  com- 
merce, there  shall  be  a  commission  composed  of  five  members  nomi- 
nated by  royal  decree.  This  shall  give  advice  concerning  the  by- 
laws of  the  association,  concerning  the  regulations  for  the  execution 
of  this  law,  and  concerning  all  the  other  questions  which  the  minister 
himself  shall  submit  to  its  examination. 

We  order  that  the  present,  furnished  with  the  seal  of  State,  be 
inserted  in  the  official  collection  of  laws  and  decrees  of  the  Kingdom 
of  Italy,  commanding  every  one  concerned  to  observe  it  and  to  cause 
it  to  be  observed  as  the  law  of  the  State. 

Given  at  Racconigi,  on  July  15,  190G. 


(Seal:)  The  Keeper  of  the  Seal,  Gallo. 


Victor  Emanuel. 

F.  Cocco  Ortu. 
A.  Majorana. 
Massimini. 
Gianturco. 


EXHIBIT  F.— RUSSIAN  LAWS  REGULATING  THE  PRODUCTION  AND 

SALE  OF  SUGAR.' 

Law  of  November  20,  1895. 

The  Imperial  State  Council  in  its  session  of  the  united  depart- 
TTients,  after  considering  the  proposition  of  the  Finance  Minister^ 
"  concerning  certain  regulations  with  respect  to  the  sugar  industry,^'' 
decrees  that  the  folloiving  provisions  apply  respectinq  the  sugar 
production  in  the  campaigns  of  1895-96, 1896-97, 1897-98: 

Article  I.  For  each  campaign  of  sugar  production  the  committee 
of  ministers  on  the  proposal  of  the  Minister  of  Finance  determines : 

{a)  The  quantity  of  sugar,  which  is  to  be  brought  on  the  do- 
mestic market  by  the  granulated  sugar  factories  and  the  beet  sugar 
refineries. 

{h)  The  quantity  of  an  unconditional  inviolable  stock  of  sugar  of 
the  said  factories. 


1  Translated   from   the   German   translation   of  Preyer,    Die   russische  Zuckorindustrie. 
'inziir.    1!)()S. 


Leipzig,   1908. 


790  EEPOET   OF    THE   COMMISSIONER   OP   COEPOEATIONS. 

(c)  The  limit  price  of  sugar  for  the  domestic  market  up  to  which 
the  said  stock  remains  inviolable  and  the  conditions  under  which 
sugar  may  be  brought  on  the  domestic  market  from  this  stock. 

Article  II.  The  sugar  produced  in  each  campaign  by  granu- 
lated sugar  factories  and  beet  sugar  refineries  which  exceeds  the  quan- 
tity determined  for  the  domestic  market  (Article  I, a), is  regarded 
as  surplus  and  is  subject  to  a  special  additional  tax  of  1.75  roubles 
per  pood  besides  the  sugar  tax  (consumption  tax). 

Article  III.  This  surplus  (Article  II)  is  reckoned  for  the  indi- 
vidual factories,  according  to  the  quantity  of  production  which  ex- 
ceeds 60,000  poods. 

Note  1.  To  the  Finance  Minister  is  left : 

{a)  To  fix  the  method  by  which  the  current  and  definite  computa- 
tions are  to  be  made  for  the  determination  of  the  surplus  for  the 
factories. 

{!))  To  determine,  which  products  can  be  taken  for  the  computa- 
tion of  production  in  the  determination  of  the  surplus  and  which 
can  be  transferred  from  the  surplus  to  the  inviolable  stock  (Article 

Note  2.  If  in  the  computation  of  the  surplus  in  the  campaign  of 
1896-1897  it  shall  appear  that  by  individual  factories  sugar  has 
already  been  brought  on  the  market  from  the  surplus,  then  for  these 
factories  equal  quantities  of  sugar  are  reckoned  in  the  surplus  for  the 
following  campaigTi.  In  such  case  this  quantity  is  to  be  deducted 
from  the  production  of  the  general  surplus  of  the  campaign  1896- 
1897. 

Article  IV.  The  unconditional  inviolable  stock  (Article  I,  &)  is 
formed  in  each  campaign  from  the  general  surplus  and  is  completely 
maintained  from  this.  For  the  individual  factories  this  stock  is  reck- 
oned in  the  quantity  of  the  general  surplus  on  the  basis  of  the  regu- 
lations contained  in  Article  III. 

Note.  For  the  security  of  the  current  payment  of  the  tax  in  the 
amount  of  75  kopecks  on  the  sugar  which  is  brought  on  the  market 
by  the  factories,  the  sugar  transferred  to  the  inviolable  reserve  is 
taken  over  by  the  State  at  a  price  and  under  conditions  which  are  to 
be  fixed  by  the  Finance  Minister. 

Article  V.  The  existing  sugar  surplus  of  the  factories  (in  excess 
of  the  required  unconditional  inviolable  stock)  may  be  brought  on 
the  domestic  market  only  after  full  payment  of  the  additional  tax. 
The  sugar  tax  for  this  sugar  is  paid  according  to  the  general  pro- 
visions for  sugar  of  the  current  campaign.  It  is  suggested,  however, 
that  the  manufacturer  leave  this  sugar  in  storage  in  the  factory  as  a 
free  stock,  and  in  this  case  he  does  not  need  to  pay  either  the  sugar 
tax  or  the  additional  tax  imtil  it  leaves  the  factory. 

Note.  The  existing  free  stock  of  sulplus  sugar  of  a  factory  at  the 
end  of  a  campaign  can  upon  the  request  of  the  manufacturer  be 
reckoned  in  with  the  production  of  the  next  campaign  in  this  factory 
with  cancellation  of  the  computation  of  the  surplus. 

Article  VI.  The  sugar  stored  in  a  factory  in  the  inviolable  stock  is 
subject  neither  to  the  sugar  tax  nor  to  special  taxes  before  leaving  the 
factory,  which,  however,  is  allowed  only  under  the  conditions  provided 
in  Article  VII.  The  sugar  held  in  the  inviolable  stock  must  be  un- 
conditionally replaced  in  every  period  by  sugar  of  new  production. 


TRUST  LAWS   AND  UNFAIR  COMPETITION.  791 

Note.  In  case  of  the  closing  doAYn  of  a  factory  its  existing  in- 
violable stock  is  at  the  disposition  of  the  manufacturer  at  the  close 
of  the  campaign.  He  is  obligated  either  to  export  it  abroad  (Article 
IX)  or,  if  he  brings  it  on  the  domestic  market,  to  pay  the  sugar  tax 
according  to  the  general  provisions  of  the  following  campaign,  as 
well  as  the  additional  tax.  The  paj^'ment  of  both  taxes  by  the  manu- 
facturer must  also  take  place  in  case  of  forced  sale. 

Article  VII.  If  the  sugar  price  in  the  domestic  market  shall  ex- 
ceed the  limit  prices  (Article  I,  c)  the  Finance  Minister  ordains  that 
the  requisite  quantity  of  sugar  from  the  inviolable  as  well  as  from 
the  free  stock  to  be  brought  upon  the  domestic  market  until  the  price 
falls.  For  this  sugar  the  payment  of  the  additional  tax  is  not 
requisite,  but  only  the  sugar  tax  for  sugar  of  the  current  campaign. 

Article  VIII.  In  case  the  sugar  existing  in  the  inviolable  or  free 
stock  falls  below  without  fault  of  the  manufacturer,  the  Finance 
Minister  is  empowered  not  to  bring  this  sugar  into  the  reckoning  for 
the  quantity  fixed  for  the  factory  and  to  remit  the  payment  of  the 
sugar  tax  and  the  additional  tax  for  him. 

Article  IX.  In  the  case  of  exports  abroad  from  the  sugar  surplus 
such  sugar  is  entirely  exempt  from  the  payment  of  the  sugar  tax  and 
the  special  additional  tax. 

Note.  In  case  the  sugar  price  shall  so  increase  on  the  foreign 
European  markets  that  this  advance  operates  as  a  stimulus  to  a  con- 
siderable overproduction  by  our  factories,  the  Finance  Minister  is  em- 
powered to  submit  a  proposal  to  the  committee  of  ministers  to  the 
end  of  suspending  temporaril}^  the  freeing  of  the  exported  sugar 
either  wholly  or  partially  from  the  additional  tax. 

Article  X.  From  the  granulated  sugar  factories  as  well  as  from 
the  beet  sugar  refineries,  sugar  may  be  shipped  only  with  the  permis- 
sion of  the  tax  inspector  who  must  certify  with  his  signature  the 
observance  of  the  legal  regulations. 

Article  XI.  Manufacturers  who  in  an  unauthorized  manner  bring 
sugar  upon  the  market  from  the  unconditional  inviolable  stock  as  well 
as  from  the  surplus  without  payment  of  the  sugar  tax,  and  further 
owners  of  refineries  and  dealers  who  acquire  such  sugar  unlawfully 
brought  \\\)0\\  the  market,  are  to  be  brought  to  account  according  to 
Article  109G  of  the  provisions  regarding  consumption  taxes  and  in- 
ternal taxes. 

Article  XII.  The  Finance  Minister  has  the  authority,  in  accord 
with  the  State  Comptroller: 

{a)  To  issue  regulations  regarding  the  bookkeeping  of  the  indi- 
vidual factories  respecting  the  additional  tax  affecting  the  sugar 
surplus. 

(6)  To  fix  the  method  for  reckoning  the  surplus  of  the  individual 
factories  and  for  establishing  the  unconditional  inviolable  stock,  as 
well  as  to  make  regulations  concerning  its  preservation  in  the  fac- 
tories and  its  liberation  on  the  market. 

(c)  To  issue  regulations  for  exportation. 

{d)  To  give  all  instructions  and  explanations  which  shall  become 
necessary  respecting  the  application  of  this  law. 

Conclusion.  His  Imperial  Majesty,  after  approval  of  these  regu- 
lations by  the  State  Council  in  general  session,  has  given  them  his 
august  confirmation  and  commanded  their  execution. 


792  EEPOET   OF   THE   COMMISSIONEE    OE   CORPORATIONS. 

Amendment  of  May  11,  1898.     Decision  or  the  State  Council  in 

ITS  Assembled  Departments. 

Article  I.  The  temporary  provisions  of  the  law  of  November  20, 
1895,  confirmed  by  august  decree,  regarding  the  sugar  industry  shall 
continue  in  effect  until  further  notice  with  the  following  addition: 

The  Finance  Minister  is  empowered  to  make  regulations  concern- 
ing what  products  of  those  which  at  the  end  of  each  campaign  re- 
main as  surplus  at  the  factories  can  be  reckoned  by  the  manufac- 
turers to  the  production  for  the  new  period,  after  deducting  from 
the  quantity  of  the  surplus,  and  to  what  extent  this  may  occur,  begin- 
ning with  the  surplus  of  the  campaign  1897-98. 

Article  IL  Note  2  of  Article  III  and  the  Notes  to  Article  V  of 
the  said  law  are  abolished. 

Law  or  May  12,  1903.     Concerning  Changes  and  Supplements  to 
Existing  Laws  Regarding  the  Sugar  Industry. 

Article  I.  In  changing  and  supplementing  the  existing  laws  it  is 
provided : 

1.  For  each  annual  campaign  the  extent  of  the  general  normal 
(useful)  sugar  production  is  fixed  by  the  committee  of  ministers 
according  to  the  proposal  of  the  Finance  Minister. 

2.  If  the  quantity  of  the  actual  sugar  production  for  a  given  cam- 
paign does  not  exceed  the  general  normal  (useful)  production,  then 
the  surplus  of  the  actual  production  over  the  quantity  fixed  for  the 
domestic  market  is  to  be  allotted  to  the  individual  factories  in  pro- 
portion to  their  actual  production  which  exceeds  80,000  poods. 

3.  If  the  quantity  of  the  actual  sugar  production  for  a  given  cam- 
paign is  greater  than  the  general  normal  (useful)  production,  then 
the  surplus  of  the  actual  production  over  the  quantity  fixed  for  the 
domestic  market  is  to  be  apportioned  as  follows : 

(a)  The  part  of  the  surplus  which  is  expressed  by  the  difference 
between  the  actual  and  the  general  normal  (useful)  production  is 
apportioned  exclusively  among  the  factories  which  have  exceeded  the 
quantities  apportioned  to  them  from  the  normal  (useful)  production 
(see  No.  4),  and  indeed  in  proportion  to  the  excess  incurred  by  each 
individual  factory. 

(b)  The  part  of  the  surplus  remaining  over  is  apportioned  to 
all  factories  in  proportion  to  the  actual  production  of  each  individual 
factory  which  exceeds  80,000  poods.  In  this  case,  however,  the  sur- 
plus computed  according  to  paragraph  a  is  to  be  deducted  first. 

4.  Under  the  normal  (useful)  production  of  each  factory  for  a 
campaign  is  to  be  understood  the  quantity  which  is  obtained  through 
the  apportionment  of  the  general  normal  (useful)  production  to  the 
individual  factories  corresponding  to  their  productive  capacity. 
The  normal  production  of  a  factory  may  not  be  placed  under  80,000 
poods. 

5.  In  order  to  compute  the  productive  capacity  of  an  operating  fac- 
tory the  extent  of  its  actual  production  in  the  last  ten  campaigns  is 
taken  as  a  basis.    From  this  is  to  be  deducted : 

(a)  For  the  campaigns  1896-97  to  1902-03:  The  quantity  of  sugar 
which  has  been  included  from  the  free  stock  of  a  preceding  campaign 
in  the  production  of  the  following  camj^aign. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  793 

(h)  For  the  campaigns  from  1903-04  on: — the  surphis  computed 
according  to  No.  3  (a). 

6.  The  productive  capacity  of  the  factories  named  under  5  is 
fixed  as  follows : 

For  factories  which  have  been  in  operation  eight  or  more  years — 
as  the  arithmetical  mean  of  the  production  of  the  three  largest 
years. 

For  factories  which  haA'e  been  in  operation  from  five  to  seven 
years — as  the  arithmetical  mean  of  the  production  of  the  two  largest 
years. 

For  factories  which  have  been  in  operation  from  two  to  four 
years — as  the  largest  production. 

For  factories  which  haA^e  been  in  operation  one  year — as  this  pro- 
duction. 

7.  The  productive  capacity  of  newly  established  factories  and  of 
such  old  ones  as  were  temporarily  not  in  operation  in  the  course  of 
the  last  ten  campaigns  is  fixed  for  the  first  campaign  or  the  resump- 
tion of  activity  according  to  their  actual  production  in  this  campaign, 
but  not  higher  than  160,000  poods. 

8.  The  productive  capacity  of  factories  which  have  been  enlarged 
for  the  purpose  of  extension  of  operations  is  fixed  according  to  the 
regulations  which  have  been  established  for  existing  factories  (Arti- 
cles I,  5  and  6),  or  in  case  of  a  special  application  from  the  manu- 
facturers according  to  the  regulations  for  newly  established  factories 
(No.  7  and  Article  V). 

9.  The  unconditional  and  inviolable  stock  is  computed  for  the 
individual  factories : 

(a)  In  case  the  actual  production  does  not  exceed  the  general, 
normal  production  upon  the  basis  of  No.  2. 

(h)  In  all  other  cases  upon  the  basis  of  No.  3b. 

10.  The  existing  free  stock  of  sugar  at  a  factory  at  the  end  of  a 
campaign  at  the  request  of  the  manufacturer  in  the  quantity  specified 
by  him  is  reckoned  in  with  the  production  of  the  new  campaign. 
This  provision  extends  to  the  free  stock  of  sugar  which  remains  over 
at  the  end  of  the  campaign  1902-03. 

11.  The  stone  buildings  of  the  granulated  sugar  factories  and  beet 
sugar  refineries  now  in  operation  which  are  situated  outside  of  the 
capital,  in  order  to  assure  the  payment  of  the  sugar  tax  on  the  basis 
of  paragraph  4  of  section  9  of  appendix  I  to  Article  339  of  the  regu- 
lations concerning  consumption  taxes,  are  taken  as  pledge  with  the 
special  permission  of  the  Finance  Minister  in  each  individual  case. 

Article  II.  Paragraph  3  of  the  note  to  Article  996  of  the  regula- 
tions concerning  consumption  taxes  is  abolished. 

Article  III.  With  respect  to  such  of  the  newly  erected  factories 
whose  equipment  was  begun  before  the  publication  of  these  regula- 
tions in  the  "  Collection  of  Laws  and  Government  Ordinances  "  and 
whose  production  begins  not  later  than  with  the  campaign  of  1904-05, 
the  restrictions  of  Article  I,  No.  7,  have  no  application.  The  pro- 
ductive capacity  of  these  factories  in  the  first  period  of  their  activity 
is  to  be  reckoned  equal  to  their  actual  production  in  this  time. 

Article  IV.  In  the  determination  of  the  productive  capacity  of 
the  factories  for  the  cam])aigns  1903-04  and  1904-0."),  the  pi-oduction 
of  the  years  prior  to  the  campaign  1895-96  is  not  to  be  brought  into 
reckoning. 


794  REPORT  OP   THE   COMMISSIONER  OF   CORPORATIONS. 

Article  V.  The  productive  capacity  of  the  factories,  which  in  the 
years  1900-01, 1901-02,  and  1902-03,  have  been  enlarged  with  the  pur- 
pose of  extension  of  their  operations,  for  the  campaigns  1903-04, 
1904—05,  and  1905-06,  upon  special  application  of  their  owners  is  to 
be  made  equal  to  the  product  of  the  mean  sugar  production  of  2-1 
hours  of  each  of  these  factories  in  the  campaign  1902-03,  multiplied 
by  the  arithmetical  mean  of  the  working  days  of  all  factories  in  the 
'  Empire  during  the  same  period. 

Article  YI.  The  Finance  Minister  is  empowered,  with  the  assent 
of  the  State  Comptroller,  to  establish  regulations  in  applicable  in- 
stances for: 

(a)  The  method  of  application  of  the  provisions  made  in  Article 
I,  Nos.  3-10,  as  well  as  in  Articles  III  and  V,  also. 

(h)  The  conditions  under  which  the  productive  capacity  of  the 
factories  mentioned  in  Article  V  can  be  reckoned,  according  to  the 
provisions  for  newly  erected  factories  as  well  as  according  to  the 
provisions  in  the  article  cited. 

Article  VII.  For  a  period  of  three  years  (1903-04-1905-06)  the 
following  provisions  are  made: 

1.  The  Finance  Minister  is  empowered  on  special  request  of  the 
factories  to  allow  that  denatured  sugar  for  cattle  fodder  and  for  tech- 
nical purposes  be  brought  on  the  domestic  market  without  payment 
of  the  sugar  tax  and  additional  tax. 

2.  The  conditions  under  which  the  manufacturer  is  allowed  the 
use  of  the  privilege  mentioned  in  the  preceding  number  are  to  be 
fixed  by  the  Finance  Minister  in  agreement  with  the  Minister  of  Agri- 
culture and  the  State  Comptroller.  These  conditions  are  to  be  laid 
before  the  Senate  by  the  Finance  Minister  which  will  publish  them 
for  general  information. 

3.  The  denatured  sugar  mentioned  in  No.  1  is  not  to  be  reckoned  in 
the  quantity  which  is  determined  for  each  campaign  for  the  domestic 
market. 

Article  VIII.  The  regulations  contained  in  Article  I,  Nos.  1-10 
and  in  Article  III-V,  take  effect  from  September  1,  1903. 


EXHIBIT  G.— ROUMANIAN  LAW  CONCERNING  THE  APPORTION- 
MENT OF  THE  TOTAL  REQUIREMENTS  OF  ILLUMINATING  PE- 
TROLEUM AMONG  THE  REFINERIES  OF  THE  COUNTRY.' 

[Law  of  April  10  (O.  S.),  1908.] 

Chapter  I.  Apportionment  op  the  Requirements. 

Article  1.  The  government  is  empowered  by  the  present  law  to  ap- 
portion the  total  requirements  of  illuminating  petroleum  among  the 
existing  refineries  or  those  to  be  organized  in  the  future. 

Article  2.  The  apportionment  takes  place  on  the  basis  of  the  pro- 
ductive capacity  of  each  refinery.  The  productive  cai)acity  is  de- 
termined according  to  the  quantity  of  crude  oil,  which  a  refinery 
can  refine  in  one  year. 

1  Translated  from  the  German  text  in  Denkschrift  ueber  das  Kartellwesen,  IV.  Teii,  Ber- 
lin, 1908,  pp.  151-4. 


TRUST   LAWS  AND  UNFAIR  COMPETITION.  795 

Article  3.  The  refineries  which  are  not  in  a  position  to  refine  more 
than  40,000  tons  of  crude  oil  annually,  shall  in  the  apportionment 
receive  an  addition  of  200  per  cent  in  relation  to  their  productive 
capacity  over  against  the  refineries,  which  consume  more  than  40,000 
tons  annually;  those  which  can  not  refine  more  than  10,000  tons 
annually,  shall  in  relation  to  their  productive  capacity  receive  an  ad- 
dition of  400  per  cent  over  against  the  refineries  which  annually  refine 
more  than  40,000  tons  of  crude  oil. 

Article  If.  The  operation  of  such  refineries,  which  are  not  able  to 
produce  illuminating  petroleum  as  prescribed,  is  strictly  forbidden. 
The  existing  refineries,  which  do  not  comply  with  these  conditions, 
are  excluded,  and  operation  shall  not  be  permitted  until  they  provide 
themselves  with  the  necessary  apparatus  for  producing  illuminating 
IDetroleum  according  to  the  existing  ordinances  or  such  special  ordi- 
nances as  shall  be  promulgated. 

Article  5.  Each  year,  in  the  month  of  April,  the  Minister  of  Finance 
submits  to  the  Council  of  Ministers  a  report  on  the  apportionment  of 
the  total  requirements  among  the  existing  factories,  which  are  in  a 
position  to  produce  petroleum  in  the  prescribed  manner.  After  ap- 
proval of  the  apportionment  by  the  Council  of  Ministers,  the  Minis- 
ter of  Finance  allots  to  each  refinery  that  part  of  the  annual  con- 
sumption which  falls  to  it. 

With  the  surplus  of  production  the  following  method  is  pursued : 
if  it  is  exported,  the  refinery  must  prove  the  export  by  means  of  the 
bills  of  lading  and  with  other  proofs,  which  are  demanded  by  the 
controlling  officers  from  the  Ministry  of  Finance.  If  the  surplus  is 
not  exported,  it  must  be  stored  in  a  warehouse  or  in  a  special  reser- 
voir of  the  manufacturer  under  the  seal  of  the  official  of  the  Ministry 
of  Finance  who  is  stationed  at  each  factory  for  the  purpose  of  col- 
lecting the  State  and  local  taxes. 

Article  6.  If  a  refinery  should  cease  to  operate,  or  if  it  can  not  or 
will  not  market  its  proportionate  share,  as  it  is  determined  by  the 
government,  the  other  refineries  must  assume  the  delivery  in  its  place 
in  proportion  to  their  participation  in  the  total  requirements.  Like- 
wise the  excess,  which  results  in  consequence  of  the  above-mentioned 
causes,  as  well  as  the  surplus,  which  is  determined  by  the  increase 
in  the  anticipated  consumption  at  the  beginning  of  the  fiscal  year,  is 
apportioned  according  to  articles  1,  2  and  3  above,  and  the  INIinistry 
of  Finance  will  notify  each  refinery  of  the  share  allotted  to  it. 

Chapter  II.  Selling  Price. 

Article  7.  The  government  establishes  the  maximum  price,  at  which 
all  refineries  are  obliged  to  sell  illuminating  petroleum.  This  price, 
which  is  computed  when  the  petroleum  leaves  the  factory,  is  estab- 
lished on  the  following  basis  for  100  kilograms :  An  amount  of  from 
3.50  to  4.60  lei  is  established,  which  represents  the  cost  of  refining 
and  the  profit  of  the  manufacturer;  to  this  amount  is  added  the 
average  price  for  100  kilograms  of  crude  oil  delivered  to  the  factory; 
the  sum  of  these  two  amounts  forms  the  maximum  selling  price, 
which  is  prescribed  for  all  refineries. 

Article  8.  This  price  is  established  during  the  month  of  April  for 
the  three  succeeding  months,  and  is  retained  as  long  as  the  average 


796  EEPOET   OF    THE   COMMISSIONER  OF   COEPOEATIONS. 

price  of  crude  oil  remains  imchanged.  If  the  price  of  crude  oil  after 
the  expiration  of  the  three  months  should  be  changed,  either  increased 
or  reduced,  then  the  maximum  selling  price  will  also  be  changed 
accordingly. 

Article  9.  The  price  as  well  as  the  changes  in  price,  are  fixed  by 
the  Council  of  Ministers  on  the  basis  of  the  report  of  the  Ministei- 
of  Finance,  and  are  brought  to  the  attention  of  the  refineries  by  him. 

Chapter  III.  Fines. 

Article  10.  The  owner  of  a  refinery,  who  during  a  year  markets 
more  than  the  share  that  was  allotted  to  him  by  the  Minister  of 
Finance,  is  liable  to  a  money  fine,  wdiich  represents  a  hundred  times 
the  value  of  the  excess  quantity  of  petroleum  which  he  markets. 

The  agent  stationed  by  the  Ministry  of  Finance  at  the  factory,  who 
has  made  himself  guilty  of  such  an  offence,  will  be  dismissed,  sen- 
tenced to  two  months  imprisonment  and  loss  of  right  ever  again  to 
hold  any  public  office. 

The  owner  of  a  refinery,  who  makes  himself  guilty  of  the  same 
offense  for  two  succeeding  years,  will  be  condemned  to  the  above- 
mentioned  fine  and  besides  to  the  closing  of  his  factory  for  three 
months,  besides  to  a  loss  of  one-fourth  of  his  annual  share  in  the 
consumption  of  the  year  m  which  the  offense  has  occurred. 

Article  11.  Whoever  markets  illuminating  petroleum  wdiich  does 
not  come  up  to  the  regulations  shall  be  punished  with  a  fine  of  from 
2,000  to  5,000  lei. 

In  case  of  repetition  of  the  offense  he  will  be  punished  with  a 
double  fine,  and  in  case  of  a  second  repetition  w^ith  a  double  fine  and 
w^ith  closing  of  his  factory. 

The  representatives  of  the  government,  who  have  been  in  a  position 
to  exert  a  control  over  the  quality  of  petroleum  and  who  nevertheless 
have  permitted  the  offense,  will  be  dismissed  and  will  lose  the  right 
ever  to  hold  public  office  again. 

Article  12.  Whoever  mixes  residuum  with  benzine,  in  order  to 
market  this  mixture  as  illuminating  petroleum,  will  be  punished 
with  a  fine  of  5,000  to  10,000  lei  and  three  months  imprisonment. 

In  case  of  repetition  of  the  offense  his  business,  of  whatever  nature 
it  be,  will  in  addition  be  permanently  closed. 

The  informers  of  such  frauds  will  receive  75  per  cent  of  the  sum 
collected. 

Article  13.  The  owners  of  refineries,  who  from  their  place  of  busi- 
ness sell  petroleum  at  a  higher  price  than  the  maximum  price  estab- 
lished by  the  government,  will  be  punished  wnth  a  fine  of  from  2,000 
to  10,000  lei. 

In  case  of  repetition  of  the  offense  they  are  punished  with  a 
double  fine  and  the  money  fines  are  doubled  in  each  new  case  of 
repetition. 

Article  IJ^.  The  punishments  established  by  this  law  are  inflicted 
as  follows: 

(1.)  Relative  to  the  dismissals,  by  the  Minister  to  whom  the  guilty 
official  is  subordinated. 

(2.)  Relative  to  the  money  fines,  by  the  Minister  of  Finance,  on  the 
basis  of  the  minutes  which  establish  the  offense.  In  this  case  the 
condemned  has  the  right  of  appeal  to  the  court  within  fifteen  days 


TKUST   LAWS  AND  UNFAIR  COMPETITION.  797 

from  the  time  when  the  approved  minutes  were  delivered.  The  court 
renders  the  decision  in  a  speedy  trial  and  definitely;  an  appeal  is 
not  permitted. 

(3.)  Relative  to  the  prison  fines  and  the  right  to  again  hold  public 
office,  the  offenders  are  summoned  before  the  court,  Avhich  decides  in 
a  speedy  trial.    Legal  means  are  allowed. 

Chapter  IV.  Eeservoirs  for  Retail  Sale. 

Article  15.  In  so  far  as  the  refiners  do  not  build  reservoirs  at  their 
own  expense  for  the  storage  of  illuminating  petroleum  at  the  rail- 
road stations  and  the  harbors,  in  order  to  spread  the  consumption  as 
much  as  possible  and  to  furnish  the  petroleum  as  cheaply  as  possible 
to  the  public,  the  Ministry  of  Finance  is  authorized  to  build  such 
I'eservoirs  at  the  expense  of  the  State,  according  to  the  pattern  of 
those  which  have  been  erected  prior  to  the  promulgation  of  this  law 
by  some  of  the  refiners;  for  this  purpose  the  Minister  of  Finance 
shall  demand  the  necessary  credits  in  the  budget. 

The  rent  at  which  the  State  will  place  at  the  disposal  of  the  public 
the  reservoirs  leased  by  it,  shall  amount  to  only  5  per  cent  of  the 
cost  and  5  per  cent  for  amortisation. 

Article  16.  All  these  reservoirs,  whether  they  have  been  erected 
prior  to  the  promulgation  of  the  present  law  or  later  by  the  State  or 
by  the  refineries,  are  obliged  to  deliver  to  each  buyer  a  minimum 
amount  of  150  kilograms  illuminating  petroleum  in  a  barrel;  they 
are  entirely  free  to  sell  also  smaller  quantities. 

TRANSITIONAL  REGULATIONS. 

Article  17.  The  present  law  takes  effect  at  the  latest  on  October  1, 
1908.  The  first  division  of  the  consumption  as  it  is  determined  in 
Chapter  I,  and  the  first  price  which  is  to  be  fixed  for  three  months 
according  to  Article  2,  will  be  determined  as  an  exception  in  that 
month,  Avhich  precedes  the  promulgation  of  the  law. 

EXHIBIT   H.— BRAZILIAN    COFFEE   VALORIZATION;    AGREEMENTS, 

LAWS,  ETC.^ 

CONVf;NTION    OF   TxVUBATE. 

(AiiUBEMENT  Made  by  the  States  op  Rio  db  Janeiuo,  Minas  Geiiaes,  and  S.  Paulo  for 
THE  Valorization  of  Coffee,  the  REfiULATioN  of  the  Trade,  the  Promotion  of  an 
Increase  in  the  Consumption,  and  the  Creation  of  a  Conversion  Bureau  Fixing 
THE  Value  of  the  Currency.) 

Article  1.  During  such  a  j)eriod  as  may  be  convenient  the  contract- 
ing States  obligate  themselves  to  maintain  in  the  domestic  markets 
the  minimum  price  of  55  to  G5  francs  (gold,  or  Brazilian  currency 
at  the  rate  of  exchange  of  the  day)  per  bag  of  60  kilos  for  the  Amer- 
ican type  No.  7  in  the  first  year;  this  minimum  price  may  later  be 
raised  to  a  maximum  of  70  francs,  in  accordance  with  what  the  mar- 
ket warrants.  For  the  higher  grades,  according  to  the  Amei-ican 
classification,  the  prices  indicated  will  be  increased  proportionately 
during  the  same  periods. 

Article  2.  The  contracting  (lovernments  will  by  suitable  means 
seek  to  hinder  the  exportation  abroad  of  coffees  inferior  to  ts\)&  No. 
7  and  to  favor  yo  far  as  possible  the  development  of  their  consump- 
tion at  home. 

1  From  translations  In  U.  S.  v.  Herman  Sielcken  et  al.,  Petition  in  equity.  Southern 
District  of  New  York,  1912. 


798  REPORT   OP   THE   COMMISSIONER   OF   CORPORATIONS. 

Article  3.  The  contracting  States  bind  themselves  to  organize  and 
maintain  a  regular  and  permanent  service  of  coffee  propaganda,  with 
the  object  of  increasing  the  consumption  by  tlie  development  of  the 
present  markets,  the  gaining  of  new  ones,  and  the  defense  (of  coffee) 
against  frauds  and  falsifications. 

Article  Jf.  The  contracting  Governments,  when  they  consider  the 
time  opportune,  shall  establish  national  (Brazilian)  types  of  coffee, 
promoting  the  creation  of  exchanges  or  brokers'  associations  for 
dealing  in  such  types.  The  prices  referred  to  in  article  1  Avill  then 
be  fixed  in  accordance  with  the  new  types. 

Article  6.  The  producers  of  coffee  will  have  facilities  offered  them 
for  the  improvement  of  the  quality  of  their  product  by  remilling. 

Article  6.  The  contracting  Governments  obligate  themselves  to 
create  a  surtax  of  three  francs,  subject  to  increase  or  reduction,  upon 
each  bag  of  coffee  exported  from  any  of  the  (contracting)  States, 
and  also  to  keep  in  force  the  laws  which  hinder,  by  a  sufficiently  high 
tax,  the  increasing  of  the  areas  planted  with  coffee  in  their  terri- 
tories, for  a  j)eriod  of  two  years,  which  may  be  prolonged  by  mutual 
agreement. 

Article  7.  The  product  of  the  surtax  mentioned  in  the  previous 
article,  payable  when  the  coffee  is  exported,  will  be  collected  by  the 
Federal  Government  and  reserved  for  the  payment  of  the  interest 
and  amortization  of  the  capital  necessary  for  the  carrying  out  of  this 
agreement,  any  balance  remaining  being  applied  against  the  expenses 
incurred  in  this  service.  The  collection  of  the  surtax  is  to  begin 
after  article  8  has  been  complied  with. 

Article  8.  For  the  execution  of  this  agreement  the  State  of  S. 
Paulo  is  hereby  authorized  to  undertake,  at  home  or  abroad,  with  the 
guarantee  of  the  surtax  of  three  francs  mentioned  in  article  G,  and 
with  the  joint  responsibility  of  the  three  States,  the  necessary  credit 
operations  to  provide  a  capital  of  up  to  fifteen  millions  sterling, 
which  will  be  used  as  a  ballast  for  the  bureau  of  gold  emission  and 
conversion  to  be  created  by  the  National  Congress  for  the  fixing  of 
the  value  of  the  currency. 

1.  The  product  of  the  emission  upon  this  ballast  will  be  applied,  as 
provided  in  this  agreement,  to  the  regulation  of  the  trade  in  coffee 
and  to  its  valorization,  without  prejudice  to  the  conversion  bureau  to 
make  applications  for  other  purposes  as  provided  by  law. 

2.  The  State  of  S.  Paulo,  before  completing  the  credit  operations 
mentioned  above,  will  submit  the  conditions  and  clauses  to  the  Fed- 
eral Government  or  the  other  contracting  States  for  their  approval. 

3.  In  case  it  should  be  necessary  to  obtain  the  endorsement  or  the 
guarantee  of  the  union  for  these  credit  operations,  article  2,  No.  10, 
of  Law  No.  1452,  of  the  30th  December,  1905,  will  be  complied  with. 

Article  9.  The  organization  and  direction  of  all  the  work  which 
this  agreement  provides  for  w  ill  be  entrusted  to  a  committee  of  three 
members,  one  being  named  by  each  State,  a  fourth  member,  selected 
by  the  three  States,  acting  as  president  and  voting  only  in  case  of  a 
tie  (?) ,  when  his  vote  is  the  deciding  one. 

Each  director  will  have  a  substitute,  also  named  by  the  respective 
States,  who  will  take  his  place  when  he  can  not  be  present. 

Article  10.  The  committee  mentioned  in  the  previous  article  will 
arrange  all  the  Avork  and  appoint  all  assistants  necessary  for  the 


TRUST   LAWS  AND   UNFAIR  COMPETITION.  799 

execution  of  the  agreement,  but  may  entrust  the  work  in  part  to  some 
national  association  or  company,  under  its  immediate  control,  all  in 
accordance  with  the  regulations. 

Article  11.  The  office  of  the  directing  committee  will  be  in  the  city 
of  S.  Paulo. 

Article  12.  For  the  execution  of  this  agreement  the  committee  will 
draw  up  the  necessary  regulations,  which  will  be  submitted  to  the 
contracting  States  for  their  approval.  They  must  give  their  opinion 
within  15  days,  and  failure  to  do  so  is  considered  equivalent  to  ap- 
proval. 

Article  13.  The  advantages  resulting  from  this  agreement  will  be 
divided  among  the  contracting  States  in  proportion  to  the  amount  of 
surtax  collected  by  each,  as  provided  for  in  the  regulations. 

Article  11^.  The  contracting  States  recognize  and  accept  the  Presi- 
dent of  the  Republic  as  arbitrator  in  any  question  that  may  arise 
among  them  in  the  execution  of  the  present  agreement. 

Article  15.  The  present  agreement  will  take  effect  on  the  date  of  its 
approval  by  the  President  of  the  Republic,  in  accordance  with  No.  16 
of  Article  48  of  the  Federal  Constitution. 

Executed  in  the  city  of  Taubate,  February  26th,  1906. 

(Signed)  Nilo  Peqanha, 

Francisco  Salles,  and 
Jorge  Tibiriqa. 

state  law  no.  990  of  june,  1906,  approving  the  taubate  agreement 
and  providing  for  its  execution. 

Tlie  'president  of  the  State  of  S.  Paulo. 

I  hereby  make  known  that  the  State  legislature  has  decreed  and  I 
promulgate  the  following  law : 

Ai'ticle  1.  Approves,  in  all  its  clauses,  the  agreement  made  on  the 
26th  of  February  of  the  present  year,  in  Taubate,  by  the  president  of 
the  State  with  the  presidents  of  the  States  of  Minas  Geraes  and  Rio 
de  Janeiro  for  the  valorization  of  coffee  and  the  developing  of  its 
consumption,  as  well  as  to  work  for  the  creation  by  the  Federal  Gov- 
ernment of  a  conversion  bureau  for  paper  money  and  the  fixing  of  its 
value. 

Article  2.  The  executive  of  the  State  is  hereby  authorized  to  deter- 
mine when  to  begin  the  collection  of  the  additional  tax  in  currency 
equivalent  to  three  francs  gold,  at  the  rate  of  exchange  of  the  day, 
upon  each  bag  of  coffee  of  60  kilos  exported,  and  also  to  decide  with 
reference  to  the  exportation  of  low  grade  coffees,  ex-vi  articles  28, 
paragraph  6,  and  29  of  Law  No.  984  of  29th  December,  1905. 

Article  3.  In  accordance  with  clause  7  of  the  Taubate  agreement 
the  executive  of  the  State  is  authorized  to  transfer  to  the  Federal 
Government  the  right  to  collect  the  additional  tax  referred  to  in  the 
preceding  article,  to  be  used  in  paying  interest  and  amortization  on 
the  loan  to  be  contracted  for  the  purpose  of  emitting,  convertible  gold 
(notes) ,  and  fixing  the  value  of  the  paper  currency. 

Article  4- — For  the  carrying  out  of  the  present  law  or  of  the 
clauses  of  the  Taubate  agreement  the  executive  of  the  State  is  au- 
thorized to  contract,  at  home  or  abroad,  a  loan  of  a  maximum  of 
fifteen  million  pounds  sterling. 


800  REPORT   OF    THE   COMMISSIONER   OF    CORPORATIONS. 

The  executive  is  also  authorized  to  open  the  necessary  credits  to 
cover  the  preliminary  expenses  with  reference  to  the  said  Taubate 
agreement. 

Article  5. — Contrary  provisions  are  hereby  repealed. 

The  secretary  of  the  interior  will  have  the  above  executed. 

Palace  of  the  Government  of  the  State  of  S.  Paulo,  4th  June,  190G. 

JOKGE   TlBIRIQA. 

M.  J.  Albuquerque  Lins. 

MODIFICATIONS  AND  ADDITIONS  TO  TAUBATE  AGREEMENT. 

The  Presidents  of  the  States  of  Eio  de  Janeiro,  Minas  Geraes,  and 
S.  Paulo  agree  and  resolve  to  modify  the  Taubate  agreement  by  the 
addition  of  the  following  clauses,  which  become  an  integral  part  of 
the  said  agreement : 

1st. 

For  article  1  of  the  agreement  the  following  is  substituted : 
During  such  a  period  as  may  be  convenient  the  contracting  States 
obligate  themselves  to  maintain  in  the  domestic  markets  the  mini- 
mum price  of  32  to  36  milreis  per  bag  of  60  kilos  of  coffee,  for  the 
American  type  7,  in  the  first  year;  this  mmimum  price  may  later  be 
raised  to  a  maximum  of  40  milreis,  in  accordance  with  what  the 
market  warrants.  For  the  higher  grades,  according  to  the  American 
classification,  the  prices  indicated  will  be  increased  proportionately 
during  the  same  period. 

2nd. 

If  the  credit  operations  necessary  for  the  execution  of  the  agree- 
ment should  be  midertaken  by  the  three  States  without  the  endorse- 
ment or  guarantee  of  the  Union,  the  surtax  of  three  francs  referred 
to  in  article  6  of  the  said  agreement  will  be  collected  by  the  States 
and  its  product  will  be  deposited  for  use  as  prescribed  in  article  7. 

3rd. 

The  collection  of  the  surtax  of  throe  francs  will  begin  at  a  time  to 
be  determined  by  the  contracting  States. 

4th. 

As  long  as  the  bureau  of  emission  and  conversion  is  not  established 
or  has  not  begun  its  work  the  States  may  apply  the  product  of  the 
loan  directly  to  the  valorization  of  coffee. 

5th. 

The  Government  of  the  State  of  S.  Paulo,  before  completing  the 
negotiations  relative  to  the  credit  operation  mentioned  in  article  8 
of  the  agreement,  wdll  submit  the  conditions  and  clauses  that  have 
been  proposed  to  the  Governments  of  the  other  contracting  States  for 
approval,  and  also  to  the  Federal  Government,  in  the  case  of  en- 
dorsement by  the  Union,  in  order  to  determine  expressly  the  re- 


TRUST   LAWS  AND  UNFAIR   COMPETITION.  801 

sponsibility  of  each  in  the  operation  to  be  undertaken,  which  depends 
upon  that  approval. 

6th. 

The  present  agreement  will  take  effect  the  day  it  is  approved  as 
per  No.  16  of  article  48  of  the  Federal  constitution. 
Bello  Horizonte,  4th  July,  1906. 

(Signed)  Jorge  TiBiRigA. 

Francisco  Antonio  de  Salles. 
NiLO  Peqaniia. 

FEDERAL  DECREE  NO.  14  89  OF  6TH  AUGUST,  19  06. 

Approves  the  agreement  made  by  the  Presidents  of  the  States  of 
S.  Pauio,  Rio  de  Janeiro,  and  Minas  Geraes  on  the  26th  of  February, 
with  the  modifications  contained  in  the  agreement  signed  by  the  same 
Presidents  on  the  4th  of  July  of  the  present  year. 

Tlie  President  of  the  Republic  of  the  United  States  of  Brazil: 

I  hereby  make  known  that  the  National  Congi'ess  decreed  and  I 
sanction  the  following  resolution : 

Article  1.  approves  the  agreement  made  on  the  26th  of  February 
of  the  present  year  by  the  Presidents  of  the  States  of  S.  Paulo,  Rio 
de  Janeiro,  and  Minas  Geraes,  with  the  modifications  contained  in 
the  agreement  signed  by  the  same  Presidents  on  the  4th  of  July  of 
the  same  year.  The  clause  referring  to  the  bureau  of  gold  emission 
and  conversion,  the  creation  of  which  depends  upon  a  resolution  of 
the  National  Congress,  is  excluded  from  this  approval. 

Article  2.  Contrary  provisions  are  hereby  repealed. 

Rio  de  Janeiro,  6th  August,  1906,  18th  of  the  Republic. 

Francisco  de  Paula  Rodrigues  Alves. 
Leopoldo  de  Bulhoes. 

legislation  with  reference  to  the  service  of  the  defense  of 

COFFEE. 
[State  Law  No.  1127  of  the  25th  August,  1908.] 

Dr.  Manoel  J.  DE  Albuquerque  Lins, 

President  of  the  State  of  S.  Paulo. 

I  hereby  make  known  that  the  legislative  congress  has  decreed, 
and  I  promulgate,  the  following  law : 

Article  1.  Upon  the  coffee  which  leaves  the  State  and  which  ex- 
ceeds nine  million  bags  during  the  current  crop  year,  which  began  on 
the  1st  July,  pp.,  nine  and  one-half  million  bags  during  the  crop 
year  beginning  July  1st,  1909,  and  ten  million  bags  during  the  fol- 
lowing years,  an  additional  tax  of  twenty  per  cent  ad  valorem  will 
be  collected,  in  the  manner  prescribed  by  the  laws  in  force. 

Aj^ticle  2.  The  surtax  created  by  article  29  of  Law  No.  984,  of  the 
29th  December,  1905,  and  which  will  apply  to  all  the  coffee  which 
leaves  the  State,  is  hereby  increased  to  five  francs,  or  their  equivalent 
in  (Brazilian)  currency,  calculated  at  the  official  rate  of  exchange 
of  tlie  day. 

30035°— 16 51  -/.J 


802  EEPOET    OF    THE    COMMISSIONEK    OF    COEPOKATIONS. 


Article  3.  The  State  government  is  authorized  to  contract  a  loan 
immediately,  abroad,  for  a  maximum  of  fifteen  million  pounds  stg., 
the  product  of  said  loan  to  be  used  for  the  completion  of  the  meas- 
ures necessary  for  the  defense  of  coffee,  and  for  the  conversion  into  a 
consolidated  debt  of  the  various  temporary  credit  operations  under- 
taken with  the  same  object  in  view. 

la.  The  loan  to  be  contracted  will  have,  in  addition  to  the  general 
guarantees,  a  special  guarantee  in  the  coffee  which  the  State  has  ac- 
quired and  still  possesses,  and  in  the  product  of  the  surtax  referred 
to  in  the  preceding  article. 

2a.  The  product  of  the  sales  of  coffees  of  the  State,  which  shall 
take  place  opportuntely,  shall  be  applied  to  the  amortization  of  the 
loan  contracted  by  virtue  of  the  present  authorization. 

3a.  The  government  shall  stipulate  in  the  contract  for  the  loan  the 
conditions  as  to  interest  and  amortization,  type  (rate  of  issue), 
periods,  exemption  from  tax,  and  such  others  as  may  be  judged 
necessary. 

Article  If.  Contrary  provisions  are  hereby  repealed. 

The  secretary  of  the  interior  will  have  the  above  law  executed. 
Palace  of  the  government  of  the  State  of  S.  Paulo,  25th  August, 
1908. 

M.  J.  DE  Albuquerque  Lins. 
Olavo  Egydio  de  Souza  Aranha. 

For  the  execution  of  this  law  the  following  regulations  were  issued : 

DECREE  NO.  1661  OF  12TPI  SEPTEMBER,  19 OS. 

The  president  of  the  State  of  S.  Paulo,  by  virtue  of  the  powers 
conferred  upon  him  by  article  36,  No.  2,  of  the  State  constitution, 
and  for  the  proper  execution  of  laAv  Xo.  1127,  of  the  25th  August, 
1908,  hereby  directs  that  the  following  regulations  are  to  be  observed 
with  respect  to  coffee  leaving  the  State. 

Article  1.  (The  same  as  article  1  of  the  previous  law  of  25th  August, 
1908,  with  the  following  additional  paragraph:) 

The  said  additional  tax  of  twenty  per  cent  ad  valorem  shall  be  col- 
lected, together  with  the  export  duty  of  nine  per  cent  imposed  by 
previous  laws,  and  with  the  tax  of  five  francs. 

Article  2.  (The  same  as  article  2  of  the  law  of  25th  August,  1908, 
but  "  upon  each  bag  of  sixty  kilos  that  leaves  the  State.") 

Article  3.  The  duties  to  which  the  present  regulations  ap]5ly  shall 
be  collected  by  the  State  customs  ofiice  in  Santos  upon  all  coffees  pre- 
sented for  shipment,  the  method  of  collecting  being  the  same  as  up 
to  the  present. 

Coffees  destined  for  the  port  of  Rio  de  Janeiro  shall  pay  at  the  re- 
spective fiscal  stations  the  tax  of  nine  per  cent  ad  valorem,  as  hith- 
erto, and  in  addition  a  tax  of  two  francs  or  their  equivalent  in  cur- 
rency, continuing  to  pay  at  the  port  of  Rio  de  Janeiro  a  tax  of  three 
franc?,  as  provided  by  previous  regulations. 

Article  Ji.  The  present  regulations  will  take  effect  on  the  24th  of  the 
current  month  of  September. 

Article  5.  Previous  regulations  respecting  export  duties  that  are  not 
contrary  to  the  present  ones  will  remain  in  force. 


TEUST   LAWS   AND   UNFAIR   COMPETITION.  803 

Article  6.  Contrary  proA'isions  are  hereby  repealed. 
Palace  of  the  goAernment  of  the  State  of  S.  Paulo,  12th  September, 
1908. 

M.  J.  DE  Albuquerque  Lins. 

Olavo  Egydio  de  Souza  Aranha. 

decree  no.  2014,  dec.  9tii,  1908. 

The  President  of  the  Repuhlic  of  the  United  States  of  Brazil. 

I  hereby  make  known  that  the  National  Congress  has  decreed  and 
1  sanction  the  following  resolution : 

Ai'ticle  1.  The  President  of  the  Republic  is  hereby  authorized  to 
guarantee,  up  to  the  nominal  maximum  of  fifteen  millions  sterling, 
the  foreign  loan  which  the  State  of  S.  Paulo  will  contract  in  order  to 
li(iuidate  the  operations  effected  for  the  A^alorization  of  coffee  and  to 
convert  into  a  consolidated  debt  the  temporary  credit  arrangements 
which  were  entered  into  with  the  same  object  in  view. 

Article  2.  To  give  effect  to  article  1  the  State  of  S.  Paulo  will  obli- 
gate itself  to  accept  and  carry  out  the  following  regulations : 

{a)  The  amount  of  the  surtax  of  five  francs  on  each  bag  of  coffee 
exported  shall  be  deposited  weekly  in  an  establishment  which  the 
Federal  Government  will  designate,  and  shall  be  destined  for  the  pay- 
ment of  interest  and  amortization  of  the  said  loan,  and  cannot  in  any 
way,  for  any  reason  whatever,  be  diverted  from  this  purpose. 

(6)  In  case  the  product  of  the  surtax  of  five  francs  is  insufficient, 
the  State  of  S.  Paulo  will  be  obliged  to  make  up  the  necessary  amount 
at  the  proper  time  for  the  punctual  and  exact  carrying  out  of  the 
terms  of  said  loan;  and  any  surplus  remaining  at  the  end  of  a  year 
shall  be  deposited  and  held  for  later  payments. 

{c)  In  the  contract  for  the  loan  the  stock  of  6,994,920  bags  of 
cofi'ee  which  the  State  of  S.  Paulo  has  in  the  ports  of  Havre,  New 
York,  Hamburg,  Antwerp,  London,  Eotterdam,  Bremen,  Trieste, 
and  Marseilles  iw^ij  be  given  as  a  guarantee  to  the  creditors,  but  in 
the  same  contract  it  must  be  specified  that  these  coffees  can  be  sold 
only  by  agreement  of  the  Federal  Government  with  the  State  of 
S.  Paulo  and  authorization  of  the  Federal  Government. 

{d)  The  amounts  obtained  for  coffees  in  the  stock  referred  to  in 
paragraph  {c)  shall  be  destined  exclusively  for  the  amortization  of 
the  loan  mentioned  in  article  1. 

(e)  If  for  any  reason  it  should  be  convenient  for  the  State  of 
S.  Paulo  to  reduce  the  export  duty  on  coffee,  such  reduction  cannot 
affect  the  surtax  of  five  francs,  which  will  remain  unaltered. 

Article  3.  The  State  of  S.  Paulo  obligates  itself  to  keep  in  force 
the  State  law  of  the  25th  August,  1908,  until  the  effective  liquidation 
of  the  loan,  except  in  the  case  of  an  agreement  with  the  Federal 
Government  to  adopt  some  other  measure  in  place  of  the  limitation 
of  the  exports  of  coffee  provided  for  in  the  said  law. 

Article  4.  The  President  of  the  Republic  is  hereby  authorized  to 
]nake  use  of,  in  addition  to  the  guarantees  prescribed  in  article  2,  all 
others  that  he  may  consider  necessary  or  called  for  l)y  the  nature  of 
the  operation  referred  to  in  article  1  of  the  present  law. 

Article  5.  Contrary  provisions  are  hereby  repealed. 

Rio  de  Janeiro,  9th  December,  1908,  20tli  of  the  Republic. 

Affonso  Augusto  Moreira  Penxa. 
David  Campista. 


804  EEPOET    OF    THE    COMMISSIONER   OF    COEPOEATIONS. 

AGREEMENT  RELATIVE  TO  THE  FISCAL  COMMITTEE. 

London,  11th  Decemher,  1908. 

Agreement  entered  into  this  day,  11th  December,  1908,  by  the 
Government  of  the  State  of  S.  Paulo,  in  the  Republic  of  the  United 
States  of  Brazil  (in  this  instrument  designated  as  "the  Govern- 
ment"), represented  by  His  Excellency  Counsellor  Dr.  Antonio  da 
Silva  Prado,  duly  authorized  for  this  purpose  by  power  of  attorney 
dated  1-lth  August,  1908,  or  by  Dr.  Francisco  Ferreira  Eamos,  to 
"vyhom  the  said  Dr.  Antonio  da  Silva  Prado  transferred  his  powers, 
on  the  one  hand;  J,  Henry  Schroeder  &  Co.,  145  Leadenhall  Street, 
London  (in  this  instrument  designated  as  Messrs.  Schroeder),  and 
the  Societe  Generale  pour  favoriser  le  de^'eloppement  du  Commerce 
et  I'Industrie  en  France,  in  Paris  (in  this  instrument  designated  as 
"the  Societe  Generale),  on  the  other  hand,  the  said  Messrs.  Schroe- 
der and  the  said  Societe  Generale  being  hereafter  designated 
collectively  as  "the  Bankers,"  an  expression  which,  with  the  ex- 
pressions "Messrs.  Schroeder"  and  "the  Societe  Generale"  will 
indicate  in  the  present  agreeinent  (both  collectively  and  individ- 
ually, as  the  case  may  demand)  the  persons  or  the  person,  the  cor- 
poration or  the  corporations,  which  then  or  from  time  to  time  shall 
conduct  the  business  of  the  said  J.  Henry  Schroeder  &  Co.  and  of 
the  said  Societe  Generale  pour  favoriser  le  developpement  du  Com- 
merce et  de  rindustrie  en  France,  completing  respectively  an  agree- 
ment dated  11th  December,  1908,  for  the  emission  and  sale  of  fifteen 
million  pounds  Stg.  of  five  per  cent  Treasury  bonds  of  the  State  of 
S.  Paulo,  between  the  Government  of  the  State  of  S.  Paulo,  on  the 
one  hand,  and  Messrs.  J.  Henry  Schroeder  &  Co.,  the  Societe  Gen- 
erale, and  the  Banque  de  Paris  &  des  Pays  Bas,  on  the  other  hand. 

And  the  terms  of  the  said  agreement  were  stipulated  and  arranged 
as  follows  by  and  between  the  parties  who  sign  the  present. 

Article  1.  A  committee  shall  be  created  composed  of  seven  members 
residing  in  Europe  or  in  the  United  States  of  America,  or  in  part  in 
the  one  place  and  in  part  in  the  other,  of  which  four  members  and 
their  successors  will  be  designated  by  Messrs.  Schroeder  &  Co.,  two 
members  and  their  successors  by  the  Societe  Generale,  and  one  mem- 
ber and  his  successors  by  the  (rovernment,  and  this  committee  shall 
be  dul}^  invested  by  the  Government  and  by  the  Bankers  with  plenary 
powers  to  permit  it  to  comply  with  and  execute  the  following : 

A.  Pay  and  liquidate  through  the  bankers  all  the  funds  or  any  part 
of  the  funds  actually  due  for  advances  made  under  the  guarantee  of 
all  the  coffee  now  belonging  to  the  Government,  and  which  is  at  pres- 
ent stored  in  the  ports  of  the  United  States  of  America  and  of  Eu- 
rope, and  to  free  the  said  cofi^ee  from  the  onus  now  resting  upon  it. 

B.  Pay  through  the  bankers  all  insurance,  storage  charges,  and 
other  expenses  on  said  coffee.  The  insurance  will  be  effected  by  the 
bankers  or  through  them. 

C.  Effect  the  liquidation  of  the  stock  of  coffee  in  the  name  and  for 
account  of  the  Government  of  S.  Paulo,  in  the  manner  specified  by 
article  2. 

The  committee  will  name  its  president. 

Article  2.  A,  The  Government  of  S  Panlo  now  obligates  itself  to 
offer  for  sale,  through  the  committee,  at  public  auctions  or  by  sealed 
proposals,  at  the  price  of  the  day,  preferably  during  the  last  six 


TEUST   LAWS   AND  UNFAIR  COMPETITION.  805 

months  of  the  coffee  crop,  i.  e.,  from  January  to  June  30th,  500,000 
bags  m  1909-1910,  000,000  bags  in  1910-1911,  700,000  bags  in  1912- 
1913,  etc.,  and  700,000  bags  each  following  year. 

B.  In  consequence  the  Government  expressly  concedes  to  the  com- 
mittee full  and  irrevocable  power  to  determine  the  times  of  sale,  the 
minimum  obligatory  quantities  above  mentioned,  the  markets  in 
which  to  sell,  and  to  make  the  sales  in  the  name  of  the  Government, 
exercise  control  over  the  transactions,  and  generally  to  do  what  is 
required. 

C.  Beyond  and  within  the  minimum  quantities  fixed  by  these  fig- 
ures, and  at  any  time  before  the  beginning  of  the  obligatory  sales,  the 
trade  may  always  have  at  its  disposal  the  quantities  which  it  requires 
at  a  price  not  lower  than  47  francs  per  50  kilos  for  good  average  and 
50  francs  for  Havre  type  superior.  The  additional  quantitv  may 
equal  in  each  year  the  minimum  obligatory  quantity. 

D.  Should  this  quantity  not  be  sufficient  for  the  needs  of  the  trade, 
the  committee  shall  also  stipulate,  in  agreement  with  the  Government, 
the  price  to  be  asked  for  the  additional  quantity. 

E.  In  case  that,  through  the  effect  of  the  preceding  clause,  the  sales 
should  exceed  the  quantities  annually  provided  for,  the  committee 
may  postpone  the  later  minimum  sales  if  the  state  of  the  market  and 
the  statistical  situation  appears  to  warrant  such  delay,  but  only  to  the 
extent  of  the  sales  actually  made  in  anticipation. 

F.  All  the  sales  shall  be  made  by  the  committee  in  the  name  of  the 
Government  of  S.  Paulo,  under  the  rules  for  public  auctions  or  sealed 
proposals;  the  notes  of  advice  shall  be  sent  to  the  committee,  but  for 
the  State  of  S.  Paulo. 

Article  3.  Any  two  members  of  the  said  committee  shall  have  the 
right  to  call  a  meeting  of  the  same  in  London,  giving  or  sending  by 
mail  or  by  telegraph  to  each  of  the  other  members  48  hours'  notice  of 
the  time  and  the  place  of  said  meeting.  No  deliberations  can  take 
place  at  any  meeting  to  which  the  representative  of  the  Government 
has  not  been  called.  For  this  reason  the  delegate  of  the  Govern- 
ment must  be  domiciled  in  one  of  the  four  following  ports:  London, 
Havre,  Antwerp,  Hamburg. 

The  place  fixed  upon  as  domicile,  before  the  present  contract  enters 
into  effect,  can  not  be  changed  except  with  the  consent  of  the  com- 
mittee. 

Article  4.  Each  member  of  the  said  committee  shall  have  one  vote. 
Any  member  absent  may  send  his  vote  by  telegraph  or  by  mail,  or 
may  delegate  one  of  the  members  ]:)resent  to  vote  for  him.  In  case 
of  a  tie  the  vote  of  the  president  will  decide. 

The  meml)er  of  the  committee  representing  the  Government  will 
have  the  right  to  put  his  veto  upon  any  resolution  of  the  couunittee, 
with  the  exception  however  of  the  decisions  arrived  at  by  the  com- 
mittee with  respect  to  questions  left  by  the  present  convention  to  its 
appreciation  or  exclusive  decision.  In  such  case  any  doubts  raised 
will  be  submitted  to  the  governor  of  the  Bank  of  England  or  to  any 
other  person  designated  by  him.  The  decision  of  the  arbitrator  will 
be  considered  final,  and  should  it  be  contrary  to  the  veto,  the  veto 
will  be  considered  void  and  without  effect,  and  the  resolution  of  the 
committee  will  receive  immediate  and  complete  execution. 

Article  o.  Four  members  of  the  said  committee  will  constitute  a 
quorum  for  the  transaction  of  business  at  any  meeting  of  the  said 


806  KEPOET    OF    THE    COMMISSIONER    OF    COEPOEATIONS. 

committee,  and  a  decision  by  a  majorit}^  of  the  votes  of  the  said  com- 
mittee, or  of  any  quorum  of  the  members  of  said  committee,  will  be 
considered  effective  and  binding-  on  all  the  members,  except  in  the 
case  of  a  veto  by  the  representative  of  the  Government,  or  if  he  has 
not  been  notified  of  the  meeting. 

Article  6.  The  said  committee  may  rent  offices  in  London,  employ  a 
secretary  and  any  other  assistants,  brokers,  and  other  commercial 
agents  whom  it  may  deem  necessary  for  the  transaction  of  the  busi- 
ness confided  to  it. 

Article  7.  The  committee  shall  be  formed  and  shall  continue  to  act 
for  a  period  of  ten  years  from  the  date  of  the  present  agreement. 

Article  8.  The  committee  shall  be  paid  one  per  cent  upon  the  net 
product  of  the  sales. 

The  said  remuneration  shall  be  divided  among  the  members  of  the 
committee  in  such  proportions  as  the  committee  may  from  time  to 
time  determine,  and  it  will  include  the  salary  of  the  secretary  and  all 
the  expenses  entailed  by  its  action,  except  brokerage,  storage  charges, 
and  other  expenses  connected  with  the  sale  and  delivery  of  coffee. 

Article  0.  The  said  committee  will  give  orders  for  the  delivery  to 
the  bankers,  after  deducting  the  expenses  paid  by  them,  in  the  pro- 
portion of  two-thirds  to  Messrs.  Schroeder  and  one-third  to  the 
Societe  Generale,  of  all  receipts  from  the  sale  of  said  coffee  after  they 
have  been  received. 

A  rticle  10.  The  Government  having  decreed  a  law  imposing  an  ad- 
ditional  tax  of  twenty  per  cent  upon  all  coffees  exported  from  the 
State  of  S.  Paulo  in  excess  of  nine  million  bags  during  the  year 
June  30th,  1908-1909,  in  excess  of  9,500,000  bags  during  the  year 
ending  30th  June,  1910,  and  in  excess  of  ten  million  bags  during  any 
year  after  the  1st  July,  1910,  it  hereby  obligates  itself  not  to  revoke 
nor  to  modify  this  law  as  long  as  the  said  bonds  are  in  circulation 
and  not  redeemed. 

Article  11.  In  addition  to  this  the  Government  obligates  itself  to 
decree  any  new  law  that  may  become  necessary  to  guarantee  that 
the  limitation  of  exports  will  be  strictly  observed. 

Article  1'2.  The  present  agreement  may  be  modified  by  agreement 
between  the  Government  and  the  committee. 

In  witness  whereof  Dr.  Francisco  Ferreira  Ramos,  in  the  name 
of  the  Government,  Baron  Bruno  Schroeder,  in  the  name  of  Messrs.' 
Schroeder,  and  Mr.  Doryzon,  director,  in  the  name  of  the  Societe 
Generale,  have  affixed  their  respective  signatures  to  the  present. 
(The  signatures  follow.) 

(Duly  sanctioned  by  the  Federal  Government,  represented  by  Jose 
Antonio  de  Azevedo  Castro,  who  also  signed  the  agreement.) 


EXHIBIT    I.— GERMAN    LAW    AGAINST    UNFAIR    COMPETITION    OF 

JUNE  7,   1909.' 

We.,  William,  hy  the  Grace  of  God  Gci'rtmn  Emperor^  King  of 
Prussia.,  etc.,  decree  in  the  name  of  the  Kiru/dojn^  with  the  consent 
of  the  Federal  Council  and  of  the  Imperial  Diet.,  as  follows : 

Section  1.  Whoever  in  business  affairs,  for  the  purpose  of  com- 
petition, commits  acts  which  are  repugnant  to  good  morals  may  be 
subject  to  an  action  to  desist  therefrom  and  to  pay  damages. 

1  Gesotz  jje^pn  den  nnlaiiteren  Wettbewerb  vom  7  Tiini  1900  ;  Relchsgesetzblatt  1900  ; 
s.  499. 


TEUST   LAWS   AND   UNFAIR   COMPETITION.  807 

Section  2.  Under  goods,  within  the  meaning  of  this  law,  agricul- 
tural products  are  also  to  be  understood,  under  industrial  services 
and  interests,  agricultural  services  and  interests  also. 

Section  3.  Whoever  in  public  advertisements  or  in  communica- 
tions intended  for  an  extensive  group  of  persons,  makes  incorrect 
statements  regarding  business  relations,  especially  regarding  the 
qualit}^,  the  origin,  the  method  of  production  or  the  scale  of  prices 
of  goods  or  industrial  services,  regarding  the  kind  of  supply  or 
the  source  of  supply  of  goods,  regarding  the  possession  of  marks 
of  distinction,  regarding  the  cause  or  the  purpose  of  the  sale,  or 
regarding  the  quantity  of  the  stocks,  which  are  adapted  to  create 
the  impression  of  an  especially  favorable  offer,  is  subject  to  an  action 
to  desist  from  such  incorrect  statements. 

Section  4.  Whoever,  with  the  intention  to  create  the  impression 
of  an  especially  favorable  offer,  knowingly  makes  untrue  statements 
and  statements  adapted  to  mislead,  in  public  advertisements  or 
in  communications  intended  for  an  extensive  group  of  persons,  re- 
garding business  relations,  especially  regarding  the  quality,  the 
origin,  the  method  of  production  or  the  scale  of  prices  of  goods  or 
industrial  services,  regarding  the  kind  of  supply  or  the  source  of 
supply  of  goods,  regarding  the  possession  of  marks  of  distinction, 
regarding  the  cause  or  the  purpose  of  the  sale,  or  regarding  the 
quantity  of  the  stock,  is  punished  with  imprisonment  up  to  one  year 
and  with  a  fine  up  to  5,000  mai'ks,  or  with  one  of  these  penalties. 

If  the  incorrect  statements  specified  in  paragraph  1  were  made 
in  a  business  establishment  by  an  employee  or  representative,  then 
the  proprietor  or  manager  of  the  concern  is  punishable  besides 
the  employee  or  representative,  if  the  action  happened  with  his 
knowledge. 

Section  5.  The  use  of  names  which  in  business  dealings  serve  to 
specify  certain  goods  or  industrial  services,  without  intending  to 
specify  their  provenance,  is  not  included  under  the  provisions  of 
Sections  3  and  4. 

In  the  sense  of  the  provisions  of  Sections  3  and  4,  pictorial  pres- 
entations and  other  contrivances  which  are  calculated  and  adapted 
to  replace  such  statements  are  to  be  regarded  in  the  same  way  as 
the  specified  statements. 

Section  G.  If  in  public  advertisements  or  in  communications  in- 
tended for  an  extensive  group  of  persons,  the  sale  of  goods  is  an- 
nounced, which  came  from  a  bankrupt  stock,  but  no  longer  belong  to 
such  Ijiinkrupt  stock,  it  is  forbidden  to  make  any  reference  to  the 
origin  of  the  goods  from  a  bankrupt  stock. 

Violations  of  this  provision  will  be  punished  with  a  fine  up  to 
1 50  marks  or  with  arrest. 

Section  7.  Whoever  in  pu])lic  advertisements  or  in  communica- 
tions which  are  intended  for  an  extensive  group  of  persons  an- 
nounces the  sale  of  goods  under  the  designation  of  a  closing  out  sale 
is  obliged  in  the  announcement  to  give  the  reason  which  has  given 
occasion  to  the  closing  out  sale. 

Through  the  superior  administrative  authorities,  after  hearing 
given  to  the  proper  legal  representatives  of  industry  and  trade, 
regulations  may  be  made  for  the  announcement  of  certain  kinds  of 
closing  out  sales,  to  the  etfect  that  notices  regarding  the  reason  of  the 
closing  out  sale  and  the  time  of  its  beginning  be  provided  at  a  place 


808  EEPOET   OF   THE   COMMISSIONED   OF   COEPORATIONS. 

to  be  designated  by  them,  as  well  as  a  list  furnished  of  the  goods 
to  be  sold  out. 

The  inspection  of  the  list  is  permitted  to  everyone. 

Section  8.  Whoever  in  case  of  the  announcement  of  a  closing  out 
sale  places  goods  for  sale,  which  have  been  procured  merely  for 
the  purpose  of  a  closing  out  sale  (so-called  replenishment  of  goods), 
is  punished  with  imprisonment  up  to  one  year  and  with  a  fine  up 
to  5,000  marks,  or  with  one  of  these  penalties. 

Section  9.  The  announcement  of  a  closing  out  sale  within  the 
meaning  of  Section  7,  paragraph  2,  and  of  Section  8,  applies  also 
to  every  other  amiouncement  which  relates  to  tlie  sale  of  goods 
on  account  of  winding  up  business,  giving  up  a  particular  kind  of 
goods,  ov  getting  rid  of  a  specific  stock  of  goods  from  the  existing 
supply. 

With  respect  to  season  and  inventory  sales,  which  in  the  announce- 
ment are  specified  as  such  and  are  customary  in  regular  business, 
the  provisions  of  Sections  7  and  8  have  no  application.  Concern- 
ing the  number,  time  and  duration  of  the  customary  season  and  in- 
ventory sales,  the  superior  administrative  authorities  may  make  regu- 
lations after  hearing  the  proper  legal  representatives  of  industry 
and  trade. 

Section  10.  With  fines  up  to  150  marks  or  with  arrest  is  punished — 

(1)  Whoever,  contrary  to  the  provisions  of  Section  7,  paragraph  1, 
neglects,  m  the  announcement  of  a  closing  out  sale,  to  give  the  reason 
which  has  given  occasion  to  the  closing  out  sale : 

(2)  Whoever  violates  the  regulations  issued  on  the  basis  of  Section 
7,  paragraph  2,  or  in  complying  with  these  regulations  makes  incor- 
rect statements; 

(3)  Whoever  violates  the  regulations  provided  by  the  superior 
administrative  authorities  on  the  basis  of  Section  9,  paragraph  2, 
sentence  2. 

Section  11.  By  decision  of  the  Federal  Council  it  may  be  determined 
that  certain  goods  in  retail  trade  may  be  sold  or  offered  for  sale  only 
in  prescribed  units  of  number,  volume  or  weight,  or  with  a  descrip- 
tion upon  the  article  or  its  covering  concerning  the  number,  measure, 
weight,  place  of  production  or  place  of  origin  of  the  article. 

For  the  retail  trade  in  beer  in  bottles  or  jugs,  the  description  of 
the  content  can  be  prescribed  with  provision  of  suitable  limits  of 
toleration  for  error. 

The  regulations  prescribed  by  the  Federal  Council  are  to  be  pub- 
lished in  the  Imperial  Gazette  and  laid  before  the  Imperial  Diet 
immediately  or  at  its  next  meeting. 

Conduct  contrary  to  the  regulations  of  the  Federal  Council  is  pun- 
ished with  a  fine  up  to  150  marks  or  with  arrest. 

Section  12.  Whoever  in  business  dealings  for  the  purpose  of  com- 
petition offers,  promises  or  grants  presents  or  other  advantages  to  the 
employee  or  representative  of  a  business,  in  order  to  obtain  through 
improper  conduct  of  the  employee  or  representative  an  advantage 
for  himself  or  a  third  person  in  the  supply  of  goods  or  industrial 
services,  is  punished  with  imprisonment  up  to  one  year  and  with  fine 
up  to  5000  marks  or  with  one  of  these  penalties,  unless  a  heaviei 
penalty  is  incurred  under  other  legal  provisions. 

The  same  punishment  applies  to  an  employee  or  representative 
of  a  business  establishment  who  in  business  dealings  demands,  allows 


TRUST   LAWS   AND  UNFAIR   COMPETITION.  809 

to  be  promised  or  accepts  presents  or  other  advantages  in  order  that 
he  through  improper  conduct  may  give  another  a  preference  in  the 
supply  of  goods  or  industrial  services. 

In  the  judgment,  the  thing  received  or  its  vahie  is  to  be  declared 
forfeited  to  the  State. 

Section  13.  In  the  cases  of  Sections  1  and  3  the  action  to  desist  can 
be  brought  by  every  manufacturer  who  produces  goods  or  services 
of  a  like  or  related  kind,  or  handles  them  in  trade,  or  by  associations 
for  the  promotion  of  industrial  interests,  in  so  far  as  the  associations 
as  such  can  sue  in  civil  litigation.  These  manufacturers  and  associa- 
tions can  also  bring  an  action  to  desist  against  those  who  violate 
Sections  6,  8,  10,  11  and  12. 

For  compensation  of  the  damage  arising  from  the  violation  is  re- 
sponsible : 

(1)  Whoever  in  case  of  Section  3  knew  or  should  have  known  the 
incorrectness  of  the  statements  made  by  him.  Against  editors,  pub- 
lishers, printers  or  distributors  of  printed  periodicals,  the  claim  for 
compensation  of  damage  can  be  made  efi'ective  only  if  they  knew  the 
incorrectness  of  the  statements. 

(2)  Whoever  intentionally  or  negligently  violates  Sections  6,  8, 
10,  11  and  12. 

If  acts  which  are  not  permitted  according  to  Sections  1,  3,  6,  8, 
10,  11  and  12,  are  committed  in  a  business  estal)lishment  by  an 
employee  or  representative,  the  action  to  desist  therefrom  may  also  be 
brought  against  the  owner  of  the  establishment. 

Section  11^.  Whoever  for  the  purpose  of  competition  asserts  or 
circulates  facts  concerning  the  business  of  another,  concerning  the 
personality  of  the  owner  or  manager  of  the  business,  concerning 
the  goods  or  industrial  services  of  another,  which  are  adapted  to 
injure  the  operation  of  the  business  or  the  credit  of  the  owner,  is 
bound,  in  so  far  as  the  facts  are  not  demonstrably  true,  to  make 
compensation  for  the  damage  arising  therefrom.  The  injured  party 
may  also  demand  that  the  assertion  or  circulation  of  the  facts  cease. 

If  it  relates  to  confidential  communications  and  if  the  communi- 
cant or  the  recipient  of  the  comnmnication  has  a  rightful  interest 
therein,  then  the  action  to  desist  is  only  permissible  when  the  facts 
are  asserted  or  circulated  contrary  to  the  ti'uth.  The  claim  for  com- 
pensation of  damages  can  be  made  only  if  the  communicant  knew 
or  should  know  the  incorrectness  of  the  facts. 

The  provisions  of  Section  13,  paragraph  3,  have  corresponding 
application. 

Section  15.  Whoever  against  bettor  knowledge  asserts  or  circu- 
lates facts  contrary  to  the  truth  concerning  the  biisiness  of  another, 
concei'ning  the  personality  of  the  owner  or  manager  of  the  business, 
concerning  the  goods  or  industrial  services  of  another,  which  are 
adapted  to  injure  the  operation  of  the  business  is  punished  with 
imprisonment  up  to  one  year  and  with  a  fine  up  to  5000  marks,  or 
with  one  of  these  penalties. 

If  the  facts  specified  in  paragi-aph  1  are  asserted  or  circulated 
by  an  employee  or  representative  in  a  business  establishment,  then 
the  owner  of  the  establishment,  besides  the  employee  or  representa- 
tive, is  punishable,  if  the  act  happened  with  his  knowledge. 

Section  10.  Whoever  in  business  dealings  uses  a  name  of  a  person, 
a  firm  name  or  the  special  designation  of  a  business  establishment, 


810  EEPORT   OF    THE   COMMIGSIONEE    OF   CORPORATIONS. 

of  an  industrial  undertaking  or  of  printed  matter  in  a  manner  which 
is  adapted  to  produce  confusion  with  the  name,  firm  name  or  special 
designation,  which  another  properly  uses,  may  be  made  subject  by 
the  latter  to  an  action  to  desist  from  such  use. 

The  user  is  bound  to  compensate  the  injured  party  for  damages  if 
he  knew  or  ought  to  know  that  the  improper  kind  of  use  was  adapted 
to  produce  confusion. 

Equivalent  to  the  special  designation  of  a  business  establishment 
are  such  business  insignia  and  other  distinctive  fittings  for  distin- 
guishing the  establishment  from  other  establishments,  which  are 
used  within  the  business  circles  affected  as  marks  of  distinction  of  a 
business  establishment.  For  the  protection  of  trade  marks  and  the 
dress  of  goods  (Sections  1  and  15  of  the  Law  for  the  Protection 
of  Trade  Marks  of  May  12,  1894,  Imperial  Gazette,  p.  411),  these 
provisions  have  no  application. 

The  provisions  of  Section  13,  paragraph  3,  have  corresponding 
application. 

hection  17.  Whoever  as  employee,  laborer  or  apprentice  of  a  busi- 
ness establishment,  for  the  purpose  of  competition  or  with  the  inten- 
tion to  do  injury  to  the  owner  of  the  business  establishment,  imparts 
to  otliers  without  authorit}'  commercial  or  manufacturing  secrets, 
which  are  confided  to  him  on  account  of  his  employment  or  other- 
wise have  become  accessible  to  him  during  the  period  of  employ- 
ment, is  punished  wdth  imprisomnent  up  to  one  jqav  and  with 
a  fine  up  to  five  thousand  marks  or  with  one  of  these  penalties. 

Like  penalties  affect  him  wlio,  without  authority,  for  the  purpose  of 
competition  makes  a  profit  from  or  imparts  to  another  commercial  or 
manufacturing  secrets,  the  knowledge  of  which  he  acquired  through 
one  of  the  means  of  communication  specified  in  paragraph  1,  or 
through  his  ow^n  act,  contrary  to  law  or  in  a  manner  repugnant  to 
good  morals. 

Section  18.  Whoever  without  authority,  for  the  purpose  of  compe- 
tition, makes  a  profit  from  or  imparts  to  another  plans  or  rules  of  a 
technical  character,  especially  drawings,  models,  patterns,  dress  pat- 
terns, or  recipes,  which  are  confided  to  him  in  business  dealings,  is 
punished  with  imprisonment  up  to  one  year  and  with  a  fine  up  to 
five  thousand  marks  or  wath  one  of  these  penalties. 

Section  19.  Acts  contrarj^  to  the  provisions  of  Sections  17  and  18 
obligate  furthermore  compensation  for  the  injury  arising  therefrom. 
Several  obligors  are  responsible  as  joint  debtors. 

Section  20.  Whoever  for  the  purpose  of  competition  undertakes  to 
induce  another  to  do  an  act  contrary  to  the  provisions  of  Section  17, 
paragraph  1,  and  Section  18,  is  punished  with  imprisonment  up  to 
nine  months  and  with  a  fine  up  to  2000  marks  or  with  one  of  these 
penalties. 

Section  21.  The  action  to  desist  or  for  compensation  for  injury 
f-pecified  in  this  law-  is  outlaw^ed  w^ithin  six  months  from  the  time  in 
which  the  person  entitled  to  the  action  acquires  knowledge  of  ihe 
act  and  of  the  person  liable,  and,  Avithout  regard  to  this  knowledge, 
within  tliree  years  from  the  connnitting  of  the  act. 

For  the  claims  to  compensation  for  injury  the  period  of  prescrip- 
tion does  not  begin  before  the  time  in  which  an  injurj'^  arose. 

Section  22.  Criminal  prosecution  takes  place,  with  the  exception  of 
the  cases  specified  in  sections  6,  10  and  11,  only  upon  complaint.    In 


TEUST   LAWS  AND  UNFAIR   COMPETITION,  811 

the  cases  of  sections  4,  8  and  12  eA^ery  manufacturer  and  association 
specified  in  section  13,  paragraph  1,  has  the  right  to  make  the 
comphiint. 

The  withdrawal  of  the  comphiint  is  permissible. 

Punishable  acts,  whose  prosecution  occurs  only  upon  complaint,  can 
be  prosecuted  by  way  of  private  suit  by  those  (lualified  to  make  the 
complaint,  without  requiring  a  previous  complaint  to  the  State  prose- 
cuting officers.  Public  complaint  is  made  by  the  State  prosecuting 
officers  only  if  this  is  in  the  public  interest. 

If  prosecution  occurs  by  way  of  private  suit,  then  the  "  Schoffen  " 
courts^  have  jurisdiction. 

Section  23.  If  in  the  cases  of  sections  4,  6,  8  and  12,  a  penalty  is 
adjudged,  then  it  may  be  ordered  that  the  condemnation  be  made  i>ub- 
licly  known  at  the  cost  of  the  culprit. 

If  in  the  cases  of  section  15  a  penalty  is  adjudged,  then  the  injured 
party  is  allowed  the  right  to  have  the  condemnation  made  publicly 
known  within  a  definite  time  at  the  cost  of  the  condemned  person. 

Upon  request  of  the  accused  who  has  been  acquitted,  the  Court  may 
order  the  public  announcement  of  the  acquittal ;  the  State  treasury 
bears  the  cost  in  so  far  as  the  same  is  not  imposed  on  the  accuser  or 
the  private  complainant. 

If  upon  the  basis  of  one  of  the  provisions  of  this  law  an  action  to 
desist  is  brought,  then  the  successful  party  may  be  granted  in  the 
judgment  the  right  to  have  the  decree  part  of  the  judgment  made 
publicly  known  within  a  definite  period  at  the  cost  of  the  defeated 
party. 

The  manner  of  the  announcement  is  to  be  determined  in  the  judg- 
ment. 

Section  2.!j.  For  complaints  upon  the  basis  of  this  law  the  court  in 
whose  district  the  defendant  has  his  business  establishment,  or  in 
absence  of  that,  his  domicile,  has  exclusive  jurisdiction.  For  persons 
who  have  neither  a  business  establishment  nor  domicile  within  the 
country,  the  court  of  the  place  of  sojourn  within  the  country,  or  when 
such  is  not  known,  the  court  in  the  district  in  which  the  act  occurred, 
has  exclusive  jurisdiction. 

Section  25.  For  enforcing  the  actions  to  desist  specified  in  this  law, 
temporary  orders  may  be  made,  even  if  the  prere(iuisites  specified 
in  sections  935  and  940  of  the  Code  of  Civil  Procedure  do  not  apply. 
The  District  Court  also  has  jurisdiction  within  whose  district  the 
dealings  occurred  upon  which  the  action  is  based;  besides  the  pro- 
visions of  section  942  of  the  Code  of  Civil  Procedure  apply. 

Section  26.  Besides  a  penalty  inflicted  in  accordance  with  this  law, 
upon  demand  of  the  injured  party,  a  money  fine,  to  be  paid  to  him, 
ma}'  be  adjudged  up  to  the  amount  of  ten  thousand  marks.  For  this 
fiue  those  condemned  thereto  are  responsible  as  joint  debtors.  An 
adjudged  fine  excludes  the  right  to  make  further  claiuis  for  coui- 
pensation  for  damages. 

Section  27.  Civil  suits,  in  which,  by  complaint,  an  action  is  brought 
on  the  basis  of  this  law.  in  so  far  as  the  State  courts  have  origiutd 
jurisdiction,  belong  before  the  chauibers  for  business  cases. 

In  civil  suits,  in  which,  by  complaint  or  counter  complaint,  an  ac- 
tion is  brought  on  the  basis  of  this  law.  the  proceedings  and  decision 

1  Courts  of  inforior  jurisdiction  bavinj;  one  profossional  and  two  lay  judges  or  assessors. 


812  E.EPOKT   OF    THE    COMMISSIONER   OF   COEPOEATIOXS. 

in  the  last  instance,  according  to  section  8  of  the  introductory  law 
to  the  law  foi'  the  organization  of  the  courts,  are  referred  to  the 
Imperial  Court. 

Section  28.  Whoever  does  not  possess  a  principal  place  of  business 
within  the  country  lias  a  claim  to  the  protection  of  this  law  only  in 
so  far  as,  in  the  State  in  which  his  principal  place  of  business  is 
found,  German  manufacturers  enjoy  a  corresponding  protection, 
according  to  an  announcement  contained  in  the  Imperial  Gazette. 

Section  29.  What  authorities  in  each  federal  State  are  to  be  under- 
stood under  the  designation  of  superior  administrative  authorities 
in  the  meaning  of  this  law  is  determined  by  the  central  authorities  of 
the  federal  States. 

Section  30.  This  law  takes  effect  October  1,  1909. 

At  that  time  the  Law  for  Preventing  Unfair  Competition  of  May 
27,  189G  (Imperial  Gazette,  p.  145),  ceases  to  have  force. 

Authenticated  under  our  own  august  signature  and  affixed  imperial 
seal. 

Issued  at  New  Palace,  June  7,  1909. 

[seal.]  William. 

VON  Bethmann  Hollweg. 


INDEX. 


Page. 

Aargau,  unfair  competition  law 618-620 

Adopting  competitor's  old  telephone  num- 
ber    429, 458, 557 

Advertising,  cooperative,  interference  with 

competitor's 369,403, 458, 706-707 

See  also  Unfair  advertising;  Unfair  compe- 
tition. 
Agents,  bribery  of.    See  Bribery. 

Agreements,  affecting  foreign  commerce 79-83, 

125-126 
among  competing  buyers,  validity  at  com- 
mon law 51-52 

between  noncompetitors 37n 

by  associations  to  control  prices 717-724 

cartel,  validity  decided  by  arbitration 269 

common  marketing  agency 46-53, 

258-259,266,270,282 

connected  with  sale  of  business.  26-36, 157n,  158n, 

160, 204-205, 255, 283, 423-430, 586-588, 695 

contrary  to  good  morals  or  public  order. .  259-261, 

272,274,278,279,281,2.83, 

286,288,291,296,297,298 

divisibility  of 31-32 

exclusive  agency 149n, 

151n,  160n,  161n,  184n,  185n,  414-415, 420, 472 
exclusive   dealing,    validity    at   common 

law 409, 414, 415-420 

validity  in  foreign  countries 236, 

240-241, 251-252, 262, 286, 539-543, 553-554 
validity  under  Sherman  law.. .  466-472, 484-486 

validity  under  State  laws 184-186 

freedom  of  contract 5, 73, 85, 233, 236, 238, 265 

gentlemen's 15, 197 

implied,  not  to  disclose  trade  secrets . .     354-355, 

364,585,593 
implied,  not  to  reenter  business..  425-426,586-588 
in  restraint  of  trade,  validity  at  common 

law 3-5, 24-69, 233-238 

validity  in  foreign  countries 233-238, 

239, 241-242, 243-245, 254, 255-256, 296 

validity  under  Sherman  law 83-89 

validity  under  State  laws 150-159 

international 299-300, 697-704 

limited  as  to  time,  unlimited  as  to  space.. .       32 

not  affecting  articles  of  prime  necessity 55n 

not  to  bid  against  competitors 52-53, 

112, 168,  234, 257, 261, 266-267, 268-269, 
272,  274,  277-278,  280,  286,  290,  292,  296 

not  to  sell  to  delinquent  debtors 153n,  732-735 

not  to  use  unpatented  articles  with  pat- 
ented    472-473, 496-497, 53^-543 

restricting  competition,  validity  at  com- 
mon law 36-57 

validity  in  foreign  countries 239, 

241-242, 250-251,  2.54,  2.58-2.59, 269-270, 
274 ,  277, 278, 280, 286, 287-288, 292, 296 

validity  imder  State  laws 1.59-164 

to  apportion  earnings 42, 

113  114, 124, 164-168, 2.38, 256, 260-261 

to  apportion  output 109-112, 

179-182, 236, 245, 258, 270, 288, 291 


Page. 
Agreements,  tobuyonlyfromapproved  deal- 
ers    77-78, 152n,  15.3n, 

185n,  401-403,405,490,725-726,728-729 

to  control  market 3-5, 

38-41, 89-92, 114-115, 144-150, 241, 244, 250- 
251, 254,  259-260, 269-270, 271, 292,  298, 299 

to  cut  off  competitors'  supplies 243, 

257,396-401,457-458 

to  divide  territory 41, 112-113, 15.3n,  154n, 

157n,  175n,  176n,  182,  233, 234, 270,  730-731 
to  fix  or  control  prices,  validity  at  common 

law 3, 42-46 

validity  in  foreign  countries 234, 235, 236, 

239, 241, 243, 245, 254, 256, 259, 260, 262,  263, 

265, 267, 269-270,  275,  276, 277, 284, 291, 297 

validity  xmder  Sherman  law. . .  105-107, 722-724 

validity  under  State  laws 153n, 

157n,  165n,  168-178, 186n,  718-720 
to  limit  output,  validity  at  common  law...  38-41 

validity  in  foreign  countries 260, 

262, 263-265, 266, 268, 270, 276-277, 281, 284, 
■    285,  289-290,  291,  293,   294-296,  299-300 

validity  under  Sherman  law 107-109 

validity  under  State  laws . . .  154n,  157n,  179-182 
to  maintain  resale  prices,  validity  at  com- 
mon law 456, 460-461 

validity  in  foreign  coimtries 236, 239, 282, 

283, 579-580, 591-593, 598, 650-653, 674-675 

validity  under  Sherman  law 117-119, 728n 

validity  under  State  laws 172n,  176n,  183 

to  oppose  combinations  of  laborers.. .  233-234,239 

to  reduce  wages  by  lockouts 265, 280 

to  regulate  transportation 195 

to  sell  only  to  approved  dealers 77-78, 

154n,  176n,  185n,  396-399, 40.5-406,  475-477, 
489,  490-492, 653-654,  724-726,  727-728,  729 

trust,  validity  at  common  law 7-8, 60-65 

ultra  vires 58-61, 238,458, 461,557 

unlimited  as  to  place  or  time 32 

valid  restrictive 53-57 

violating  State  laws,  void 213 

voting-trust 58n 

Agricultural     organizations,     cases     under 

Sherman  law  relating  to 96-97 

cooperative 708 

exemption  of 123n,  138 

German  law,  applicability  to 646 

State  antitrust  laws  regarding.  97-98, 123n,  195-197 

Alabama,  antitrust  laws 145, 149, 152, 

159, 162, 165, 166, 178, 179,193, 206, 208,  212 

decisions 145n,  152n 

stock-watering  laws 216, 217, 220, 225 

unfair  competition  laws  .  506,  .509, 510, 514, 522, 525 

decisions 514, 515 

A laska,  stock-watering  laws 219 

unfair  competition  laws 506 

Alsace- Lorraine,  antitrust  laws 257 

Antidiscrimination  statutes.    See  Price  dis- 
crimination. 

813 


814 


INDEX. 


Page. 
Antitrust  legislation,  Clayton  Antitrast  Act . .      22- 

23, 132-142 
Federal  Trade  Commission  Act. . . .  21-22, 128-132 

foreign  countries 231-300, 737-SOG 

hearings  before  congressional  committees 

relating  to 314,315,316,318, 

319, 322, 324, 325, 326, 327, 328, 329, 330, 331 

historical  review  of 1-23 

international 299-300 

Interstate  Commerce  Act 10, 124 

Panama  Canal  Act  of  1912 126-128 

Sherman  Antitrust  Act 10-12, 70-123 

State  laws,  present 143-216 

State  laws,  prior  to  the  Sherman  Act 9, 14 

Wilson  Tariff  Act 125-126 

Apprentices,  enticement  of 511 

Apportioning  of  earnings.    See  Pooling. 
Apportioning  output,  cases  under  Sherman 

law  relating  to 109-112 

distinguished  from  limiting  output 109 

foreign  decisions  relating  to 236, 

245, 258, 270-271, 279, 288, 291 

State  laws  regarding 179-182 

Appropriation  of  values  created  by  competi- 
tor's expenditures 367-369 

Arbitration,  of  labor  difficulties 199 

of  unfair  competition  cases 661-663 

validity  of  cartel  agreements  decided  by  .  269, 281 

Argentina,  antitrust  legislation 296-297 

Civil  Code,  invalid  agreements 296 

international  agreements 703 

Penal  Code,  unlawful  agreements,  etc 290 

trade-mark  law 691-692 

unfair  competition  laws 296, 691-692 

Arizona,  antitrust  laws 144, 149, 151, 160, 

166, 168, 171, 179, 181, 195, 206, 208, 212, 216 

stock-watering  laws 210, 221, 223 

unfair  competition  laws 506, 509, 522, 527 

Arkansas,  antitrust  laws 144, 145-146, 

149, 166, 172, 180, 187, 193-194, 206, 212 

decisions 172 

stock-watering  laws 216 

unfair  competition  laws. .  509,510,515,522,523,525 

decisions 515 

Articles  of  prime  necessity,  defined 55n 

early  laws  regarding 26 

increasing  price  of,  illegal 2, 

270,277,278,287,292,299 

Artificers,  enticement  of 511 

Assignees'  sales,  unfair  advertising  of.  State 

laws 520 

Assumed  names.    See  Names. 

Auction  sales,  regulation  of,  foreign  laws 235n, 

257-258, 261, 267, 268-269, 272, 
274, 278,  279, 280, 290, 292,  296 
See  also  Closing-out  sales. 

Australia,  antitrust  legislation 24.3-250 

Australian  Industries  Preservation  Act 243- 

246,551-556 

text  of 746-756 

Commerce  (Trade  Descriptions)  Act 547-548 

common  law 243 

dumping  legislation 555-556 

Inter-State  Commission  Act 247-250 

text  of 756-770 

Inter-State  Commission,  investigation  by  249-250 

Patents  Act 246-247, 540 

Royal  Commission 250 

reports  of 250, 297, 538 


Page. 

Australia,  unfair  competition  laws 537-538, 

540, 544, 545, 546, 547-548, 549, 551-556 

Austria,  antitrust  legislation 265-268 

Civil  Code,  invalid  agreements 267-268 

unfair  competition  provisions 663 

coalition  law 265 

copyright  law 668 

foodstuffs  law 668-670 

international  agreements 299, 697, 701 

Penal  Code,  unlawful  agreements 265 

imfair  competition  provisions 664 

sugar  industry ,  regulation  in 268 

trade  law  of  1883 664-667 

trade-mark  law 667 

unfair  competition  laws,  general 663-670 

special,  proposed 663-664 

Bankrupt  sales.    See  Closing-out  sales. 

Banks,  buying  up  .securities  of  competitors. .  4.58 
holding  stock  in  other  banks,  prohibited...  200 
interlocking  directorates 136 

Basel,  xmfair  competition  laws 614 

Belgium,  antitrust  legislation 280-283 

Civil  Code,  invalid  agreements 281-282 

unfair  competition  provisions 588, 590 

international  agreements 299, 697, 701 

Penal  Code,  unlawful  agreements,  etc  280-281, 283 

unfair  competition  provisions 588-589 

trade-mark  law 589-590 

luifair  competition  laws,  general 282, 588-595 

special,  failure  to  adopt 588 

Binder  twine,  misbranding 525, 549 

Blacklisting,  by  trade  associations 284, 

474-477, 732-734 

Sherman  law,  decisions  regarding 474-477 

decrees  against 490-492 

State  laws  regarding 732-734 

"Block  system,"  Austria 666-667 

Bogus  independents ,  deceptive  advertising . .      659 

operation  condemned '. 318-319 

Sherman  law,  decisions  regarding 465-466 

decrees  against 481-482 

State  laws  regarding 526-527 

to  stifle  competit ion 4.59 

Boots  and  shoes,  misbranding  of 524, 549 

Bonuses,  encouraging  home  industries  by 551 

giving,  a  form  of  price  cutting 479 

inducing  breach  of  contract  by ICOn,  459, 487 

Boycotts,  by  labor  organizations 93 

by  trade  associations 474-477, 707, 731-732 

Clayton  Act,  provisions  regarding 141-142 

maintaining  resale  prices  by 653, 654 

purpose  of 488 

Sherman  law,  decisions  regarding 474-477 

decrees  against 490 

State  laws  prohibiting 167, 18.5-186 

Brands.    See  Labels. 

Brazil,  antitrust  legislation 293-296 

coffee  valorization 294-296, 797-806 

customs  law 294, 691 

international  agreements 697,700,701,703 

Penal  Code,  unfair  competition  provisions  687-688 

trade-mark  law 688-689 

unfair  competition  laws 687-691 

Breach  of  contracts,  agreements  to  sell  prop- 
erty       342 

for  indeterminate  period 348n 

free  goods 160n,459 


INDEX. 


815 


Page. 
Breach  of  contracts,  indemnifying  customers 

for 341 

inducement  of,  by  noncompetitors 34Sn 

by  persuasion  or  solicitation 341-342 

by  unlawful  means 336-338, 342-344 

common  law 335-345 

inducing  by  lawful  means 338-342, 344-345 

inducing,  Sherman  law,  decisions  regard- 
ing   473-474 

decrees  against 487 

master  and  servant 345, 346n 

Bribery,  benefits  derived  from  suits 422n 

common  law  decisions  regarding 420-423 

custom,  no  defense  of 539 

enticing  competitor's  employees  by.  346n,  583, 594 

extent  of,  in  New  York 504 

foreign  laws  regarding,  Australia 538 

Belgium 594-595 

Canada 537 

England 534-537 

France 583-584 

Germany 634-636 

Isle  of  Man 539 

New  Zealand 538 

Portugal 606 

Sierra  Leone 539 

Switzerland 615-<J19 

forms  of 635 

gifts  and  bribes  distinguished 422n 

justifies  employees'  discharge 421 ,  423 

justifies  recission  of  contracts 420, 421-423 

of  railroad  employees 500n,  504n 

practice  of,  declared  imfair 420 

recovery  of  commissions  paid 420, 421-423 

Sherman  law,  decisions  regarding 474 

decrees  against 487 

societies  for  the  prevention  of 535, 636 

State  laws  against 504-505 

decisions 505 

unfair  from  business  viewpoint 325 

who  may  be  enjoined  for,  in  Germany 636 

Bridge  contractors.  State  laws  against  pool- 
ing by 168, 182 

Bnissels  International  Sugar  Convention 290, 

299-300 
Bulgaria,    Penal    Code,    unfair   competition 

provisions 685 

trade-mark  law 685-{i86 

unfair  competition  laws 685-686 

Bureau  of  Corporations,  abolition  of 129 

establishment  of 13-14 

investigations  by 16 

objects  of 14 

reports  of 312,313,315,317,318, 

319, 320, 321-322, 323, 324, 325, 329, 500n 

stimulated  prosecution  of  trusts 16 

Business  of  public  consequence,  State  laws 

regarding 202-204 

California,  antitrust  laws 150, 157, 158, 160, 166, 

170,171,177, 17S,  179,  ISO 
181, 187, 196, 206, 209-212 

decisions 157n,  172n 

stock-watering  laws 216 

unfair  competition  laws 507, 

509, 516, 517, 519, 520, 522, 524, 527 
decisions 515, 516 


Page. 

Canada,  antitrust  legislation 239-242 

bribery 537 

Combines  Investigation  Act,  antitrust  pro- 
visions  241,242 

text  of 737-746 

unfair  competition  provisions 541 

Criminal  Code,  antitrust  provisions 239 

unfair  competition  provisions .". 547 

customs  tariff  law 240 

dumping  laws 550 

Gold  and  Silver  Marking  Act 548 

Inland-revenue  Act,  antitrust  provisions.  240-241 

unfair  competition  provisions 540-54 1 

patent  law 240, 544 

Kailway  Act  of  1903 242 

trading-stamp  laws 545 

Cartels.    Sec  Agreements;  Combinations. 
Cash  discounts,  trading-stamp  laws  not  appli- 
cable to 513 

uniform  terms  of,  imposed  by  trade  associa- 
tions       708 

Chain  cables,  misbranding  of 526 

Chicago,  unfair  advertising  ordinance 518 

China,  antitrust  legislation 298-299 

corners  forbidden 299 

trade  combinations  regulated 298 

Chile,  international  agreements 703 

Penal  Code,  unfair  competition  provisions.      692 

trade-mark  law 692-693 

unfair  competition  laws 692-693 

Circulars,    placing   in    newspapers   without 

owner's  consent 457, 528 

Clayton  Antitrust  Act,  boycotting 142 

dealings  of  common  carriers  in  securities  or 

supplies 137 

decisions  under 497 

declared  retroactive 497 

equity  decrees,  prima  facie  evidence 138 

exclusive  contracts 133-134, 496 

holding  companies 134 

interlocking  directorates 135-136 

labor  not  a  commodity 23, 138 

picketing 142 

price  discrimination  prohibited  by  . .  132-133,496 

purposes  of 22-23 

recovery  of  treble  damages  imder 138 

statute  of  limitations,  suspension  by 138 

text  of 132-142 

violation  of,  officers'  liability 140 

Closing-out  sales,  defined 61 7, 629, 631 

duration  of 618, 620, 629, 668, 672, 681 

foreign  laws  regarding,  Austria 667-668 

Denmark ^ 672 

Germany 628-630 

Greece 681-682 

Switzerland 614, 615, 617-618, 619-620 

French  com-t  decisions  regarding 580-581 

German  court  decisionsregarding.  630,631,632-633 

replenishment  of  stock  prohibited 632, 668, 672 

seasonal  sales  not  considered  as 631-632, 682 

State  laws  regulating 520 

Coercion.    Sfe  Intimidation. 

Coffee  valorization,  Bra.il 294-296, 797-806 

Collection  agencies,  maintenance  by  trade  as- 
social  ions 710 

Colombia,  antitrust  legislation 297 


816 


INDEX. 


Page. 

C!olombia,  international  agreements 703 

Commercial  Code,  antitrust  provisions 297 

Colorado,  antitrust  laws 151, 160, 

171, 172, 196, 197, 206, 212, 216 
blacklisting.exemption  of  credit  associations     734 

stock-watering  laws 216, 221, 223 

unfair  competition  laws. .  506, 509, 516, 520, 523, 525 

decisions 513 

Combinations,  applicability  of  Sherman  Act 

to  manufacturing 11, 74 

apportioning  output  by 55, 

109-112, 236, 258, 270, 288 

by  means  of  holding  companies 8-9, 

13, 14, 15, 16, 103-105, 134-135, 147n,  199-202 

"combine"  defined 241 

commercial  trust  defiiied 252 

condemnation  of  property  of 71-72,122,126 

contrary  to  good  morals 297 

corporate 65-69 

customs  duties  may  be  reduced  to  punish. .    240, 

242,249,250 

decline  in  formation  of 15 

effect  of  dissolution  of 17-21 

effected  by  pooling  arrangements 42, 

45, 53, 113-114, 124, 164-168, 238, 254 

eilected  by  common  marketing  agencies 46-53, 

266, 270, 282 

effected  by  trust  agreements 7-8, 57-58, 60-65 

engaged  in  import  trade 12-5-126 

extortion  by 11 ,  257 

farmers' 96-98, 123n,  138, 195-197 

formed  by  merger 13, 15, 16, 58, 68, 98-103 

forms  of,  in  restraint  of  trade 98 

growth  of,  due  to  defective  state  laws 21 

historical  review  of 1-23 

increased  activity  in  prosecution  of 15-16 

investigated  by  congressional  committees. .       21 

labor 93-95, 123n, 

138, 141-142, 197-199, 239, 259, 265, 281 

legality  of  fixing  resale  prices  by 117-119, 

. 183, 236, 239-240, 282-283 
legislation  against,  prior  to  Sherman  Act. . .    9-10 

list  of  those  formed  between  1898-1901 12-13 

maintenance  of  exclusive  contract  system 

by 241 

of  employers  to  oppose  employees 233-234, 239 

of  mining  interests,  prohibited 273 

of  public  utility  corporations,  prohibited. . .    123n 

patent 54, 115-117 

professional  syndicates 271 

railroad 11, 95-96, 124, 126-128, 238, 242, 247 

rapid  growth  of 12-13 

secret 258 

shipping,  mail  contracts  with,  prohibited.  254-255 

State  constitutional  provisions  relating  to . .     144- 

145, 150, 159, 1G4-165,  168-169,  179,  196,  199 

State  laws  relating  to 9, 143-216 

suits  for  dissolution  of 122 

to  control  the  market 7, 37n,  38-40, 89-92, 

114-115, 144-150,  233,259-260,  261,271,  299 

to  cut  off  competitor's  supplies 234-235, 

257, 396-401, 405-406, 457-458 

to  cut  prices 192-195, 234 

to  destroy  competitor's  market 401-405 

to  divide  territory 41, 

112-113, 154n,  157n,  175n,  182, 233, 234, 270 


Page. 

Combinations,  to  fix  or  control  prices 42-46, 49, 

51-52, 54, 105-107, 168-178, 234, 235, 
236, 239, 243,  245,  254, 256,  260, 262, 
269, 274,  275,  278,  284, 286, 296, 298 

to  limit  output 40-41, 

107-109,   154n,   157n,   179-182,  239,  260, 
262, 264, 266, 268, 276, 281, 284-285, 289-290 

to  prevent  emigration 276 

trading  and  manufacturing 92-93 

treble  damage  suits  against 122 

unfair  practices  of 462-500 

use  of  gentlemen's  agreements  by 15 

valid  agreements  at  common  law  by 53-57 

validity  of,  decided  by  arbitration 269, 281 

See  also  Agreements;  Monopolies;  Restraint 
of  trade;  Sherman  Antitrust  Act. 
Commission  merchants,  State  antitrust  laws 

relating  to 168, 178, 197 

Common  carriers.    See  Railroads;  Shipping 

combtaations. 
Common  law  principles,  recognition  of,  in 

State  laws 204-205 

Common  selling  agencies,  validity  at  common 

law 46-53 

Competition,  by  classes  of  traders 302 

elimination  of  water,  by  railroads 500 

exists,  when 303-304 

fair  and  unfair  methods  of 303-310 

methods  of,  regarded  unfair 310-311 

retention  of  competitor's  property  to  hinder     495 

special  advantages  in 303 

threats  to  engage  in 494 

imfair  and  unlawful  distinguished 558-^559 

See  also  Restraint  of  competition;  Unfair 
competition. 

Concessions,  price  discrimination  by 481 

to  water  power  companies 286 

Condemnation  of  property,  of  combinations 

engaged  in  importing  goods 126 

of  combinations  violating  Sherman  law 71 

proceedings  under  Sherman  law 122 

Conditional  sales,  Clayton  Act  provisions  pro- 
hibiting    133-134 

of  patented  articles. .  418-419, 472-473, 486, 539-543 

State  laws  prohibiting 183 

Confidential  information,  bribing  employees 

to  disclose 423, 487, 535, 537 

directors  may  not  disclose 363-364 

disclosure  by  common  carriers 499, 500n 

disclosure  in  foreign  countries,  Australia.  537-539 

Belgium 593-594 

Canada 367, 537 

England 364-367,534-537 

France 585-586 

Germany 642-646,654-655 

New  Zealand 538-539 

disclosure,  validity  at  common  law 355-367 

general  information  not  considered 362-363 

implied  contract  not  to  disclose 364, 593 

list  of  customers  considered 356-359, 

366, 585-586, 593, 643, 654 

memory  lists  of  customers 360-361 

methods  of  advertising  considered 593 

rule  as  to  insurance  business 359-360 

Sherman  law,  proposed  amendment  pro- 
hibiting disclosure  of 323-324 


INDEX. 


817 


Page. 
Confidential  information,  somces  of  supply, 

costs,  etc.,  considered 361-363,367 

See  also  Trade  secrets. 
Confusion  of  goods.    See  Passing  off. 

Connecticut,  antitrust  laws 144, 181, 212 

stock-watering  laws 219, 222, 225 

unfair  competition  laws 504, 

507, 509, 511, 517, 520, 522,  .523, 525 
Consent  decrees,  not  prima  facie  evidence —      138 

Sherman  law 122, 478, 716,  723-724,  728-729 

Conspiracies,  by  labor  organizations 94 

constitutionality  of  Sherman  law  punishing      120 

criminal  proceedings  against 120-121 

criminal  statutes  against 2-3, 26,  70-71, 2S7 

in  restraint  of  trade,  illegal 70-71 , 

125, 147n, 155n, 214, 239, 254 

State  constitutional  provisions  against 145, 

150, 159, 196 

State  laws  prohibiting 148, 149, 

155, 156, 164, 178, 181, 192, 197, 198, 214 

to  comer  market 37n,  114-115, 148n,  240, 253 

to  cut  prices 192, 456, 463 

tofixprices 3,168,178,720,721 

to  fi-K  wages  of  labor 3 

to  increase  prices 2, 287 

to  injure  competitors 234, 397n,  733 

to  limit  output 181-182, 239 

to  monopolize  contrary  to  public  interest . .      253 
Copyrights,  international  agreements  regard- 
ing   701,704 

foreign  laws  prortecting,  Austria 668 

Eg>'pt 556-557 

Greece 679-680 

Russia 678 

Turkey 686 

publication  of  works  alter  expiration  of 446 

Corners,  by  noneompeting  parties 37n 

cases  under  Sherman  law  relating  to 114-115 

in  broadstuffs  forbidden,  China 299 

Corporate  names,  adoption  of,  already  in  use  505-508 

assuming  fictitious 526-527 

foreign  corporations,  adoption  of 507-508 

foreign  laws  protecting,  Australia 546 

Belgium 588-589 

Brazil 687 

Canada 546 

Denmark 673 

England 546 

Germany 621-622, 640, 641-642 

Japan 695 

Now  Zealand 546 

Spain 605 

passing  ofT  by  similarity  in 437-438, 450-451 

State  laws  regarding  use  of 505-508, 526-527 

imauthorized  use  of 508 

use  of  personal  names  as 505,  .506 

Sec  also  Passing  ofl;  Trade-marks. 
Corporations,  acquiring  stock  of  competitors, 

common  law 58-60 

adopting  names  already  in  use,  State  laws  50r>-508 

assuming  fictitious  names 526-527 

authorized  consolidation  of,  State  laws 8-9 

common  directors  among  competing,  pro- 
hibited    135-136 

disclosure  of  confidential  information  by 

directors 363-364 

discriminating  against  nonstockholders 481 

30035°— 16 52 


Page. 

Corporations,  forfeiture  of  charter  of 213, 215 

issuance  of  stock  by 216-230 

misuse  of  corporate  names 546, 605 

operating  under  various  names...  465-466, 481-482 

organization  of,  limited 148-149, 156 

purchasing  stock  for  unfair  purposes 329, 495 

reports  of,  Federal  Trade  Commission  may 

require 128-129 

ultra  vires  acts  of 58-60, 238, 458, 461, 557 

See  also  Corporate  names;  Holding  com- 
panies. 

Cost  accounting,  standardization  of 709 

Cost  of  production,  advertising  false  state- 
ments regarding 519 

disclosure  of  competitors,  unfair 367 

efforts  by  independents  to  prevent  selling 

below 313 

selling  below,  State  laws 192-194 

Costa  Rica,  international  agreements 703 

Cotton  gimiing  companies,  ownership  of 200 

Cotton,  misbranding  of 525 

Countervailing    duties,   collected    to    offset 

bounties 551 

Coupons , ' '  block  system, ' '  Austria 666-667 

opposition  to  use  of 314-315 

use  prohibited 615, 673-674 

See  also  Trading  stamps. 

Credit ,  association  bureaus 709-710 

injuring  competitor's,  by  lawsuit 458 

cutting  ofl  competitor's 328 

excessive  grants  of,  unfair 315 

Impeaching  dealers',  by  associations 732-735 

impeachment  of  competitor's. . .  373,379-380,492, 
619,636,638,664,682,685,694 

uniform  terms  of,  urged  by  associations 708 

Cuba,  international  agreements 697, 700, 701, 703 

Currant  industry,  regulation  of,  Greece 293 

Customers,  adopting  competitor's  old  tele- 
phone number  to  solicit 429, 458, 557 

agreements  to  buy  from  one  person 410- 

414,417-418 
agreements   to   use   one   kind   of  trading 

stamps 150n,  336-337, 498 

allotment  of 113, 730 

boycotting  of  delinquent 153n,  732-735 

combination  giving  rebates  to  independ- 
ents'      153n 

disclosing  trade  secrets  to  competitor's 599 

discrimination  against  competitor's 480 

discrimination  in  favor  of  large 315-316, 481 

enticing,  by  promise  of  aleatory  advantages.      616 

enticing,  by  unfair  methods 407, 

408, 598-599, 610, 654-655 

exclusive  dealing,  inducing  by  rebates  to . .  l.S4n, 

320, 415-416, 419-420, 455, 466^69, 541-543 

indemnifying,  for  violation  of  contracts..  335,337 

inducing,  to  break  contracts.  335-345,473-474,487 

insurance  agents  solicit  ing  former 359-360, 654 

intimidating,  by  infringement  suits 148n, 

389-395,495,543-544 

intimidating,  by  trade  associations  . .  154n,lS5n, 

401-403, 40.5-4()(),  474-477, 488-492, 727-729 

legality  of  soliciting  competitor's 34ln, 

427-429,430 

list  of,  use  by  former  employees 356- 

361 , 366-367, 586, 587-588, 593-594 
misleading,  as  to  identity  of  dealer 459 


818 


INDEX. 


Page. 

Customers,  obstructing  competitor's 407-408 

prohibition  of  gifts  to 673-674 

protection  of,  in  passing-ofi  cases 433, 564 

purpose  of  misbranding  laws  to  protect 521 

tlireatenrng  competitor's 330, 

406-407, 408-409, 456-457 

threats  to  compete  with 459, 494 

use  of  "block  system"  to  attract 666-667 

use  of  trading  stamps  to  attract 511 

use  of  nonpatented  articles  with  patented 

by 472-173,539-540 

Customs  tarifl  laws.  Federal 125-126, 501 

in  foreign  countries,  Canada 240, 550 

Brazil 294, 688, 691 

New  Zealand 250-251 

South  Africa 551 

Sweden 677-678 

See  also  Importation  of  goods. 

Cutlery,  misbranding  of 548, 549, 557 

Cutting  off  competitor's  supplies,  by  charging 

exorbitant  prices 329 

by  trade  associations 185n, 

397, 398-399, 400, 724-729 
for   distributing   handbills   with   newspa- 
pers    457-458 

legality  at  common  law 396-401 

not  illegal  in  England 395 

Sherman  law  decrees  enjoining 493-494 

unfair  method  of  competition 328-329 

Dealing  in  goods  of  parties  violating  state 

laws  prohibited 215-216 

Defamation.    See  Disparaging  statements. 

Delaware,  stock  watering  laws 216 

unfair  competition  laws 506, 527 

Denmark,  antitrust  legislation 286-287 

international  agreements 697, 701 

Penal  Code,  unfair  competition  provisions 

670-671 

unfair  competition  laws,  general 670-671 

special 671-675 

Designs,  use  of  deceptive 644-646, 696-697 

See  also  Patents. 
Directories,  deceptive  advertising  in  trade. . .     387, 

582-583,599,658 
Disparaging  statements,  actionable  per  se. . .    370, 

377,381 

against  mail-order  houses 325, 376 

allegation  of  special  damage 373 

375-376, 382n, 385 

business  and  economic  views  on 325-326 

by  trade  associations 376, 732-735 

common  law  decisions  relating  to 370-386 

foreign  laws  regarding,  Australia 383 

Austria 664 

Belgium 690-591 

Bulgaria 685 

Canada 383-384, 385-386 

Denmark 673 

England 377-386 

Germany 623, 636-639, 656-658 

Greece 679, 682-683 

France 558, 575-579 

Italy .' 599-600 

Japan 69 1 

Netherlands 606, 609 

Spain 602, 603 

Switzerland 611, 615, 617, 619 


Page. 
Disparaging  statements,  impeaching  credit  of 

competitors 373, 

379-380, 492, 619, 636, 638, 664, 682, 685, 694 

implied  from  acts 386-387, 658 

implying  want  of  skill 372, 378 

imputing  dishonesty 371-373, 379 

inciting  public  hatred 380 

indirectly  attacking  dealer 373-375,381-382 

libel  and  slander  not  enjoined 376-377 

personal  defamation 370- 

375,377-382,599,6.36-637,673,682 
regarding    competitor's    retirement    from 

business 373, 385-386, 639 

"pulTmg"  distinguished 384 

"  pulTing  "  own  goods  legal 383n,  575, 590-591 

regarding  competitor's  goods 375- 

376, 382-385, 576-579, 591, 603, 609,615, 
619, 636-637, 657-658,  664,  673, 682-683 

Sherman  law  decrees  enjoining  use  of 492-493 

true  statements  will  be  enjoined 579, 590 

use  defined  as  unfair  by  courts 370 

words  imputing  crimes  are 370-371 

Distribution.    See  Selling  methods. 

District  of  Columbia,  antitrust  laws 71, 123n 

stock  watering  laws 202 

unfair  competition  laws 506, 509, 510, 513, 515 

decisions 513 

Division  of  territory,  by  bridge  builders, 

illegal 182 

by  trade  associations 730-731 

cases  imder  Sherman  law  relating  to 1 12-113 

common  law  decisions  relating  to 41 

foreign  decisions  relating  to 233, 234, 270 

illegality  of  agi'eements 12, 76, 112-113 

State  laws  regarding 182 

decisions 157n,  175n 

Domestics,  enticement  of 511 

Dominican  Republic.    See  Santo  Domingo. 
Drawings,  models,  etc.    See  Designs. 

Dry  goods,  misbranding  of 523, 549 

Dumping,    agricultvu-al    implements.    New 

Zealand 551 

declared  imfair  competition 555 

foreign  laws  preventing,  Australia 244, 

551-556, 746-756 

Canada 550 

New  Zealand 551 

South  Africa 551 

prevention  of,  by  advancing  money  to 

cmrant  producers 293 

piu-pose  of  potash  law  to  prevent 264 

Duplicating  and  selling  competitor's  goods 368 

Ecuador,  international  agreements 703 

Egj-pt,  antitrust  legislation 257 

Civil  Code,  unfair  competition  provisions. . .      556 
Penal    Code,    unfair   competition    provi- 
sions    556-557 

unlawful  agreements 257 

unfair  competition  laws 556-557 

Employment  agencies,  by  trade  associations. .      712 

enticement  by 510, 511 

E  ngland ,  antitrust  legislation 2-5, 233-238 

bribery 421-423, 534-537 

Companies  (Consolidation)  Act 546 

disclosure  of  trade  secrets 355, 364-367 

disparaging  statements,   common-law   de- 
cisions   377-386 


INDEX. 


819 


Page. 

England,  enticement  of  employees 348 

exclusive  contracts 416-420, 539-540 

Exhibition  Medals  Act 388, 549-550 

Fabrics  (Misdescription)  Act  of  1913 549 

inducing  breach  of  competitor's  contracts  342-345 

international  agreements 299, 697, 700, 701 

intimidation  of  compet  itors 394- 

395,408-409,543-544 

Merchandise  Marks  Act 546 

monopolies  by  Crown  patent 2 

passing  otT 446-455 

I'atent  and  Designs  (amendment)  Act  238, 539-540 
Patents,  Designs,  and  Trade-marks  Act. .  543-544 

Prevention  of  Corruption  Act 535 

convictions  under 530-537 

Railway  and  Canal  Commission 238 

restraint  of  trade,  ancient  criminal  statutes .      2-5 

restraint  of  trade,  common  law 2:33-238 

sale  of  good  will,  common  law  regarding. .  429-430 
Secret  Commissions  and  Bribery  Preven- 
tion League 535, 536 

Statute  of  Monopolies 236-237 

Trade-marks  Act 448-547 

imfair  competition  laws 533-537, 539-5 10, 

543-544 , 546-547, 548, 549-550 

Engrossing,  regrating,  and  forestalling 2, 4 , 

205, 233, 292 
Enticement    of   customers,    by    disparaging 

statements 599-000 

by  ruimers 407, 408-409, 598, 054 

in  foreign  coimtries,  Germany 054-055 

Italy 598-599 

Switzerland 010 

See  also  Customers;  Passing  ofl. 
Enticement  of  employees,  actionable  at  com- 
mon law 346-348 

by  employment  agencies 510, 511 

by  legal  means 346, 595 

by  noncompetitors 348n 

in  absence  of  contract 347, 348, 594-595 

in  foreign  coimtries,  Belgiiun  .• 594-595 

England 348 

France 583-584 

of  arsenals 510 

Sherman  law,  decisions  relating  to 346n,  474 

Stale  laws  prohibiting 510-511 

to  obtain  trade  secrets 349, 594-595 

unfair  method  of  competition 323 

See  also  Breach  of  contracts;  Bribery. 

Espionage,  by  trade  associations 324, 399 

securing  trade  secrets  by,  illegal 606 

Sherman  law,  decisions  relating  to 474 

decrees  enjoining  practice  of 487 

proposed  amendment  to,  regarding 323-324 

unfair  business  method 323-325 

See  also  Bribery. 

Excessive  credits,  unfair  use  of 315 

Exclusive  agencies,  agents  and   customers 

distmguished 470-171 

contracts  legal  at  common  law 414  415,420 

granting  exclusive  territory 415 

State  laws  relat  ing  to 184,  is.5 

decisions..  149n.  151n,  160n,  lOln,  173n,  lS4n,  185n 

validity  under  Sherman  law 472 

Exclusive  dealing,  brewer's  leases 411,417 

buying  contracts 249, 410-111, 417 

by  grain  dealers 186 


Page. 

Exclusive  dealing,  bj'  implement  dealers. ...      184 

liylicenseofpatentedarticles.  247, 418-419, 471-472 

by  public-service  corporations 412-414 

Clayton  Act  provisions  relating  to 496-497 

common  law  decisions  relatmg  to 409—120 

contracts  for  entire  output 174n, 

235,245,411,417-118 

engaging  in  competition  to  compel 459 

foreign  laws  regarding,  Australia.  247, 249, 540, 553 

Canada 240-241, 540-541 

England 410-120, 539-540 

Germany 257, 262, 655 

New  Zealand 251-252, 540, 541-542 

South  Africa 255, 542-543 

in  patented  articles 247, 

418-419, 471^72, 486, 539-540 

inducing,  by  rebates lS4n,  234, 

241, 243-244, 251-252, 255, 320, 415-416, 419- 

420, 455,  456,  459, 466-469, 541-543,  553-554 

power  to  impose,  dependent  on  monopoly.  320-321 

reasonable  restraint  of  trade 467 

restraining  competition 160n 

refusal  to  deal,  except  on  exclusive  terms .  185-186, 
257, 262, 320, 469-471, 4.85-486 

Sherman  law,  decisions  relating  to 466-472 

decrees  prohibiting 484-486 

State  laws  regarding 184-186 

decisions 149nj  151n, 

153n,  154n,  160n,  171n,  173n,  174n,  184n,  185n 

tying  contracts  imposing 133-134, 

240-241, 242, 418-419, 539-540, 541 

unfair  method  of  competition 319-:321 

See  also  Exclusive  agencies. 

Explosives,  misbranding  of 525 

Expositions,  distinctions  granted  by  fictitious      568 

falsely  claiming  awards  of 388, 519, 549-550, 

568-509, 005, 606, 01 1 ,  627, 671 ,  675, 692 

Exports,  regulation  of,  foreign  laws 263-265, 

284-285, 289-290, 294-296 

Extortion,  Germany 257 

False   advertisements.    See    Unfair    adver- 
tising. 
Federal  Reserve  Board,  Clayton  Act  enforce- 
able by 139 

Federal  Trade  Commission  Act,  text  of 128-132 

Federal  Trade  Commission,  creation  of 21-22 

directed  to  prohibit  unfair  competition. . .  495-496 

powers  of 128-132 

provisions  of  Clayton  Act  enforceable  by...      139 

recommended  by  President 21-22 

Fighting  brands,  purpose  of 483 

Sherman  law  decrees  relating  to 483-484 

sold  by  flying  squadrons 484 

unfair  use  of 313-314 

Fighting  ships,  purpose  of 482-483 

right  of  individual  to  employ . ». 483 

Sherman  law,  decisions  relating  to 464r465 

decrees  condemning  use  of 482-483 

Florida,  antitrust  laws 197, 206, 208 

stock-watering  laws 220, 222 

unfair  compet  it  ion  laws 506, 

508, 509, 510, 511 , 515, 522, 523, 525 

decisions 515 

Flying  squadron 484 

Foodstuffs,  adulterat  ion  of 567, 669, 675 

misbrandnig  ot,  Austria 668-670 

use  of  deceptive  labels  on 614 


820 


INDEX. 


Page. 

Foreign  countries,  antitrust  laws 231-300 

articles  imported  from,  bearing  deceptive 

marks 501 

unfair  competition  laws 529-704 

Foreign  trade,  interest  of  trade  associations  in      714 

Sherman  law  decisions  effecting 79-83 

Forestalling.    See  Engrossing,  regrating,  etc. 
France,   adoption  of  legal  system  in  other 

countries 532-533 

antitrust  legislation 269-273 

Civil  Code,  invalid  agreements 272-273 

unfair  competition  provisions 559,569,585 

disparagement 575-579 

Government  monopolies  in 273, 591 

international  agreements 299, 697, 700, 701 

passing  oil 560-574,581-582 

patent  laws 562 

Penal  Code — 

unfair  competition  provisions 559, 560, 585 

imlawf ul  agreements,  etc 269-272 

price  cutting 579-580 

professional  syndicates 271 

trade-mark  laws 562-567 

unfair  competition  laws,  general 559, 569-588 

special 559-569 

Fraud,  inducing  breach  of  contract  by.  336-338,343 

relief  in  passing-off  cases  based  on 433 

Free  goods.    See  Bonuses. 
Full-line  forcing,  combination  orders  not  for- 
bidden        486 

defined 321 

relation  to  exclusive  dealing 322 

Sherman  law  decrees  prohibiting 486 

See  also  Exclusive  dealing. 

Furniture,  misbranding  of 549 

Geneva  Cross,  misuse  of 672, 675 

Georgia,  antitrust  laws 145, 

157, 159, 162, 167, 199, 205 

stock-watering  laws 221, 224 

imfair  competition  laws 508, 

509,510,511,516,522,525 

decisions 515,517 

Germany,  adoption  of  legal  system  in  other 

coimtries 532 

antitrust  legislation 257-265 

arbitration  boards  in 661-663 

Berlin  Board  of  Arbitration 662-663 

bribery 634-636 

Civil  Code,  invalid  agreements,  etc 259-263 

unfair  competition  provisions 263, 

623, 638, 648, 655 
Commercial  Code,  unfair  competition  pro- 
visions   640, 648 

disparagement 636-639, 656-658 

disclosure  of  trade  secrets 642-646, 656 

encouragement  of  cartels  in 265 

extortion  prohibited  in 257 

Industrial  Code,  validity  of  agreements, 

etc 258-259 

international  agreements 299, 697, 701 

passing  off 639-642, 659-661 

patent  law 621 

petroleum  industry,  proposed  monopoly  in .    265n 

potash  law 263-264, 770-781 

Penal  Code,  extortion,  etc.,  prohibited...  257,258 

mifair  competition  provisions 637n,  638 

Prussian  Criminal  Code 257-258 


Page. 
Germany,    Society   for   the    Prevention  of 

Bribery 636 

trade-mark  law 621-622 

unfair  advertising 624-634 , 6.58-659 

imfair  competition  laws,  general 620, 647-661 

special 261, 621-647, 806-812 

Gift  enterprises.    See  Trading  stamps. 

Gifts.    See  Bribery. 

Gold   and   silverware,   misbranding.    State 

laws 522-523 

foreign  countries 548, 556, 686 

Good  will,  antitrust  laws  not  applicable  to 

sale  of 157, 204-205 

competing  after  sale  of 33-34, 

157n,  158n,  423-430, 586-588 

defined 423n 

depreciating  value  of 425-426, 430n 

distinction  between  commercial  and  profes- 
sional     427n 

foreign  laws  regarding  sale  of 255, 695 

right  of  vendor  to  reenter  business 424, 429 

sale  of,  Massachusetts  rule 425-426 

sale  of  professional 426-427 

solicitation  of  customers  after  sale  of 427-429 

430,587 
vendor  retaining  old  telephone  number. .  429, 557 
See  also  Sale  of  business. 

Grain  dealers,  antitrust  laws  relating  to 156, 

163, 167, 177, 186 

Greece,  antitrust  legislation 292-293 

ciu-rant  industry,  regulation  in 293 

Penal  Code,  antitmst  provisions,  etc 292-293 

imfair  competition  provisions 679-680 

unfair  competition  laws,  general 679-680 

special 680-684 

Guatemala,  international  agreements 703 

Haiti,  international  agreements 703 

Handbills,  placing  in  newspapers,  etc.,  ille- 
gal    457-458, 528 

Harassing  competitors.    See  Intimidation. 

Hawaii,  antitrust  laws 149 

unfair  competition  laws 510, 516 

decisions 516 

Hay  and  straw,  misbranding  of 525 

Holding  companies,  cases  under  Sherman  law 

relating  to 103-105 

Clayton  Act,  provisions  relating  to 134-135 

cottonseed-oil  companies 200 

legality  at  common  law 58-60, 67-68 

legislation  prior  to  Sherman  Act  regarding.      8-9 
Northern  Securities  case,  economic  effects. .  14-16 

Panama  Canal  Act ,  use  of  canal  by 126-128 

prohiViition  of,  in  Standard  Oil  decree 17 

purpose  of 103 

railroads,  Canada 242 

State  constitutional  provisions  relating  to. .      199 

State  laws  prohibitmg 8-9, 199-202 

decisions 147n,  153n,  175n 

st  ock  ownership  of  banks  forbidden 200 

succeeded  "  trust ' '  form  of  comliination 8, 103 

to  restrain  competition  forbidden 134-135 

Honduras,  international  agreements 703 

Hungary,  antitrust  legislation 268-269 

Criminal  Code,  antitrust  provisions 268 

international  agreements 299, 697, 701 

trade  law  of  1SS4 670 

unfair  competition  laws 670 


INDEX. 


821 


Page. 
Hydroelectric  companies.  State  laws  relating 

to 158-159,182,204 

Idaho,  antitrust  laws 149, 154, 168, 

173, 179, 181, 192, 202, 206, 207, 212, 216 

stock -watering  laws 216, 220 

unfair  competition  laws 507, 509, 517, 522 

Illinois,  antitrust  laws 97, 165, 

173, 178, 180, 196, 206, 208, 212, 213 

decisions 97, 165n,  173n,  718 

stock-watering  laws 216, 219, 224, 226 

unfair  competition  laws 506, 508, 

509,511,517,522,523 
Imitation  of  goods.    See  Passing  off. 
Importation  of  goods,  antitrust  laws  regard- 
ing   125-126 

bearing  confusing  trade-marks  forbidden. .      684 

bearing  counterfeit  marks 590, 687 

bearing  deceptive  trade  descriptions 501 

bearing  false  indication  of  origin,  prohib- 
ited    677-678,700 

bearing  labels  in  foreign  language 68s,  691 

combinations  in  restraint  of  trade  illegal.  125-126 
See  also  Customs  tariff  laws. 

India,  antitrust  legislation 255-257 

Indian  Contract  Act 255-257 

Merchandise  Marks  Act -. . . .  548, 549 

unfair  competition  laws 544d,  548, 549 

Indiana,  antitrust  laws 149, 155, 

162, 173-174, 181, 186, 187, 196, 
206, 207, 208, 210, 212,  215,  216 

decisions 719n,  721 

stock-watering  laws 219, 221, 224 

imfair  competitions  laws 504, 507, 

509,517,518,524,525,527 

Indictments  under  Sherman  law 121 

Inducing  breach  of  contracts.    See  Breach  of 
contracts. 

Industrial  Commission,  purpose  of 13 

recommendations  by 13 

reports  of 306,313,320,321,323 

Information,  sale  of,  antitrust  laws 188, 204 

unfair  use  of  competitor's 377-368, 369 

Insurance,  interest  taken  by  associations  in.  713-714 

not  a  commodity 171n 

not  interstate  commerce 170n 

right  of  agent  to  solicit  old  customers 359-360, 

654-655 

State  laws  relating  to 162, 160, 167, 

170, 171, 174, 2U9 

decisions 170n,  171n,  HSn 

Iflterlockmg  directorates,  jft-ohibited  by  Clay- 
ton Act  135-137 

International    agreements,    Association    for 

Creating  a  World  Trade-mark 701 

Berne  agreement  protecting  cop>Tights 701 

Brussels  International  Sugar  Convention. . .     290, 

299-300 

false  indications  of  origin  of  goods 700 

International  American  Conference 703-704 

International  Congress  of  Chambers  of  Com- 
merce, etc 702-703 

International  Union  for  the  protection  of 

industrial  property 697-700 

Middle-Euroi)ean  Economic  Association.  701-702 
regarding  registration  of  trade-marks ....  700-701 
Interstate  Commerce  Act,  disclosure  of  con- 
fidential information  by  carriers  pro- 
hibited   499-500 


Page. 
Interstate  Commerce  Act,  forerunner  of  Fed- 
eral antitrust  law 10 

increase  in  rates  due  to  elimination  of  water 

competition 500 

Panama  Canal  Act  amending 126-128 

provisions  relating  to  combinations 124 

rate  discrimmation  prohibited  by 498 

unfair  competition  provisions 498-500 

Interstate   Commerce  Commission,   associa- 
tions oppose  rate  increases  granted  by . .      711 

Clayton  Act,  sections  enforceable  by 137, 139 

common  carriers  subject  to,  exempted  from 

Clayton  Act 135-136, 140-141 

Intimidation,  by  threats  to  establish  com- 
peting plants 494 

l)y  threats  to  sue  customers . .  389-395, 495, 543-544 

foreign  laws  regarding,  Australia 544 

England 408-409, 54.3-544 

New  Zealand 544 

other  countries 544 

inducing  breach  of  contract  by. . .  336-338,343, 344 

of  competitor's  agents 407, 459 

Sherman  law  decrees  relating  to 494-495 

unlawful  at  common  law 406-409 

unfair  method  of  competition 329-330, 390-391 

Iowa,  antitrust  laws 162, 

166, 173, 178, 180, 187, 206, 212, 216 

decisions 191, 721-722 

stock-watering  laws 221, 223, 226-227 

unfair  competition  laws 504, 

509, 516, 517, 520, 521, 522, 523, 524, 525, 526 

decisions 517 

Iron-ore  industry  regulated  in  Sweden 284-285 

Italy,  antitrust  legislation . : 273-277 

citrus  products  law 277 

Civil  Code,  invalid  agreements,  etc 274-276 

unfair  competition  provisions 598-601 

international  agreements 299, 697, 701 

patent  law 597-598 

Penal  Code,  provisions  applicable  to  com- 
binations   273-274 

unfair  competition  provisions 596 

Royal  Commission 596 

Sicilian  sulphur  industry  law 276-277,781-789 

trade-mark  law 596-597 

unfair  competition  laws,  general 595-601 

special,  recommended 596 

Japan,  antitrust  legislation 297-298 

Civil  Code,  unfair  competition  provisions..      694 
Commercial  Code,  antitrust  provisions...  297-298 

unfair  compel  it  ion  i^rovisions 695 

international  agreements 697, 701 

law  of  designs 696-697 

patent  law 696 

Penal  Code,  unfair  competition  provisions .      694 

trade-mark  law 695-696 

unfair  compet  it  ion  laws 298, 694-697 

Jobbers,  contracts  with,  termination  by  man- 
ufacturer        457 

fixing  resale  price  of 118, 119 

may  he  guilty  of  passing  off 434-435 

selling  direct  to  consumers  opposed. .  707,728, 729 

Kansas,  antitrust  laws 1^ 

151, 156, 159, 160, 166, 167, 169-170, 177, 178, 
179,  185,  187, 198, 206, 207, 208, 212, 213, 216 

decisions 160n,  170n,  718-719 

stock-watering  laws 220, 222, 224 


822 


INDEX. 


Page. 

Kansas,  unfair  competition  laws 509, 

514,517,518,520,525,526 
decisions 514 

Kentucky,  antitrust  laws 164, 165 

decisions 165n 

stock  watering  laws 216, 218, 222 

unfair  competition  laws 507, 

509, 510, 511, 515, 522, 525, 527 

decisions : 515 

Labels,  counterfeiting  of,  state  laws 508-509 

fraudulent  use  of,  foreign  laws 51G-549, 

5G3, 596,002,  G07, 614, 621-622, 671, 
676, 679, 685, 688, 690, 691, 692, 695 

fraudulent  use  of,  State  laws 509 

imitation  of,  common  law 442-443, 452—153 

piu-pose  of  State  laws  protecting 503 

refilling  and  reselling  labeled  containers 509 

See  also  Misbranding;   Passing  off;   Trade- 
marks. 

Labor  organizations,  boycotting  by 141, 142 

conspii'acies  by 91, 347 

enticement  of  employees  by 34Gn,  347 

exempted  from  Canadian  law 239 

foreign  laws  regarding 259, 265, 280, 281 

inducing  breach  of  contracts 341, 343-344 

not  illegal  under  Clayton  Act 23, 13c' 

opposition  to,  by  trade  associations 711-712 

picketing  by 141, 142 

prosecution  of 123n 

Sherman  law  decisions  relating  to 93-95 

State  laws  relating  to 197-199 

decisions 198 

subsidizing  competitor's  employees,  mem- 
bers of 586 

Leather,  misbranding  of 526 

Libel.    See  Disparaging  statements. 

Liberia,  international  agreements 701 

Lime,  misbranding  of 525 

Limitation  oi  output,  by  hydroelectric  com- 
panies       182 

by  trade  associations 729-730 

by  water-power  companies 181-182 

common  law  decisions  relating  to 40-41 

enhancement  of  prices,  presumed  from 206 

foreign  decisions  relating  to 236, 

245, 260, 262, 266, 270-271, 276, 281, 282, 288 

foreign  laws  against 239, 241 

in  petroleum  industry 291, 794-797 

in  sugar  industry 289, 299-300,  789-794 

object  of 107 

of  coffee,  Brazil 294-290, 797-806 

of  iron  ore,  Sweden 285-286 

of  potash ,  Germany 263-265,  770-781 

Sherman  law  decisions  rogajding . . .  107-109, 730n 
State  constitutional  provisions  prohibiting.      179 

State  laws  prohibiting 179-182 

decisions 154n,  157n,  185n 

Linen  goods,  misbranding  of 523-524, 548-549 

Literary     productions,    imitation    of.    See 
CopjTights. 

Lockouts,  legality  of 199, 265, 280-281 

London  Chamber  of  Commerce,  bribery  in- 
vestigation by 534 

Louisiana,  antitnist  laws 145. 149, 

150, 155, 161, 165, 166, 168, 170, ISO, 
181,187,196,197,206,207,  210,  212 


Page. 

Louisiana,  stock- watering  laws 216, 217 

unfair  competition  laws..  510, 514, 517, 522, 524, 525 

decisions 514, 515 

Lumber,  misbranding  of 523 

Tjuxemburg,  international  agreements 299, 701 

Luzern,  unfair  competition  laws 614 

Mail-order  houses,  complaints  against 324 

cutting  off  supplies  of 396 

misrepresented  by  associations 325, 328 

opposed  by  retail  associations 707 

price  cutting  by 318 

quantity  buying,  advantage  of 315 

Maine,  antitmst  laws 155, 212, 216 

stock-watering  laws 220,221,224 

imfair  competition  laws 509, 

510, 522, 523, 524,  ,525, 526 

Marketing  associations,  organization  of 708 

See  also  Agricultiu'al  organizations. 
Marks.    See  Misbranding. 

Maryland,  antitrust  laws 144 

stock-watering  laws 220,222,224 

unfair  competition  laws 508, 

509, 512, 516, 517, 520, 523, 524 

decisions 513, 514, 517 

Massachusetts,  antitrust  laws 150, 

156, 162, 184, 187, 194, 198-199, 205, 206, 208, 212 

decisions 150n,  lS4n 

stock-watering  laws 221, 223, 224 

unfair  competition  laws .  504, 507, 508, 509, 512, 516, 
517,  522,  523,  524,  525,  526 

decisions 513, 514, 515 

Matches,  misbranding  of 525 

Mattresses,  misbranding  of 524 

Meat  products,  antitrust  laws  relating  to 196, 

197, 254 
Medals,  etc.,  Exliibition  Medals  Act,  Eng- 
land   388n,  549-550 

false  claims  to,  common  law 387-389 ' 

foreign  laws  relative  to  false  use  of 549, 

568-569, 605, 606, 611, 627, 671, 675, 685, 692 

granted  by  fictitious  expositions 568 

legality  of  false  use  of 387 

misuse  of  testimonials 389 

State  laws,  false  statements  regarding 519 

Merger,  cases  under  Sherman  law  involving.  98-102 

early  combinations  formed  by 15 

State  decisions  relating  to 154n 

validity  at  common  law 68-69 

Mexico,  antitrust  legislation 297 

international  agreements 697, 701, 703 

sisal  industry,  regulated  in 297 

Michigan,  antitrust  laws 148, 

150-151, 157, 161, 162, 170, 174, 178, 180, 184, 
187, 196, 197, 204-205,  207, 209,  211,  213, 216 

decisions 14Sn,157n,  719, 720-721 

stock-watering  laws 219, 221, 224, 225 

unfair  competition  laws 358n,  504, 

506, 509, 514, 517, 520, 522, 523, 524, 525, 527 

Mill  products,  misbranding  of 525 

Minnesota,  antitrust  laws 145, 

152, 162, 166, 174, 181, 187, 206, 212, 213 

decisions 165n,  191n 

stock-watering  laws 219, 221, 223, 224-225 

imfalr  competition  laws 506, 

509, 516, 517, 520, 523, 524, 525, 527 
decisions 517 


INDEX. 


823 


Page. 
Misbranding,  altering  or  imitating  mark  of 

public  officer 522 

boots  and  shoes 524, 549 

.    dry  goods 523, 549 

false  designation  of  provenance 521 ,  567, 

600, 603-604, 605, 613, 62.5, 671, 676, 677- 
678, 685, 686-687, 689, 690, 692, 693, 697 

foreign  laws  relating  to,  Argentina 691-692 

Australia 547-548,549 

Brazil 690-691 

Bulgaria 685 

Canada 547,548,549 

Denmark 670,671 

E  gypt 556 

England 546-547,548,549 

France 567-568 

Germany 621,624-625,633-634 

Greece 682 

India 548,549 

New  Zealand 548,549 

Norway 675 

Peru 693 

Portugal 605,606 

Spain 603-604 

Switzerland 613 

Turkey 686-687 

gold  and  silverware 522-^23, 548, 686 

lumber  products 523 

mattresses 524 

miscellaneous  articles.  State  laws 525-526 

paints,  oils,  and  tm-pentine 524-525 

purpose  of  state  laws 521 

State  laws  relating  to 521-526 

thread 523 

weight,  measure,  etc.,  of  goods 521, 

522,546,634,682,691,693 

Mississippi,  antitrust  laws 149 

152, 161, 164, 166, 168, 172, 174, 180, 187, 
193, 200, 205, 206, 208, 209,  210,  212,  214 

decioions 152n,  174n,  188n,  192ii,  725 

stock-watermg  laws 216, 219, 222 

imfair  competition  laws 507, 509, 510, 525 

Missouri,  antitrust  laws 152-153, 

160, 163, 166, 174-175, 178, 180, 185, 
187,206,207,209,211,  212,  215,  216 

decisions 153n,  154n,  175n,  185n, 

716-717, 719-720, 721, 730,  733-734 

Stock-watering  laws 216, 219, 221, 223, 224 

unfair  competition  laws 506, 

507, 508, 509, 511, 517, 523, 525 

Monaco,  international  agreements 701 

Monopolies,  acquisition  of  stock  creating,  pro- 
hibited    134-135 

ambiguity  in  Sherman  law  relating  to 90-91 

cases  under  Sherman  law  involving 89-92 

cau.se  of  growth  of 21 

common  law  relating  to 5-9 

common  law  in  England  regarding 233-238 

congressional  investigation  of 2] 

conspiracies  to  monopolize 37n, 

71, 114-115, 145, 148, 149, 240, 2.51, 2.53,  287 
corporate  compinations  creating,  common 

law 65-69 

created  by  competing  buyers 51-52 

created  by  control  of  companies 8-9 

57-59, 103-105, 134-135, 147n,  199 


Page. 

Monopolies,  created  by  Crown  patent 2 

created  by  governments 232, 263-265, 268, 

273, 276-277, 284-285, 289, 291, 293, 293n,  297 

created  by  merger  of  companies 99-102 

created  by  noncompetitors 37n 

cutting  off  competitor's  raw  materials,  etc..     328- 

329, 493-494 

defined 4 

foreign  laws  relating  to,  Australia 244-246, 

250, 746-756 

Austria 265n,  268 

Belgium ; 280 

Canada 239-240, 241-242, 737-746 

China 298 

Colombia 297 

England 233-238 

France 269-270,273 

Germany 260, 263-265, 770-781 

India 255 

Italy 274,276-277,781-789 

New  Zealand 250-251, 253 

Norway 286 

Roumania 291, 794-797 

Russia 287,289-290,789-794 

Switzerland 279 

meaning  of  word  in  State  statutes 147n 

prevention     of,     Tiy     antidiscrimination 

laws 150 

public  grants  creating 57n 

State  constitutional  provisions  prohibit- 
ing   144-145 

State  laws  prohibiting 147-150 

decisions 147n,  148n,  149n,  150n, 

152n,  171n,  175n,  l&Sn 

statutory  definitions  of 145-147 

steel  products,  etc.,  not  to  be  purchased 

from 123n 

trust  agreements  creating,  common  law 60-64 

See  also  Corners;  Holding  companies;  Re- 
straint of  trade;  Sherman  Antitrust 
Act. 

Montana,  antitrust  laws 147, 152, 163, 167, 

168, 175, 179, 181, 187, 197, 206, 212 

stock-watermg  laws 216, 222, 223 

unfair  competition  laws 507, 509, 517, 522, 527 

IVails,  misl  )randing  of 526 

Names  aheady  in  use  by  corporations 505-508 

corporate,  foreign  laws  regarding 546, 588, 589, 

605, 621-622, 640, 673, 687, 692, 695 

corporate,  state  laws  regulating  use 50^508 

of  foreign  corporations,  use  regulated 507-508 

omittmg  competitor's,  from  directories 387, 

582-583,599,658 

partnership,  State  laws 527 

unauthorized  use  of  individual 508 

use  of  assumed  or  fictitious 526-527 

Sec  oi«o  Corporate  names;  Passing  off. 

Nebraska,  antitrust  laws 149, 154, 161, 163, 

166, 167, 168, 170, 177, 180, 182, 1.S3, 186, 
187, 193, 200, 202, 206, 209, 212, 215, 216 

decisions 155n,  186n,  192n,  726, 727n 

stock-watering  laws 216, 218 

unfair  competition  laws. .  504, 509, 513, 517, 524, 525 

decisions 513 

Netherlands,  antitrust  legislation 2.83-284 

(.  ivil  Code,  unfair  competition  provisions.  607-609 


824 


INDEX. 


Page. 
Netherlands,  Civil  Code,  validity  of  agree- 
ments    283-284 

international  agreements 299, 697, 701 

Penal  Code,  obtaining  unlawful  advantages 

prohibited 283 

unfair  competition  provisions 606-607, 009 

unfair  competition  laws 2S4, 606-610 

Neuchatel,  unfair  competition  laws 616-618 

Nevada,  stock- watering  laws 219, 223, 225 

unfair  competition  laws..  504,507,509,511,622,527 

New  Hampshire,  antitrust  laws 145, 159, 169 

stock-watering  laws 216-217, 219, 221 

unfair  competition  laws 506, 

509, 511, 514, 616, 520, 523, 525, 526 

decisions 514 

New  Jersey,  antitrust  laws 148, 

156, 161, 167, 169, 180, 183, 187, 200-201, 206, 212 

decisions 183n 

stock-watering  laws 219, 222, 223 

unfair  competition  laws 504, 

507, 509, 510, 517, 520, 522, 523, 624, 526, 527, 528 

New  Mexico,  antitrust  laws 147, 

160, 155, 176, 181, 212 

stock-watering  laws 219, 225 

unfair  competition  laws 507, 509, 522, 525 

New  York,  antitrust  laws 147, 

155, 163, 176-177, 181, 195, 201, 206, 208, 212 

decisions 147n,  163n,  176n,  720 

stock-watering  laws 219, 223, 225, 229-230 

unfair  competition  laws.  504,507,508,509,510,512, 
614,517,520,521,522,523,524,525,527,528 

decisions 504n,505n,512,S14,517 

New  Zealand,  Agricultural  Implement  Manu- 
facture, Importation,  and  Sale  Act 551 

antitrust  legislation 250-254 

bribery 538-539 

Commercial  Trusts  Act 251-253, 541-542 

dumping  laws 250-251, 561 

Monopoly  Prevention  Act 260-251, 551 

Patents,  Designs,  and  Trade-Marks  Act. .  263-254 

unfair  competition  laws 538-539, 

64 1-542, 544, 546, 546, 548, 649, 55 1 
Newspapers,  placing  handbills,  etc. ,  in.  457-458, 528 

publication  of  untrue  statements  by 521 

publishing  false  circulation  statements..  520-521 

publisMng  statements  in  good  faith 518 

Nicaragua,  international  agreements 703 

North  Carolina,  antitrust  laws 156 

163-164, 182, 184, 187, 194, 205, 207, 210, 212 

stock-watering  laws 220, 222, 225 

unfair  competition  laws 604, 

507, 509, 510, 511, 515, 517, 523, 525 

decisions 615 

North  Dakota,  antitrust  laws 150, 161, 164, 166, 

168, 170, 180, 183, 187, 206, 210, 211, 212 

stock-watering  laws 216, 219, 222, 224 

unfair  competition  laws 509, 

617,520,522,524,525,527 

Norway,  antitrust  legislation 286 

international  agreements 697 

law  for  the  acquisition  of  waterfalls,  etc 286 

Penal  Code,  antitrust  provisions 286 

unfair  competition  provisions 675 

trade-mark  law 676-677 

unfair  competition  laws 675-677 

Obstruction   of  competitors   or   their  cus- 
tomers    406-409, 459 


Page. 

Ohio,  antitrust  laws 150, 161, 166, 172, 178, 180, 

196,  201,  206,  207,  210,  212 

decisions lein 

stock-watering  laws 220, 221, 223, 224, 225 

unfair  competition  laws 507 

509, 511, 517, 520, 523, 524, 525, 627 

Oklahoma,  antitrust  laws 144, 149, 150, 

155, 157, 168, 178, 179, 182, 187, 194, 
197, 199,201-202, 206,  211,  212,  216 

decisions 149n,  158n,  19Sn 

Corporation  Commission,  control  of  public 

business 202-203 

orders  by 203n 

stock-watering  laws 217,220,223 

unfair  competition  laws 510,522,527 

One-commodity  price  cutting.    See  Fighting 
brands. 

Oregon,  antitrust  laws 187, 212 

stock-watering  laws 219,221,223 

unfair  competition  laws 507,509,515,517 

decisions 515 

Packages,  imitation 'of.    See  Passing  off. 

placing  foreign  substances  in 522 

Paints, linseed  oil,  etc.,  misbranding 524-525 

Panama,  international  agreements 703 

Panama  Canal  Act  of  1912,  amends  Interstate 

Commerce  Act 126 

control  of  water  carriers  prohibited  by . . .  126-128 
illegal  combinations  may  not  use  canal ....      128 

Paraguay,  international  agreements 703 

Partnerships,  dissolution  of,  India 265 

sale  of  good  will  by 424-430 

imauthorized  use  of  partner's  name 608 

use  of  fictitious  names  by 527 

Passing  off,  articles  on  which  patents  have 

expired 446, 455 

branch  stores,  false  designation 605 

by  claiming  goods  to  be  of  foreign  origin. . .  501, 
606, 676, 677-678, 685, 686-687, 700 

by  imitation  of  designs 696-097 

by  misrepresentation  in  catalogues 573, 600 

by  misrepresenting  former  business  connec- 
tions   444, 454, 572, 581,^10 

by  similarity  in  company  and  trade  names.    436- 

438, 450-451, 560, 573, 588, 597, 600, 602, 604, 

606, 607, 621-622, 040, 659-001, 005-666, 669, 

673,  676,  677,  683,  687,  691,  092,  099,  704 

by  similarity  in  descriptive  and  generic 

terms 440-442, 452, 560, 040, 083 

by  similarity  in  dress  of  goods 442-443, 

452-453, 500-561, 573, 674, 600, 602, 603, 606, 
607,  610,  012,  014,  021-622,  676,  685,  690 

by  similarity  in  dress  of  store 443-444, 

453-454, 609-573, 602-603, 600, 640-641. 064 

by  similarity  in  employees'  dress 453, 672 

by  similarity  in  geographic  or  place  names.  435-436, 
448-450, 557, 562, 003-605, 613,622, 
624,  625, 659-660, 669-670, 688,  090 

by  similarity  in  personal  names 438-440, 

451, 560, 570-571, 696, 639-640, 673, 676, 694 

by  substitution  of  goods 434-436, 

447-448, 455, 560-561, 567, 574-575, 596 

by  use  of  competitor's  testimonials 389 

by  unfair  use  of  formulae 602, 606 

common  law 431-465 

commonly  termed  unfair  competition  by 

courts 431 


INDEX. 


825 


Page. 
Passing  off,  competition  must  exist  to  support 

actions  for 437, 450, 558, 572 

definition  of  business  insignia 640-641 

foreign  laws  relating  to,  Argentina 691 

Australia 547-548 

Austria 664-666,669-670 

Belgium 588-5S9 

Brazil 687,688,689-690 

Canada ^^^ 

Chile 692 

Denmark 673 

Egypt 557 

England 446-455 

France 558-562, 5G&-575 

Germany 621-622, 639, 642, 659-661 

Greece 683 

Hungary 670 

India 548 

Italy 596-597, 600-601 

Japan 695,696-697 

New  Zealand 548 

Netherlands 607,609-610 

Norway 675, 676, 677 

Peru 693,694 

Portugal 605-606 

Russia 678 

Spain 601,602-605 

Sweden 677-678 

Switzerland 611-612,614 

Turkey 686-687 

fraudulent  adoption  of  name  for  purpose  of.     440, 

547,548,570 

imitation  of  goods  for  purpose  of 444- 

446,454-455,610 

international  agreements  relating  to 697-700 

misuse  of  royal  arms  for  purpose  of 547, 

622,685,687 
misuse  of  term  "  patented  "  for  purpose  of .     562, 

604,606,621,696 

natural  products 449-450, 560, 603, 605, 613, 690 

proof  of  deception  necessary 433-434, 641 

proof  of  fraudulent  intent 432-433, 558-559 

relief  based  on  fraud 433 

repair  parts,  right  to  manufacture 445-446 

retailer  may  be  guilty  of.  434-435, 447-448, 560, 589 

right  to  use  own  name 438, 451, 570 

secondary  meaning  required  in  actions  for.     432, 

447,600 

selling  second-grade  goods  as  first-grade 455 

State  laws  relating  to 510 

trade-mark  actions  distinguished  from 431- 

433, 447 

unfair  method  of  competition 327 

Patents,  combinations  of  owners  of. .  54-55, 115-117 
compulsory  licenses  to  manufacture  .  240,253-254 

contributory  infringement  of 473 

foreign  laws  relating  to,  Australia.  246-247, 540, 544 

Canada 240, 418-419, 540-541, 544 

England 238, 419, 539-540, 543-544 

France 562 

Germany 621 

Italy 597-598 

Japan 696 

New  Zealand 253-254,540,544 

Spain 003-604 


Page. 
Patents,  fraudulent  use  of  term  "  patented  " . .     562, 

621,671,696 

full-line  forcing  by  owners  of 321-322, 486 

legality  of  agency  contracts 472 

legality  of  exclusive  contracts 471-472 

manufacture  after  expiration  of 446, 455, 610 

manufacturers  may  fix  resale  price 598 

protection  of,  international  agreements 697- 

698, 703 
threatening  competitor  with  infringement 

suits 329, 389-395, 495, 543-5^14 

tying  contracts  by  owners  of,  illegal 133-134, 

41.8-419,472-473,539-543 

use  in  violation  of  Sherman  law 11.5-117, 

471-472,486,495 

Pennsylvania,  stock-watering  laws 216, 

219,221,223,224 

unfair  competition  laws 507, 

509, 512, 517, 520, 521, 522, 523, 524, 525, 528 

decisions 507, 513 

Peru,  international  agreements 299, 703 

trade-mark  law 693-694 

unfair  competition  laws 693-694 

Personal  names,  use  of.    See  Passing  ofl. 
Petroleum  industry,  bill  to  establish  monop- 
oly in,  Germany 265n 

price  discrimination  in 188 

proposed  control  of,  France 273n 

regulation  of,  Roumania 291, 794-797 

Philippine  Islands,  Clayton  Act  not  appli- 
cable to 132 

unfair  competition  laws 517 

Picketing,  legality  under  Clayton  Act 141, 142 

Pictorial  illustrations,  luifair  advertising  by  625, 681 

Plastering  hair,  misbranding  of 526 

Pooling,  agreements  common  prior  to  1890. . .         5 
agreements  contrary  to  good  morals,  Ger- 
many   260-261 

bids  on  public  contracts 52-53, 168 

by  bridge  builders 168 

by  commission  merchants 168 

by  common  carriers 10, 11, 42, 124, 238 

by  grain  dealers 167 

combinations  discouraged 12 

definitions  of 164 

Interstate  Commerce  Act,  prohibits 10, 124 

legality  of,  common  law 42, 45-46 

lessening  competition  by ,  insurance 167 

of  products,  for  marketing  purposes 46-53 

"real  value  "  as  used  in  statutes  defined . . .    165n 

Sherman  law  decisions  relating  to 113-114 

State  constitutional  provisions 164-165 

State  laws  prohibiting 165-168 

decisioas 164n,  165n 

validity  of,  Indian  Contract  Act 256 

Porto  Rico,  antitrust  laws 149, 155, 164 

stock-watering  laws 219 

unfair  competition  laws 507, 509, 520 

Portugal,  antitrust  legislation 278 

Civil  Code,  invalid  agieements 278 

unfair  compet  ilion  provisions 278, 605 

iulernalional  agreements 697, 700, 701 

Penal  Code,  antitrust  provisions 278 

unfair  competition  laws 60.5-606 

Potash  law,  Germany 263-264, 770-781 

Profit-sharing  schemes,  to  induce  exclusive 

dealing 467-468 


826 


INDEX. 


Page. 

Premiums,  prohibition  of 673, 674 

See  also  Trading  stamps. 
Price  control,  by  associations  of  competitors, 

common  law 42-46 

by  commission  mercliants 178 

by  cornering  market,  illegal 114-115 

by  grain  dealers 175, 177 

by  insurance  companies 170n, 

171u,  172, 173, 174, 175n,  177 

by  lumber  or  coal  companies 177 

by  means  of  false  reports 257, 

269-270, 274, 278, 283, 286, 292 
by  noneompetitors  cornering  the  market...     37n 

by  trade  associations 717-724 

by  trust  agreements 63 

by  water-power  companies 175, 178 

cases  under  Sherman  law  relating  to 105-107 

common-law  decisions  relating  to 42- 

49,51,53,55,56 

conspiracies 2, 3, 147n,  165n,  176n 

foreign  laws  relating  to,  Alsace-Lorraine. .      257 

Argentina 296 

Australia 243,245,248-249 

Austria 265-267 

Belgium 280,281 

Canada 239,241-242 

China 298 

Egypt 257 

England 233 

France 269-271 

Germany 259-261 

G  reece 292, 293 

Italy 274,275 

Mexico 297 

Netherlands 283 

New  Zealand 250-252 

Norway 286 

Portugal 278 

Russia 287 

South  Africa 254 

Spain 277-278 

Turkey 292 

foreign  decisions  relating  to 235-238, 240, 245, 

256, 260, 262, 266, 267, 270-271, 275, 284, 286 

methods  of 107, 109, 1 14 

of  necessaries  of  life 2-3, 26, 172, 233, 

250-251, 270, 277, 278, 287, 292, 290, 299 
purpose  of  agreements  to  limit  output . . .  107-109 
rate-fixing  by  railroad  combinations,  ille- 
gal    73, 95-96, 105-100 

State  constitutional  provisions  relating  to.  168-l(i9 

State  laws  prohiljiting 169-178 

decisions 147n,  154u, 

157n,  165n, 170-176n, ISOn,  718-722 

trade  associations  for  piu'poses  of 707 

through  common  agencies 46-53 

"  unreasonabl  y  high  price ' '  defined 252 

See  also   Pooling;  Resale  prices;  Restraint 
of  trade;  Sherman  Antitrust  Act. 

Price  cutting,  below  cost  of  production 192, 

193, 463, 579 

blacklisting  to  prevent 475 

bonuses  a  form  of 479 

boycottmg  to  prevent 176n,  653-654, 727-728 

called  imfair  practice  by  economists 306, 

308,309,310 


Page. 
Price  cutting,  conspiracies  for  ptu^ose  of.  234, 456, 463 

cut-price  sales  prohibited 620 

foreign  laws  regarding,  Belgium 591-593 

Denmark 673,674-675 

France 579-580 

Germany 650-653 

goods  not  in  stock 460-461, 592 

general  price  reduction 192-195, 314 

legality  of  giving  samples 463 

local 187-191, 311-313, 479-480 

not  repugnant  to  good  morals 652 

of  fixed  resale  prices 172n, 

579-580, 591-593, 598, 650-653, 673, 674 

of  special  brands 313-314, 482-484 

of  standard  branded  articles 318 

purpose  of  associations  to  prevent 456 

Sherman  law  decisions  relating  to 463 

decrees  prohibiting 479 

State  laws  relating  to 192-195 

decisions 153n,  172n,  176n,  lS3n 

Price  discrimination,  by  rebates 481 

by  trade  associations 722-723 

Clajiion  Act  prohibits ■  132-133, 496 

constitutionality  of  State  statutes  prevent- 
ing   191n,192n 

due  to  quantity  buying 315-316, 481 

in  dairy  products 188 

in  favor  of  competitor's  customers 480 

in  favor  of  stockholders 481 

in  favor  of  subsidiaries 316-317, 481 

in  news  for  publication 188, 204 

in  petroleum  products 188 

in  purchasing  commodities 187-191 

purpose  of  statutes  against 150 

Sherman  law  decisions  relating  to 464 

decrees  prohibiting 479-481 

State  laws  prohibiting 187-191 

decisions 191n,  192n 

See  also  Price  cutting. 

Price  maintenance.    See  Resale  prices. 

"Puffing, "legality  of 374n, 

383n,  384, 385n,  575, 590-591 
Public  advertisement,  use  of  term  in  German 

law 625-626 

Public  buildings,  use  of,  regulated  by  State 

laws 204 

Public-service  corporations,  consolidation  of. 

District  of  Columbia 123n 

disparaging  statements  by 600 

exclusive  contracts  by 151n,  412-414 

stock  watering  by 220, 

221, 222, 224, 225, 226, 227-229 

public  grants  to 57n 

See  also  Railroads. 
Purchases,  discrimination  in.  State  laws...  187-191 

Pure-food  laws,  foreign 567, 668-670, 675 

State  laws  not  considered 503 

Quantity  buying,  combination  orders,  legal.      486 

Sherman  law 481 

statutes  permitting 133, 190 

unfair  method  of  competition 315-316 

Raihoads,  agreements  to  fix  rates  by .  11-12,105-106 
Australian  Inter-State  Commission  Act.  247-248, 

756-770 

bribery  of  employees  of 500n,  504n 

cases  under  Sherman  law 95-96 


INDEX. 


827 


rage. 
Railroads,  combinations  Inrestraint  of  trade.  11-12, 

59-60, 83-86, 103, 105-106 

consolidation  of,  Canada 242 

contracts  for  securities  or  supplies  of 137 

control  of  coal  industry  by 316 

control  of  water  carriers  using   Panama 

Canal  by,  prohibited 126-128 

disclosure  of  confidential  information  by  499-500 

elimination  of  water  competition  by 500 

English  law  regarding 238 

exclusive  contracts  by 151n,  413n 

holding  companies 14-16,103 

inducing  breach  of  contracts  of 336, 338n 

issuance  of  securities  by 136-137 

leases  by,  without  charter  authority 58n 

Northern  Securities  case,  economic  effects. .  14-16 

pooling  of  freights  prohibited 124 

public  grants  to 57n 

rate  discrimination  by . . .  238, 248, 305, 317, 498-499 

stock  watering  by 218, 221, 224-225, 227 

Trans-Missouri   Freight  Association  case, 

effects 12 

ultra  vnes  acts  by 59-60, 238, 461 ,  557 

See  also  Interstate  Commerce  Act. 

Rates,  discrimination  in 248, 305, 498-199 

Raw  materials,  preventing  competitors  from 

obtaining 493 

Rebates,  advertising  of 616 

by  common  carriers  forbidden 248, 498-499 

price  discrimination  by 481 

to  induce  exclusive  dealing 244 , 

251, 415-416, 419-420,  Ml-542, 553 

to  subsidiary  companies 316-317 

Receivers'  sales,  imfair  advertising  of 520 

Red  Cross,  misuse  of 672, 685 

Refilling  and  reselling  branded  containers. . .     368 

443,453,509,501 
Refusals  to  deal,  agreements  in  restraint  of 

trade 153n,  155n 

by  trade  associations 724-729 

common-law  right 464 

for  failure  to  maintain  prices 593 

foreign  laws  prohibiting,  Australia. . .  244, 553-5-54 

New  Zealand 251-253,542 

in  necessities,  illegal .'. .      278 

except  on  exclusive  terms 185-180, 

257, 262, 409^71, 485-486 

Sherman  law,  decisions  relating  to 409-471 

decrees  prohibiting 485-486 

State  laws  regarding 1S.>-186 

decisions 153n,  155n,  185n,  180u 

with  dolintjuent  debtors 153n,  732-735 

Regrating.    See  Engrossing,  regrating,  etc. 
Resale  prices,  contracts  to  maintain,  effect  on 

third  parties 172n,  593 

cutting  fLxed ,  illegal 579-580, 050-6.54, 673 

effect  of  contracts  fixing 118-119 

efforts  to  maintain 475^76, 652, 053 

evils  of  cutting  fixed 318 

foreign  decisions relatingto,  Belgiimi.  282, 591-593 

Canada 239-240 

Denmark 073-674 

France 579-580 

Germany 050-654 

Italy 597-598 

foreign  laws  legalizing  maintenance  of.. .  073-074 


Page. 
Resale  prices,  giving  premiums  to  avoid  fixed.      592 

legality  of  contracts  fixing 117-119, 

101, 172, 170, 183, 650-051 

maintenance  of,  by  boycotts 282, 653, 654 

by  combinations...  117-119,236,239-240,282-283 

by  intimidation 653-6.54 

economic  views 317-318 

in  absence  of  contract 592-593 

on  patented  articles 176n,  598 

urged  by  associations 712-713 

rebates  as  a  means  of  cutting 653  654 

selling  below  fixed,  common  law 456,460-461 

Sherman  law,  validity  of  agreements  fix- 
ing   117-119 

State  laws  relating  to 1S3 

decisions I61n,  172n,  176n,  183n 

Restraint  of  trade,  acts  repugnant  to  good 

morals 259-261, 272, 274, 275, 278, 279, 

281 ,  283,  286,  288,  291, 296, 297, 298 

agreements  apportioning  output 109-112 

agreements  between  buyers 51-52 

agreements  between  noncompetitors 37n 

agreements  covering  State  void 27 

agreements  covering  United  States  valid...  29-31 
agreements    not    to    sell    to    delinquent 

debtors I53n,  732-735 

agreements  to  divide  territory 41, 112-113, 182 

agreements  to  maintain  resale  prices.  117-119, 172 

by  agricultiu-al  organizations 96-98 

by  hydroelectric  companies 158-159 

by  labor  combinations 93-95 

by  owners  of  patents 115-117,472-473,539-540 

by  railroad  combinations 95-96 

by  trade  associations 717-734 

by  trading  and  manufacturing  combina- 
tions    92-93 

cases  under  Sherman  law 83-89 

combinations  importing  goods  in 125-126 

common  law  regarding 5-9 

common-law  decisions  regarding 24-69 

common  law  in  England  regarding. .  3-5, 233-238 
conspiracies  in,  prohibited.   70-71, 152, 155, 156, 158 

contracts  by  water-power  companies 158 

contracts  in  general 26-30 

contracts  unlimited  as  to  time  or  place 32 

divisibility  of  contracts  in 31-32 

exclusive  agency  contracts  not  in 151n, 

185n,  414-415, 420, 472 

exclusive  contracts  not  in 151n, 

234,409-414,416-420,460-471 

foreign  laws  relating  to,  -Vrgentina 296 

Australia 243-246, 746-756 

Austria 265, 267 

Belgium 281-282 

China 298-299 

Canada 239-242, 737-746 

England 233-238, 539-540 

France 269-270, 271, 272 

Germany 258-259 

Greece 292 

Hungary 268 

India 255-256 

Italy 274 

Netherlands 283 

Portugal 27S 

Russia 287-288 


828 


INDEX. 


Page. 
Restraint  of  trade,  foreign  laws  relating  to, 

South  Africa 254 

Switzerland 279 

Turkey 292 

forms  of  combinations  in 98 

freedom  of  contract 30, 73, 233, 265 

gentlemen's  agreements  in 15, 197 

holding  companies  in 103-105 

in  articles  not  of  prime  necessity 54, 55n 

in  foreign  commerce 79-83 

in  meat  products,  forbidden 254 

in  necessities  of  life 2-3, 

26, 270, 277, 278, 287, 292, 299 

in  professional  business 157, 205, 426-427 

in  sale  of  business 26-36, 255, 424-430 

international  agreements  regarding 299-300 

legislation  prior  to  Sherman  Act 9-10 

limitation  of  output  in 39-41, 

107-109, 179-182, 729-730 

mergers  in 98-102, 154n 

Panama  Canal  Act,  provisions  relating  to.  126-128 

pooling  agreements 113-114, 164-168 

price-fixing  agreements 42-46, 105-107 

rule  of  reason 86-89 

State  constitutional  provisions 150 

State  laws  prohibiting 9, 150-159 

decisions 150n-155n,  157n,  158n 

uncertainty  as  to  use  of  term 27 

valid  agreements  in 53-57 

Wilson  Tariff  Act,  provisions  relating  to.  125-126 
See  also  Combinations;  Monopolies;  Sher- 
man Antitrust  Act. 
Restraint  of  competition,  agreements  to  di- 
vide territory 41, 112-113, 182 

at  public  auctions 257, 268-269, 

272, 274, 277-278, 282, 286, 290, 292, 296 

by  apportioning  output 109-112, 288 

by  employment  of  common  agencies 46-53 

by  grain  dealers 163 

by  insurance  companies 162 

by  restricting  output 40-41, 107-109, 179-182 

by  system  of  resale  contracts 118-119 

Clayton  Act,  provisions  relating  to 132-142 

common-law  decisions  regarding 36-57 

controlling  supply  in 38-41 

foreign  l^ws  regarding,  Argentina 296 

Australia 243-244, 746-756 

Austria 267-268 

Belgium 281, 282 

Canada 239-242, 737-746 

France 269-271, 273 

Germany 257, 258-263 

Greece 292 

Hungary 208-269 

Italy 27 1-275 

Japan 298 

New  Zealand 250-254 

Norway 286 

Portugal 278 

Roumania 290 

Spain 277 

Turkey 292 

in  necessaries  of  life 163, 278, 287, 288, 297 

objections  to  agreements  in 36 

pooling  agreements 42, 113-114, 164-168 


Page. 
Restraint  of  competition,  price  fixing  agree- 
ments in 42-46,105-107, 168-178 

State  constitutional  provisions  relating  to. .      159 

State  laws  prohibiting 159-164 

decisions 160n,  161n,  163n 

trust  agreements 60-65 

valid  agreements  in 53-57 

Restriction   of  output.    See   Limitation   of 

output. 
Retail  dealers,  disadvantages  of  small. .  315-316, 318 

indorsement  of  price  maintenance  by 712-713 

oppose  direct  selling  by  wholesalers..  330-331,488 

.  substitution  of  goods  by 434-435, 447-448, 575 

Revenue  officials,  obtaining  information  from, 

enjomed 474 

Rhode  Island,  stock-watering  laws 219 

unfair  competition  laws 504, 

506, 514, 517, 520, 523, 525, 526, 527 

decisions 514 

Roumania,  antitrust  legislation 290-291 

Civil  Code,  invalid  agreements 290, 291 

Criminal  Code,  unlawful  agreements,  etc...      290 

petroleum  industry,  regulated  In 291, 794-797 

trade-mark  law 684 

unfair  competition  laws 684 

Russia,  antitrust  legislation 288-290 

Civil  Code,  invalid  agreements 288-289 

Code  of  Manufactures 678 

copyright  law 678 

Criminal  Code,  antitrust  provisions 287-288 

international  agreements 299 

Penal   Code,    unfair    competition    provi- 
sions   678-679 

sugar  industry,  regulation  In.  289, 290, 300, 789-794 

trade-mark  law 679 

unfair  competition  laws 678-679 

Safety  of  employees,  laws  not  included 503 

Sale  of  busmess,  agreements  In  restraint  of 

trade 26-36, 157n,  158n,  205 

implied  obligation  not  to  reenter  after 586-588 

soliciting  customers  after 427-430 

State  laws  relating  to 204-205 

vendor  competing  after 423-430, 586-588, 695 

use  of  partner's  name  after 508 

validity  of  agreements 35-36 

See  also  Good  will. 

Salvador,  international  agreements 703 

Santo  Domingo,  Intemational  agreements.  697,703 

Scythe  stones,  misbranding  of 526 

Second-grade    goods,    advertising    as    first 

grade 455-456 

Secret  commissions.    See  Bribery. 

Selling  methods,  common  marketing  agencies  46-53 

direct  selling,  tendency  t  oward 488 

efforts  of  associations  to  maintain  present . .  330- 
331, 488-492, 707, 724-729 
Servants,  bribery  of.    See  Bribery. 

Servants,  enticement  of 345, 511 

Ser via,  Internat  ional  agreements 697 

"  Seven  sisters ' '  laws 21 

Share  croppers,  enticement  of 511 

Sherman  Antitrust  Act,  agreements  appor- 
tioning output 109-112 

agreements  to  divide  territory 112-113 

agreements  to  fix  prices 105-107, 722-724 


INDEX. 


829 


Page. 
Sherman  Antitrast  Act,  agreements  to  limit 

output 107-109 

applicability  to  manufacturing  combina- 
tions   92-93 

blacklisting 474-477, 488-492 

bogus  independents 88, 465-466, 481-482 

boycotts 474-477, 488-492 

bribery 474^  487 

causes  of  enactment 10 

coml:)inations  prohibited,  forms  of 98 

condemnation  proceedings 122 

consent  decrees  in  suits  under 122 

constitutionality  of 72-74, 119-120 

corners  bj^  combinations 114-115 

criminal  prosecutions 120-122 

cutting  off  competitor's  supplies 493^94 

declaratory  of  the  common  law 24, 83-89 

decree  in  Standard  Oil  case 17n 

disparagement 492 

dissolution  suits 122 

distinction  between  manufacture  and  com- 
merce    74_75^  93 

early  cases  under 10-12 

effect  of  decisions 14-21 

enticement  of  employees 474 

equity  suits 122-123 

espionage 487 

exclusive  contracts 466-472, 484-486 

fighting  brands,  use  by  comljinations  en- 

j  oined 483-484 

fighting  ships,  use  by  combinations  en- 
joined    464-465, 482 

flying  squadrons 484 

foreign  commerce,  applicability  of 79-83 

holding  companies 103-105 

illegal  combinations  under,  may  not  use 

Panama  Canal 12? 

indictments 121 

inducing  breach  of  competitors'  contracts. .    473- 

474, 487 

ineffective  enforcement  of 10-12 

intimidation  of  competitors 494.495 

judicial  proceedings  under 120-123 

labor  organizations,  legality  under 93-95 

merger,  cases  under 98-102 

monopolies  and  attempts  at 89-92 

patents,  illegal  use 115-117 

pooling  of  earnings 113-114 

price  cuttmg 4,53^  479 

price  discrimination 4ti4, 479-481 

proposed  amendment  of 32;j-324 

resale-price  contracts 115,  I17-I19 

restraint  of  trade 83-89 

rule  of  reason 86-89 

suits  between  private  parties 122-123 

text  of 70_72 

trade  associations,  violations  of 716 

722-724,  727-729, 730 

treble  damage  suits 122 

tying  contracts,  legality  under 472-173 

imfair  competition,  decisions 462-477 

decrees 478-495 

See  also  Combinations;    Monopolies;    Re- 
straint of  trade. 
Shipping  combinations,  applicability  of  Sher- 
man Act  to 79-83 


Page. 
Shipping  combinations,  employment  of  fight- 
ing ships 482-483 

exclusive  agencies  of 420  472 

exclusive  contracts  by .  234, 254-255, 418, 

419-420, 4.55, 467, 468-469, 484, 486 

increase  in  rates  by,  illegal 298 

investigation  of 455n,  500n 

mail  contracts  with,  prohibited 254-255 

Panama  Canal,  restriction  in  use  by 126-128 

prevention  of  emigration  by 276 

unfair  practices  by . . .  403-404  463, 464-465, 479, 481 

Sisal  industry,  regulation  of,  Mexico 297 

Slander.    See  Disparaging  statements. 

South  Africa,  antitrust  legislation 254-255 

dumping  laws 551 

Meat-Trade  Act 254 

Post  Office  Administration  and  Shipping 

Combinations  Discouragement  Act..  254-255, 

542-543 

unfair  competition  laws 542-543,  544n,  551 

South  Carolina,  antitrust  laws 145, 149, 152, 159, 

163, 172, 173, 180, 185, 187, 193, 206, 212 

decisions igon 

stock- watering  laws 217, 219, 223, 225 

unfair  competition  laws . .  504, 510, 513, 522, 523, 525 

South  Dakota,  antitrust  laws 145 

149, 150, 157, 177, 179, 187, 206, 208, 212 

decisions I47n,  149n,  158n,  192n 

stock-watering  laws 217  219  222 

unfair  competition  laws. .  509, 517, 522, 524, 525, 527 

Spain,  antitrust  legislation 277-278 

Civil  Code,  invalid  agreements 278 

unfair  competition  provisions 601 

international  agreements 299, 697, 700, 701 

Law  of  Industrial  Property 601-604 

Penal    Code,    unfair    competition    provi- 
sions  601,604 

imlawful  agreements,  etc 277, 278 

unfair  competition  laws 601-605 

Standardization,  cost  systems 709 

of  products 709 

Standard  Oil  and  Tobacco  cases,  result  of 16-21 

State  laws,  administration  of 205-208 

adoption  of  corporate  names 505-508 

agricultural  organizations 195-197 

antitrust 143-230 

objects  of 143 

prior  to  the  Sherman  law 9  14 

bribery 504-505 

contracts  in  violation  of,  void 213 

damages  recoverable  under 2I6 

dealing  in  goods  of  parties  violating,  pro- 
hibited    215-216 

deceptive  advertising 517-521 

distribution  of  circulars,  etc 528 

division  of  territory i82 

enticement  of  employees 510-511 

evidence  required  imder 208-211 

foreign  corporations,  adoption  of  names. .  507-508 

growth  of  monopoly  due  to  defective 21 

holding  companies 199-202 

labels,  marks,  and  brands 508-509 

labor  organizat  ions 197-199 

legality  of  exclusive  contracts  under 184-185 

limitation  of  output 104, 179-182 

misbranding 521-526 


830 


INDEX. 


Page. 

State  laws,  monopoly 144-150 

passing  ofi 510 

penalties  for  violating < 211-216 

pooling 164-168 

price  control 164, 168-178 

price  cutting 192-195 

price  discrimination 187-191 

recognition  of  common  law  principles  in.  204-205 

regulating  transportation 195 

restraint  of  competition 159-164 

res  traint  of  trade 150-159 

restraints  on  resales 183 

stock  watering 216-230 

trade-marks 50S-509 

trading  stamps 511-517 

unfair  competition 502-528 

objects  of 502 

violation  of,  by  trade  associations 717-722, 

725-727, 730 

Stockliolders,  common  ownership  of  stocks 

not  prohibited 20n 

discrimination  in  favor  of 481 

purchasing  stock  to  harass  competitors 495 

suits  to  prevent  mifair  acts 458, 461 

voting-trust  agreements  by 5Sn 

Stock  watering,  control  of  stock  issued 219-220 

enforcement  of  laws  relating  to 223-226 

fictitious  increase  of  stock 223 

State  constitutional  provisions 216-219 

supervision  by  public-service  commissions.      224 
valuation  of  stock 220-223 

Strikes,  employment  bureaus  used  to  break..      712 

illegal  conspiracies 94 

injunction  shall  not  issue  against 141-142 

State  laws  relating  to 197-199 

subsidizing    competitor's    employees    en- 
gaged in 586, 655 

■  See  also  Labor  organizations. 

Substitution,  passing  off  goods  by 434-435, 

447-448, 455, 567, 574-575, 601 
punished  criminally 574, 596 

Sugar  mdustry,  Brussels  Sugar  Convention.  299-300 
foreign  laws  regarding 268, 289-290, 789-794 

Sulphiu:  carte! ,  Italy 276-277, 781-789 

Sweden,  antitrust  legislation 284-285 

international  agreements 299, 697, 701 

regulation  of  iron-ore  exports 284-285 

imfair  competition  laws,  general 677-678 

special,  committee  preparing 677 

Switzerland,  antitrust  legislation 278-279 

cantonal  laws 614-620 

Civil  Code,  invalid  agreements 278-279 

international  agreements 299, 697, 700, 701 

Law  of  Obligations 279, 611-613 

Penal  Code,  proposed 610 

trade-mark  law 613-614 

imfair  competition  laws,  general 279, 610-614 

special,  cantonal 614-620 

special,  proposed 610 

Taxation  of  trading-stamp  companies 515 

Telephone  numbers,  unfair  use 429, 458, 557 

Tenants,  enticement  of 51 1 

Tennessee,  antitrust  laws 144, 

159, 172, 193, 206, 208, 212 

decisions 160n 

stock  watering  laws 219, 222, 223 


Pago. 

Tennessee,  unfair  competition  laws 510, 521, 522 

decisions 515 

Texas,  antitrust  laws 144, 

146, 149, 151, 161, 164, 166, 171, 180-182, 

185, 193, 196, 202,  204, 206, 207, 212, 215 

stock-watering  laws.  216-217,219,222,223,224-225 

unfair  competition  laws 522, 525 

Tlireats,  inducing  breach  of  competitor's  con- 
tracts by 336-338, 343-344 

intimidating    competitor's   customers  by 

330, 407, 408-409, 459 
intimidating       competitor's       employees 

by 320,407,459 

made  in  good  faith 392-394 

of  infringement  suits,  common  law 389-395 

foreign  laws 543-544 

Sherman  law 405, 495 

to  cut  off  competitor's  supplies 396-401,457 

to  destroy  competitor's  market 330, 401^03 

to  discharge  employees 456-457 

to  establish  competing  plants 494 

Tobacco,  misbranding  of 525 

monopoly  in,  France 273 

Trade  associations,  blacklisting  by 284, 732-734 

boycotting    and     blacklisting,     Sherman 

law 474-477, 488-492 

classification  of 705-706 

collection  agencies  maintained  by 710 

cooperative  advertising 706-707 

cutting  ofl  dealers'  supplies 396 

credit  bureaus  maintained  by 709-710 

division  of  territory  by 110, 730-731 

efforts  to  maintain  prices 400-406, 593 

efforts  to  maintain  resale  prices 282- 

283,652-653,712-713 
encourage  common  methods  of  distribu- 
tion   707,724-729 

foreign  trade,  promotion  by 714 

in  restraint  of  trade  imder  State  laws 152n, 

154n,  155n,  165n 

interest  in  insurance 713-714 

labor  imions  opposed  by 711-712 

legislative  activities  of 712-713 

limitation  of  output  by 108, 110, 729-730 

means  of  accomplishing  purposes 731-732 

prevention  of  sales  by 724-729 

price  control  by  43-45, 165n,  173n,  186n,  707, 717-724 

publications  of 714 

purpose  of 705-714, 735 

standardization  of  cost  systems  by 709 

standardization  of  product  by 709 

traffic  matters,  interest  by 710-711 

imiform  terms  of  sale,  urged  by 708 

unlawful  objects  of 488-490 

Trade-marks,  confiscation  of  goods  bearing 

coimterfeit 092-693, 694 

coimterfeiting  of 508-509, 503, 589, 597, 

601, 013, 679. 684, 685, 690, 091, 092, 693, 695 
decisions  regarding,  governed  by  good  eon- 
science  693 

foreign  laws  relating  to ,  Argentina 091-692 

Austria 667 

Belgium 589-590 

Brazil 687-691 

Bulgaria 685-686 

Chile 692-693 

England 448 


INDEX. 


831 


Page. 
Trade-marks,     foreign    laws     relating     to, 

France 562-569 

Germany ; 621-622, 667 

Greece 679 

Italy 597 

Japan 695-696 

Netherlands 607 

Norway 676-677 

Peru 693-694 

Portugal 606 

Roumania 684 

Russia 679 

Spain 602-604 

Switzerland 612-613 

Turkey 680-6S7 

fraudulent  imitation  of,  defiiied 564 

fraudulent  use  of 509, 563, 602, 607, 613-614, 

621-622, 667, 676-677, 679, 684, 
685,687,691,  692,  693,  695-696 
importing  goods  bearing  false  or  confusing, 

prohibited 501 

international  agreements  regarding 697-698, 

700-701,703-704 
passing  off  distinguished  from  infringement 

of 431-433,447 

protection  of,  exclusive  right  necessary 431 

reflUing  and  reselling  containers 509 

State  laws  relating  to 508-509 

substitution  of  products  for  articles  l)ear- 

ing 565-566 

imfair  use  of  term  "registered" 614 

Trade  names,  unfair  use  of.    See  I'assing  off. 

Trade  secrets,  accidental  disclosiu-e  of 589, 644 

agreements  not  to  disclose,  implied . .  354-355, 364 

betrayal  of,  bm-den  of  proof 351n 

bribing  employees  to  disclose 006, 615, 619 

commercial  secrets  defined 643 

doTmition  of 349n 

disclosm-e  of,  at  common  law 348-355 

by  former  employees 585, 589, 644, 675 

inipatented  processes,  illegal 350-351 

enticing  competitor's   emploj'ees   to   dis- 
close   594-595 

express  contracts  not  to  disclose 354n 

must  have  individuality 352-353 

parties  who  may  be  enjoined  from  using.  353-354 

protection  of  designs  as 645, 684 

protect  ion  of,  foreign  laws,  Austria 664 

Belgium 589, 594 

Denmark 673 

England 355,364-365 

France 585 

Germany 623, 642-646, 656 

Greece 680, 683-684 

Italy 596-599 

Netherlands 606-607 

Norway 675 

Portugal 605-606 

Russia 679 

Spain GOl 

Switzerland 010,615,017, 619 

secret  formulas  protected  as  .  351-353, ■■J64-365, 599 
See  alxn  Conndential  infonnation. 
Trading  stamps,  disparaging  statements  re- 
garding use  of 656-C57 


Page. 

Trading    stamps,    foreign    laws    regarding, 

Australia 545 

Bermuda 540n 

Canada 545 

Denmark 67.3-674 

England 544 

New  Zealand 545-546 

South  Africa 546n 

inducing  merchants  not  to  use  competitors'       339 

legislation  prohibiting 512-516, 54»-546, 673 

monopolistic  tendency  in  use  of loOn 

obtaining,  irregularly 497-498 

proliibition  of  gift  enterprises 513-514 

purpose  of  use 611-514 

regulation  in  use  of.  State  laws 515-517 

State  laws  relating  to 512-517 

unfair  use  of 314-315 

Transient  merchants,  unfair  advertising  by..      520 

Transportation,  special  advantages  in 316-317 

regulation  of,  prohibited 195 

Trustees'  sales,  unfair  advertising  of 520 

Trusts.    See  Combinations. 

Tunis,  international  agreements 697, 700, 701 

Turkey,  antitrust  legislation 292 

Penal  Code,  antitrust  provisions,  etc 292 

unfair  com  petit  ion  provisions 686 

trade-mark  law 686-687 

imfair  competition  laws 686-687 

Turpentine,  misbranding r 524 

T  jing  contracts,  by  owners  of  patents 418-419, 

472-473, 486, 541 

declared  unlawful 133-134, 240-241, 539-542 

purpose  of 321-322 

restricting  use  of  impatented  articles  by.  472-473, 

486 
See  also  Exclusive  dealing. 

Ultra  vires.    See  Corporations. 

Unfair  advertising,  bankrupt  sales 520,581,681 

below  actual  selling  price 615 

by  transient  merchants 520 

by  usurpation  of  titles 581-582 

circulation  of  newspapers 520-521 

city  ordinances  against 517 

closing-out  sales 520, 617, 628-633, 667-668 

discrimination  between  competitors 387, 

582-583,599,658 

economic  views  on 326-327 

falsely  claiming  prizes,  etc 387-389, 

519,024,627,680 

fire  sales,  etc 520, 580 

foreign  laws  relating  to,  Austria 664 

Denmark 671, 672 

England 388-389, 549-5.50 

France 580-581 

Germany 622, 624-628, 658-659, 806-812 

Greece 680-681 

Italy 599 

Norway 675 

Spam 602 

Switzerland 613, 61.5, 617, 619 

misrepresenting  competitor's  business 387, 599 

misrepresenting   former   business  connec- 
tions    1.53-154, 444,  ,572,  .581 

misrepresenting   quantity    or    quality   of 

goods 519,615,627,633-634,680 


832 


INDEX. 


Page. 
Unfair  advertising,   misrepresenting  size  of 

business 625 

misrepresenting  value  of  goods 51d,  615 

of  goods  by  using  foreign  terms 616, 619 

of  goods  not  in  stock 460, 592, 618, 619, 627 

of  insurance  sales 520, 580 

of  railway  wreck  goods 520 

of  receiver's  sales,  etc 520 

of  second-grade  goods  as  first  grade 455, 456 

of  unpatented  articles  as  patented 621 

purpose  of  laws  against 503 

State  laws  relating  to 517-521 

statements  considered  as 626-628 

by  usurpation  of  titles 581-582 

Unfair  competition,  arbitration  of  cases  re- 
lating to 661-663 

bonuses  given  manufacturers  injured  by . . .      551 

can  not  exist  between  noncompetitors 304, 

437-438, 558 

Clayton  Act,  provisions  relating  to 132-142, 

496-498 

common  law 332-461 

defined  by  economists 307-311 

definition  of,  foreign  laws 552, 558, 602 

difficulty  in  defining 301 

dumping  declared 550-556 

economic  and  business  views  on 301-331 

Federal  statutes  relating  to 462-501 

Federal  Trade  Commission  Act,  provisions 

relating  to 128-132, 495-496 

Federal  Trade  Commission  directed  to  pro- 
hibit    495-496 

French  laws,  adoption  in  other  countries.  532-533 
German  laws,  adoption  in  other  countries.  532-533 

international  agreements  regarding 697-704 

Interstate  Commerce  Act,  provisions  relat- 
ing to  498-500 

list  of  forms  of 310-311 ,  334, 530 

overad vertising 326-327 

passing  off,  commonly  termed 431 

proceedings  by  State  against 334 

purpose  of  State  laws 502 

Sherman  law,  decisions 462-477 

decrees 478-495 

special  foreign  laws  against 552-556, 559-569, 

61.5-620, 622-647, 671-675, 680-684,  .806-812 
State  antitrust  laws,  provisions  relating 

to 184-195 

State  statutes  relating  to 502-528 

trade-mark  act,  Federal 501 

uniform  laws  recommended 702, 703 

use  of  the  term 306-310, 333-334, 431, 529, 558 

See  also  various  practices. 
Union  of  South  Africa.    Sec  South  Africa. 


Page. 

Utah,  antitrust  laws 148, 168, 173, 

178, 180, 187, 204, 206, 207, 209, 211, 212, 216 

stock-watering  laws 217-218, 223, 225 

unfair  competition  laws 506, 

509, 517, 522, 523, 525,  .527 

Vendor,  agreements  in  restraint  of  trade 26-36 

retaining  old  telephone  number 429, 557 

right  to  reenter  business 424-427, 429 

right  to  solicit  former  customers. .  427-429, 430, 587 

Venezuela,  international  agreements 703 

Vermont,  antitrust  laws 148, 156 

stock-watering  laws 220 

imfair  competition  laws 506, 

508, 509, 514, 522, 524, 525, 526 

decisions 514 

Virginia,  antitrust  constitutional  provisions.      144 

stock-watering  laws 218-219, 222, 225 

unfair  competition  laws 504, 507, 514, 523, 525 

decisions 514,515 

Voting-trust  agreements,  validity  of :     58a 

Washington,  antitrust  laws 159, 168, 

179, 182, 195, 197 

stock-watering  laws 218, 220, 222, 223 

unfah  competition  laws 506,510,515,517,522, 

523, 525, 527 

decisions 515, 516 

Water-power  companies,  concessions  to 286 

State  laws  regarding 158, 178, 181-182 

Weights  and  measures,  misbranding,  foreign 

laws 547, 633-«34, 682, 691-692 

misbranding.  State  laws 521-522 

placing  foreign  substances  in  goods,  pro- 
hibited        522 

unfair  advertising  of  goods  sold  by 619 

use  of  false,  prohibited 293, 670, 686 

See  also  Misbranding. 

West  Virginia,  stock- watering  laws 219, 222, 225 

unfair  competition  laws 507, 517 

White  lists.    See  Blacklisting. 
Wholesalers,  conspiracies  to  prevent  compe- 
tition by 721 

selling  directly  to  consumers  opposed  by . . .    330- 

331,707,  725-726, 727-729 

Wilson  Tariff  Act,  antitrust  provisions...  125-126 

Wisconsin,  antitrust  laws 155, 158, 164, 173, 180, 

182, 187, 195, 197, 203, 206, 207, 212, 216 

decisions 155n,  173n,  195n 

stock- watering  laws 219, 222, 224, 227, 229 

unfair  competition  laws 504,507 

509, 517,  .523, 524, 525 

Wyoming,  antitrust  laws 144, 159, 169, 179, 

187, 202, 206, 212 

stock-watering  laws 219, 222, 223, 225 

unfair  competition  laws 509, 522 

Zurich,  unfair  competition  law 615, 616 


o 


./ 


